Why Customer Experience Is Important: 7 Reasons

Customer experience is the practice of designing and reacting to customer interactions for the purpose of meeting or exceeding customer expectations, thereby, increasing customer satisfaction, loyalty and advocacy.

A positive customer experience is important in that customers are savvy and have the power choose between competing companies, which offer varying levels of customer service from poor to excellent. In fact, a study by White House Office of Consumer Affairs found that 80% of U.S. consumers would pay more for a product or service to ensure a superior customer experience.

Jerry Gregoire, former Chief Information Officer of Dell Computers, also believes the customer experience is important. He says that “the customer experience is the next competitive battleground.”

As the owner or manager of a business that operates in today’s competitive environment, you must understand and invest in the customer experience. I guarantee your competitors already are. This is indeed a bold statement,  but a report by Call Center Executive Priorities Report has found that customer experience will reign as the primary investment target in 2014 with 68% of businesses planning to increase their spending in that area.

With that in mind, here are the top seven reasons why customer experience is important:

  1. Improves customer satisfaction
  2. Fosters repeat customers and customer loyalty
  3. Increases customer advocacy and referrals
  4. Reduces customer churn
  5. Creates a competitive advantage
  6. Increases revenue and sales
  7. Builds stronger customer relationships


1. Improves customer satisfaction

A report by McKinsey (2014) found that companies focused on maximizing satisfaction, with regard to the entire customer journey, have the potential to increase customer satisfaction by 20%.

Essentially, in order to improve customer satisfaction, focus should be on the whole customer experience. The report suggests that it is no longer good enough to focus on individual interactions with customers. Instead, think in broader terms and of the bigger picture.

When you shift your mindset from focusing on individual interactions to the experience you deliver across the entire customer journey, you will notice one main thing: Consistency.

The goal is to create a consistent customer experience across all touch points that meets or exceeds the standard you have set in terms of what you want to deliver. At every touch point, you will ensure that the promise of a positive experience is being upheld and that the customer can experience a certain level of superior service: whether it is from sales, customer service, accounts or support.

Related: 9 actionable strategies to increase customer satisfaction


2. Fosters repeat customers and customer loyalty

Avaya and BT Research conducted a study in 2013 that revealed 44%of consumers consider customer loyalty to be a relic of the past.

Did you hear that? 44%of your customers think loyalty is dead.

Wait. Before you panic, we can break this down.

Customers may think it is a relic, but that is only because they believe there are plenty of available alternatives, given the competitive environment, and they perceive the switching costs to be too small to affect them.

Focusing on the customer experience can help alleviate these issues. When executed properly, customer experience will be a point of differentiation from competitors. Creating an experience that truly impresses customers and exceeds expectations ensures that they will want to continue doing business with you.

A superior customer experience becomes a unique and valued offering for the consumer, who recognizes they may not have the same experience with a competitor and does not want to take that risk by switching.

Brett Shockley, Senior Vice President and Chief Technology Officer at Avaya, agrees that the customer experience offers a way to increase loyalty and retention. He says that “CEM [Customer Experience Management] strives to improve the value a customer represents to the organization over the lifetime of their relationship by optimizing each interaction and creating an engaged customer relationship. This drives repeat purchases and increased loyalty.”

Phew,” I can hear you say.

Yes, that’s right. Investing in increasing customer loyalty will still yield positive results. But you cannot fake loyalty: customer loyalty is built through great customer experiences that exceed expectations, not through “buy nine, get one free” loyalty cards and mobile phone apps.

Related: 18 ways to build customer loyalty

Learn more: What is Customer Experience Management


3. Increases customer advocacy and referrals

Did you know that a referral customer costs a less to acquire and has a higher potential for retention and loyalty than a non-referral? In fact, research by Wharton School of Business found that a referred customer has a 16% higher lifetime value.

We all love referrals. They are often quicker with closing sales and less complicated or demanding customers.

But how does a great customer experience create advocates?

Let me ask you a question.

Remember a time when you received outstanding customer service that made you say, “WOW!” With how many people did you share that experience?

Probably quite a few.

And do you know why you wanted to share your experience?

Because the expectations you set for customer experience were exceeded or because the company went above and beyond average customer service in some way. Whatever the case, that interaction created an experience you will remember and continue to share for years to come.

By focusing on creating amazing customer experiences and embodying the desire for your team to go ”above and beyond,” you have the opportunity to create an enthusiastic advocate out of every customer.

