Customer Experience vs. Cost – Which Wins Out?
We hear a great deal regarding customer experience these days and retailers in both the B2B and B2C spaces are constantly searching for new ways to provide excellent experiences to the people and organizations which patronize them.
However, a question which frequently gets raised is whether companies should focus more on customer experience or on cutting costs and which of those factors holds greater sway over a customer’s decision to do business with them.
With a cost-of-living crisis, supply chains in tatters, and rising costs in several key sectors, this question is now perhaps more relevant than ever before and, with the impact of the COVID-19 pandemic still being felt and the conflict in Ukraine growing ever deeper, things are not likely to improve in the near future.
The Numbers
During a period of rapid inflation, many companies have no choice but to pass the rising costs onto their customers or risk significant economic damage to their business. This is of course different from companies which could very easily swallow the hit to their margins but choose not to, but that’s a topic for another time and place.
The question therefore becomes, will providing an improved customer experience counterbalance rising costs in the eyes of the customer?
Thankfully, the answer is yes.
Research has shown repeatedly that customers are willing to pay more for goods if they feel they are getting a superior customer experience. In fact, some studies have suggested customers are willing to pay a price premium of 13-18% based on the quality of customer experience received. Great customer experience through personalization boosts impulse purchases by almost half [49%] and customers who rate a retailer high for customer experience spend, on average, 140% more and will remain loyal to that brand for up to six years.
These findings are also backed up by research into bad customer experience. Even if a customer is dealing with a company they love, one in three will ditch it if they receive a single bad experience. More than $62 billion is lost each year to bad customer service, and another study found 91% of unhappy customers leave a brand without even bothering to register a complaint.
According to these findings, customer experience should be a number one priority for brands looking to remain competitive in the modern landscape. You will notice from the above figures that price doesn’t even come into the equation. A fantastic customer experience means you don’t give your customers a reason to look elsewhere which means prices become less relevant when trying to remain competitive.
Customer Experience
One of the main issues with customer experience is that many brands are simply not being honest with themselves regarding the quality of theirs.
When organizations were asked to rate the quality of their own customer experience, 80% claimed to be delivering to a very high level. However, when customers were asked for their opinion on the quality of the experience they were receiving, only 8% agreed. This means organizations can be overestimating the quality of their customer experience provision by up to ten times its real value.
This is hardly surprising, especially when you consider the findings above which reported customers’ tendency to abandon a brand without leaving a compliant.
There’s a certain television show you might be familiar with where an angry British chef goes into failing restaurants and theatrically tries to turn them around? In that show, one of the most common excuses the proprietors of these restaurants come up with is that they rarely receive any complaints from customers, and this is exactly the phenomenon we’re seeing here.
If customers think the experience is trash, they usually won’t tell you – they’ll simply not return. This helps explain why brands overestimate the quality of their customer experience. They assume customers are enjoying the experience because they don’t receive any complaints.
There are several key areas which your organization should focus on if it wants to improve its customer experience and make itself more competitive in this world where service trumps cost. Difficult purchasing processes, negative experiences with customer support, compromising personal security, waiting too long on hold, ignoring customer feedback, will all conspire to create a toxic experience which will have customers abandoning your organization in droves.
Final Thoughts
Customer experience trumps cost in the modern landscape, of that there is little doubt. However, it is alarming how many brands out there are overestimating the quality of their customer experience and perhaps failing to innovate in that area because of it.
2022 should be the year you brand commits to a full and frank assessment of customer experience because it is likely to be the battlefield in which all commerce is won or lost in the future.
Customer experience is sure to be a hot topic at B2B Online Orlando 2022, taking place in November at the JW Marriott Orlando Bonnet Creek Resort & Spa, FL.
Download the agenda today for more information and insights.