Positive Customer Experience Drives Loyalty, Revenues

April 2, 2012

temkingroup-likelytorecommendvscx-march2012.jpgThere is a high degree of correlation between customers’ experiences and their likelihood to recommend a company and consider purchasing more products and services from that company in the future, finds the Temkin Group in a March 2012 report. In fact, examining feedback on 206 US companies and survey data from 10,000 US consumers, the Temkin Group found a 19.5% point gap in the likelihood of customers to recommend the quintile of companies scoring best in customer experience (9.9%) and the quintile scoring worst (-9.6%). The Temkin Experience Ratings are based on functionality, accessibility, and emotion of the customer experience, and the companies were ranked in comparison with the industry average.

Likelihood to Repurchase Also Gets a Lift

Satisfied customers are not only more likely to recommend customers, but also more likely to purchase again from them in the future. While companies scoring in the lowest quintile in the Temkin experience ratings were 9.2% less likely than the industry average to see customers willing to repurchase from them, those in the 5th quintile enjoyed a likelihood of consumers repurchasing that was 9.2% higher than the average.

Looking at the third component of Temkin’s loyalty ratings, reluctance to switch, the same pattern was evident. Compared with companies in the lowest quintile of experience ratings, those in the top quintile had 19.2% points more customers reluctant to move their business away from them.

The Temkin Group findings align with a trend reported by Accenture in January 2012: according to those survey results, two-thirds of global consumers reported switching providers in at least one industry in 2011 due to poor customer service, representing a rise of 3% from 64% in 2010 and 12% from 59% in 2009. A CMO Council study released in December 2011 also found one-third of respondents indicating that a commitment to excellent customer service is a significant factor in their loyalty to a brand.

Improvements Can Generate Massive Revenue Increases

Meanwhile, data from Temkin Group’s “The ROI of Customer Experience” indicates that companies stand to gain a lot from improving their customers’ experiences. Using data from the regression analysis the Temkin Group performed to correlate its experience ratings and loyalty ratings across 18 different verticals, it found that a $1 billion fast food chain making incremental customer experience improvements could generate $382.3 million in additional revenues over 3 years from repurchases ($177.1 million), decreased churn ($119.6 million), and recommendation-driven business ($85.6 million). Large revenue increases were also estimated for billion dollar companies in a variety of other categories, including retailers ($343.7 million), grocery chains ($343.6 million), and airlines ($256.3 million).

The report defined a modest improvement in customer experience as a 10% point increase in Temkin Experience Ratings.

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