Why Focus On Customer Experience? Here’s Why.


There’s a lot of buzz in the business world about customer experience – how it’s the key to combating commoditization, securing sustainable competitive advantage, and achieving market dominance.

But here’s the little secret that business leaders don’t like to discuss:  many of them aren’t sold on the idea that a great customer experience actually pays off.

How else can you explain the indignities to which many companies subject their customers?  Excessive 800-line hold times, poorly staffed stores, long checkout queues, confusing billing statements, indecipherable correspondence, maddeningly unnavigable websites.  The list goes on and on.

These customer annoyances are tangible manifestations of the skepticism that many executives harbor towards the concept of customer experience differentiation.

Some might argue that this doesn’t reflect skepticism at all, but rather, it’s merely a case of executives doing their jobs – looking for a quantifiable business case that supports customer experience investment.  After all, it’s a lot easier to quantify the impact of hard-dollar initiatives, like the renegotiation of real estate leases or the consolidation of corporate functions, as compared to the “soft” benefits of creating happier customers.

But that argument is flawed, because the fact is, executives routinely make big investment decisions for which the financial payback is uncertain at best.  Corporate re-brandings, advertising programs, synergistic mergers, and even the hiring of highly compensated, star CEOs – these are all examples of initiatives that bring with them a good deal of risk and expense, yet must be green-lit without the benefit of a precise, quantifiable business case.

They are decisions that, to put it simply, require a leap of faith.  They require business leaders to complement what limited hard data may be available with gut instinct.  And leaders get comfortable relying on their instincts, taking that leap of faith, because they believe in the concept behind the investment – whether it’s the power of a reinvigorated brand, the potential unlocked by an acquisition, or some other transformational venture.

So, when executives resist making material investments in the customer experience, when they cite the absence of an ironclad, quantifiable business case, their reservations may actually reflect a deeper skepticism about the true value of customer experience differentiation.

One way to address such skepticism is to elevate the dialogue, getting executives – even just for a moment – to focus less on project-by-project ROI justifications and more on the macro impact of an effective customer experience strategy.

What better way to accomplish that than by conveying the value of customer experience differentiation in terms every executive can understand – the “universal business language” of shareholder value.

That was the objective behind Watermark Consulting’s “Customer Experience ROI Study,” an analysis first conducted nearly a decade ago and periodically refreshed since then.  The study sought to illustrate the overarching influence of customer experience quality on business success (with success measured via total shareholder return).

While a complete explanation of the study’s methodology and results is available at the link above, suffice it to say the analysis provides compelling evidence that should help turn at least some skeptics into believers:

Companies with a great customer experience outperform competitors, and the broader market.

Watermark Consulting Customer Experience ROI Study


With over a decade of customer experience and stock performance data analyzed, the study found that companies which lead in customer experience (as evidenced by third-party consumer surveys) tend to outperform those which lag.  The disparity is not trivial:  Over the eleven year time period analyzed, Customer Experience Leaders outperformed the Laggards by a nearly 3-to-1 margin.

And, while the analysis highlighted the apparent benefit of a great customer experience, it also underscored the penalty paid for providing a really poor one.  As a group, the worst-rated companies in customer experience delivered a total shareholder return that was less than half that of the S&P 500 Market Index.

What the market is essentially conveying through this data is that, over the long-term, companies which deliver a great customer experience are more valuable than those that do not (a finding which is relevant to both public and private entities).

Of course, it’s important to note that the connection between customer experience and business success isn’t a perfect one. The fact is, there are many ways a company can sabotage its own success, despite offering an appealing customer experience (this story about the 2011 bankruptcy of the top-rated company in customer experience is instructive in that regard).

However, what this data clearly suggests is that there is competitive advantage to be gained when companies differentiate themselves along the customer experience axis. Hopefully, awareness of that fact will lead more executives to set aside their lingering doubts, and embrace this business strategy that clearly creates fans on both Main Street and Wall Street.

This article first appeared in www.forbes.com

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