Imagine if every customer with whom you dealt became a raving advocate. How many more business referrals and new clients would you be able to attribute to this?

I challenge you to treat every customer interaction as a referral opportunity. Go into every meeting or phone call with the intent of asking for a referral at the end.

Related: How to create more advocates that refer you new business


4. Reduces customer churn

An Accenture global customer satisfaction report (2008) found that price is not the main reason for customer churn; it is actually due to the overall poor quality of customer service.

Focusing on the customer experience will help eliminate the areas in your business where poor service has been identified. When you develop your customer experience strategy, you will identify areas that do not meet the standards of other areas of your business.

Find ways to improve poor customer service in those areas and focus on bringing a more consistent approach to the overall experience you are delivering. Set high expectations and keep an eye out for any areas in the future that dip below these standards.

Related: 15 tactics to reduce customer churn


5. Creates a competitive advantage

Forrester analysts Harley Manning and Stephen Powers believe that the “customer experience is your only source of sustainable competitive advantage.”

Irving Wladawsky-Berger, WSJ contributor, also agrees that the customer experience offers a way to create a competitive advantage. He noted, “A company can differentiate itself from competitors in one of two key ways: by providing superior customer experience or by offering the lowest prices.”

A competitive advantage is huge for all businesses operating in today’s environment. We all have a myriad of competitors that offer the same or similar products and services. Our world is moving toward an environment where every service-based industry will be a commodity.

With all this pressure, how do you differentiate yourself?

The customer experience offers the perfect platform. Now, instead of a customer comparing and basing purchases on price alone, they will factor in service and the experience in which they take part.

Can you afford to compete solely based on pricing?

Related: Three examples of companies who use amazing customer experiences to ward off competitors


6. Increases revenue and sales

Did you know customers will spend more money with companies that strive to make it easier to do business with them? That is the case according to a 2012 study by Echo Research, which found that 70% of customers are willing to spend more money with a company that provides good customer service, up from 58% in 2010.

Additionally, in a 2013 study, Avaya and BT Research found that 82% of consumers were spending more with these companies, clearly indicating an upward trend in importance over the years.

When it comes to measuring return on investment and seeing monetary results from investing in the customer experience, these statistics provide evidence of the value.

Your customers are asking for a better experience. They show you they care with their wallets, not just their mouths. Another study, 2011 Customer Experience Impact Report, found that 86% of buyers said they would pay more for a better customer experience.

Again, customers value good service and they are prepared to pay for it.

What are you doing to increase sales?

Have you considered investing in the customer experience?

Related: 5 customer experience strategies that work


7. Builds stronger customer relationships

As humans and working professionals, our attention spans are steadily shrinking. Research by global computer and telecommunications research company, The Radicati Group, reveals that workplaces will receive an average of 140 emails each day by 2018.

That is a lot of emails. But it is not just emails with which we are being bombarded– it is everything.

In a world where we are being touched by hundreds of brands each and every day, how does the customer experience help you build stronger customer relationships?

Simple. By focusing on the customer experience you can deliver personalized communications tailored to each individual customer.

Leverage new technology to send electronic communications content and offers that your customers look forward to opening. This will help ensure that your messages stand out in the crowded atmosphere and reach your target audience. By offering a personalized experience tailored to the individual, you have a better chance of building rapport and increasing trust with customers.

Related: 6 strategies to build stronger customer relationships


Customer Experience is no longer a fad, it’s the norm

No longer can the customer experience be seen as a strategy or fad. It is here to stay and there are countless case studies and examples, such as DisneyLAX Airport and JetBlue, that demonstrate its importance.

The real question is: will you embrace customer experience or will you ignore it?

I am of the firm belief that in the next three years, it will be the companies that can execute the best customer experience that will yield the big revenue gains. Those who can leverage technology to engage customers and create experiences that impress and exceed expectations will be the ones who win new business and see their market share grow.

Keen to explore this topic further? I recommend these articles and resources:

Gordon Tan

Gordon Tan is an entrepreneur based in Australia who has started and sold multiple technology companies with a combined value of $150m. This included a client satisfaction benchmarking platform which gave him first hand insight into the best practices of over 6,000 businesses. After retiring at 35 he is now a recognised thought leader on winning and retaining clients - His two passions: making clients the heartbeat of a business no matter what the product or service and this blog.

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