30 Jul The real cost of customer experience
We are all familiar with the old adage, that it costs 6 to 7 times more to acquire a new customer than keep an existing one, yet we still seem to live in a world where businesses are obsessed with short-term gains and acquiring customers over retaining customers.
Legendary business author Peter Drucker famously said, “the purpose of a business is to create and keep a customer.” The keep part seems to have been overlooked. Maybe if we attributed a monetary value to long term customer retention, our attitudes might change. We all know the mighty dollar is a powerful persuader.
Customer lifetime value or CLV is a metric that is growing in importance as companies like Zappos and Airbnb pave the way in exemplary customer journeys and service, setting the benchmark in customer retention.
Not only is CLV useful to know what retaining a customer is worth, it is even more powerful when used to understand what you stand to lose if you get customer service wrong, as these examples show:
- If Apple make it hard to get your screen repaired and you switch to Samsung, it costs Apple more than $10,000.
- If a supermarket cashier refuses to help an old lady with her bags and you take a moral stand by vowing never to shop there again, it removes $50,000 from the store’s ongoing revenues
- If Starbucks get your order wrong more than you care for and you vow never to return, it’ll cost them $14,099
If you multiply these numbers out by your annual customer churn, then it starts to make a serious dent in annual revenues. The kind of dent that gets the CEO’s attention.
In today’s world, where everything communicates, we have to ensure that all product and service experiences are as great as they can be. Our owned channels become more important than ever when we consider not only retaining customers but creating customer advocacy.
The helpful interactions on the shop floor, the intuitive forms we had to fill in, the low wait time on the phone helpdesk, the option to return goods free of charge, the offer from a brand that I love, the list is infinite. The onus is on you to find out what is going to keep your customers for a lifetime.
You can find out here how to calculate your CLV and start the shift to caring more about keeping customers than chasing new ones.