14 opportunities & risks you face in 2024. Ready?
We British look at the world as if the glass is half empty. By contrast, Americans look at the world as if the glass is half full. So, when I share some statistics I read regarding customer satisfaction and leveraging behavioral economics, some of which I felt very glass-half-empty about, I hope a few of you, with your half-glass-full dispositions, will help me see the bright side.
Let's begin with an area of game-changing opportunity:
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Gallup Analytics says companies that apply the principles of behavioral economics can outperform their competition by 85% in sales growth and more than 25% in gross margins.
I agree with this one, and it's an area I have discussed before. However, I have never heard it come from a source like Gallup. Plus, those are some compelling numbers.
However, my half-empty thinking leads me to conclude that too many firms aren't doing this and using behavioral economics in their experience designs. It is a shame because behavioral economics is about understanding your customers better.
Gallup also says that 70% of economic decision-making is made with emotional factors.
In the human brain, as I understand it, the emotional system provides triggers or thresholds that say, "Okay, you've thought about this enough. Now, make a choice." It's as if the emotional trigger is built into our brains to move us forward, even if the decision itself is not emotional.
Gallup does not specify the emotional factors, but it feels right, nonetheless. Of course, this concept is another thing I always say, so that it feels right to me isn't too surprising.
Forrester says 41% of customer-obsessed companies achieved at least a 10% revenue growth, compared to 10% of less matured companies.
Forrester has a customer experience maturity index, which increases to being customer-obsessed. I'm unsure if I like the word "obsessed," but that's a different kettle of fish. I disapprove of stalking customers or looking through their windows at night while they sleep.
Semantics aside, this stat indicates that life is good by focusing on improving Customer Experience, behavioral economics, and emotions. I don't disagree or have any negative feelings about this one. I must be feeling a bit American right now.
The American Customer Satisfaction Index (ACSI) says from 2010 to 2019, about 70% of the companies tracked by ACSI had declined or flat customer satisfaction scores.
What is worse is that since then, American customer satisfaction declined more. This issue is critical and brings out my pessimistic side. Luckily, my optimistic side points out that reframing this statistic could indicate that 30 percent of companies are improving.
Why customer satisfaction is not improving on a large scale is complex and nuanced. It may result from rising customer expectations. It could be a side effect of generalized anxiety and discomfort inspired by political and economic instability, which could lead to a general feeling of dissatisfaction.
However, it could also be that even as companies have implemented policies and systems that support improving experiences, if they do it wrong or unenthusiastically, it won't matter. I suspect many of these companies went through the motions to tell their stakeholders they did their due diligence in customer areas. Nonetheless, their hearts weren't in it; the numbers reflect that.
The headline here is that too many organizations jumped on a trend and didn't understand what they were trying to do. Also, too many professionals took on responsibility without authority and couldn't make the changes that they needed to make. Plus, they haven't equated an improvement in customer satisfaction to a revenue benefit, which doesn't do experience improvement any favors when it's time to budget resources.
Bain says increasing retention by as little as 5% can boost profits by as much as 95%.
Frederick Reichheld, a recent guest on the podcast, came up with this one. My optimistic side was encouraged by this stat. I have long been an advocate of focusing on customer retention over acquisition.
However, my pessimistic side is still surprised that few organizations focus on customer retention. It cripples their customer-driven growth.
For example, all the new incentives are for new customers. Meanwhile, your loyal customer for ten years gets the same high price. Who would stick around after being treated like that?
This statistic is disappointing considering the resources spent on all the experience programs. If I were the CEO of an organization looking to cut costs because of potential recessions and everything else, I know where I would cut.
It costs five times as much to attract a new customer than to keep an existing one.
This one is also from Bain. A cognitive bias in favor of filling the funnel instead of fixing the leaks in the funnel must exist. When you group statistics 6 and 7, it's clear that we favor getting new people over keeping the ones we have.
