You cannot outperform competition by offering lower prices while ignoring customer experience.
That’s according to Forrester’s new report Banks And Retailers: You Cannot Price Your Way Out Of Bad Customer Experiences, which surveyed over 7,500 US consumers about their customer experience, loyalty, and price-value perception based on their recent interactions with banks and retailers.
The report showed that customer experience (CX) is a more powerful customer loyalty driver than price-value perception and accounts for 55.1% of loyalty for banks and 46.5% for retailers. However, while price plays just a small part in driving loyalty, banks and retailers must not ignore price-value because it affects loyalty via its impact on CX.
So why does CX trump price for customers? Author of the report Maxie Schmidt-Subramanian explained that customers first identify a product or service that meets their needs and then judge its value for money. Additionally, the study showed that price cannot beat convenience or outweigh customers’ emotions.
But despite this, companies cannot ignore price completely. The research showed that that price-value perception correlates with all three components of CX — meets needs, easy, and enjoyable. Additionally, whilst price might have little direct effect on loyalty, it will still slightly affect the outcome due to its link with CX, said the firm.
In terms of examining banks and retailers specifically, Schmidt-Subramanian found that whilst banks depend on great CX, many are not good enough at delivering it because they impose overly aggressive pricing. This was shown to have a lasting negative impact on CX as well as negatively impacting customer retention and upsell or cross-sell.
On the other hand, customer experience comes with the territory for retailers – for the fourth year in a row, retailers had the highest average score across all industries in Forrester’s CXi with 82.19. The problem they have is adding a strong CX approach to gain competitive edge, said Forrester.
To stand above the parapet, retailers can most drive loyalty through meeting customers’ needs, providing superior service and again Forrester reiterates that price does still matter, due to its link with CX.
“Banks and retailers can’t outperform competition on price only while ignoring CX. Instead, they should formulate a CX strategy that describes their target customers’ CX and pricing needs. To win over customers, retailers need to compete on CX, not price, and banks need to build trust in the transparency and fairness of their rates and fees,” said the report.
Banks have been making headlines in recent months for their failure to offer superior customer service. Ovum recently reported that European banks, fearful of data security issues, are reluctant to sell their products and service over the social channel – missing out on increased sales and better customer service as a result.
The DMA advised in its Financial Services tracking study that banks’ marketers are failing to capitalise on financial product cross-selling opportunities with existing customers.