Growth can come from your current customer base if they're more satisfied. So, why would you not have a target for the retention of customers?
Invesp says 44% of companies have a greater focus on customer acquisition, and only 18% have that focus on retention.
We don't know why this happens, so we can't explain it. However, I share it because it does reinforce the previous two stats.
Emplifi says 61% of consumers will pay at least 5% more if they know they will get a great customer experience.
I would, too. So, why do organizations ignore this?
Forrester says in 2022, only 3% of US companies were customer-obsessed, down by 7% from 2021.
This statistic supports the ASCI direction, too.
Statistic # 11:
Invesp says the probability of selling to an existing customer is 60 to 70%, while the possibility of selling to a new prospect is between 5 and 20%.
This percentage varies by industry, but that 20% sounds optimistic. Again, this statistic reinforces the opportunity too many organizations ignore: existing customer growth.
If you sell to an existing customer, assuming you provide them with a decent customer experience, it will be far more profitable. You can skip acquisition, proving your trust, and onboarding, making it a more accessible sale for the company.
It's also more accessible for the customer to buy again from you. Rather than going through the time and energy spent looking for a new provider, going back to you is much simpler.
I do this, too. I don't shop my flights; I go to Delta. Do I pay more sometimes? Probably.
I also buy everything on Amazon. Is it more expensive? Sometimes it is, sometimes it isn't.
Despite the chance that I might pay more sometimes for an item, the benefit is I don't have to search and compare. Because of my relationship with Delta and Amazon, I know that price discrepancies will eventually balance out with lower prices on other items or even through realizing other benefits, like easy customer service or loyalty rewards. Wouldn't you like loyal existing customers buying like this from you?
The Journal of Business Research (JBR) found that customers who have an emotional relationship with a brand have a 306% higher lifetime value and will recommend the company at a rate of 71% rather than the average rate of 45%.
JBR is a peer-reviewed journal, meaning other scholars have "checked the findings." Therefore, you can feel reasonably confident that this bears out in the numbers. However, you don't have to get into all the numbers to realize that an emotional relationship goes a long way with a customer.
Organizations don't focus on the lifetime value, and they should because it is vital when looking at profitability.
Gallup shows that businesses optimizing their emotional connections outperform competitors by 26% in gross margin and 85% in sales growth.
This supports the last one, too. I find this one also encouraging.
Zendesk says that 52% of customers switch to competitors if they've had a single negative impression.
Yes, you read that right; 52% of customers will switch to a competitor if they've had a single negative impression. It emphasizes the importance of delivering a consistent experience.
So, these 14 statistics say a lot about the importance of a customer focus in your day to day. Moreover, they demonstrate that there's a massive opportunity out there for the majority of organizations.
After all these years, it surprises me that so few organizations have embraced and implemented these concepts correctly. Of course, some stats show they tried but didn't implement it properly. It shows how difficult change can be.
Many business people who climb the ladder love numbers, so they focus their attention there. However, they tend to ignore those areas regarding emotions, experience, or even marketing.
All business stakeholders should remember that they are transacting with human beings, and human beings have emotions. Therefore, the soft stuff matters, too. I appreciate how some of these stats can show how customers' feelings and psychology matter but do so in numbers that everyone can understand.
However, the people who believe in the soft stuff should also remember to talk to the ones who don't in a language they can understand. In other words, backing up your plan to improve things for customers requires general statistics and specific ones for your industry and business vertical.
So, what do you think about these statistics? I would love to hear your comments below.
We can help improve your Customer Experience and Marketing and gain growth. Beyond Philosophy has been recognized by the Financial Times as the leading management consultancy for four years. Why not talk with Colin and his team about how we can help you gain growth? Click here.
Colin Shaw is an original pioneer of 'Customer Experience.' LinkedIn has recognized him as one of the 'World's Top 150 Business Influencers', where he has 291,000 followers.
Shaw’s Customer Experience consulting company, Beyond Philosophy LLC, has been recognized by the Financial...