Let’s start by getting the exceptions out of the way. You can safely ignore the following advice if
- your product or service is considerably cheaper than competition
- or you have a monopoly
In these cases, you can do pretty much whatever you want and the customers will still come back to you even if they were poorly treated. That is until a new competition emerges and eventually steals all of your customers, one by one.
These customers are just that – customers. They are not loyal to you by any means. They will not think twice when they are offered the same deal from a different company. They will gladly jump the ship.
According to a study by Oracle, 86% of customers will pay more for a better customer experience.
But turn that around, offer a great customer experience and they will subconsciously ignore any offers from the competition.
It’s not in their nature to try and gamble with a different product when they are already happy. They form strong bonds with companies that make them feel happy and can be easily persuaded to spend more money where they are being appreciated and treated as fellow human beings.
Harvard Business Review has published a study which states that average annual revenue per customer is 140% more for the happiest customers compared to those who had the worst customer experience. And it’s not just because they buy the same product again, we need look deeper.
Customer Lifetime Value
Let’s say your product costs $100, is a one-time purchase and you provide a horrible customer experience. Your business expenses to make that deal are $50. So your Customer Lifetime Value is $50. Sounds like you are doing pretty well, yes?
No. Onboarding customers to purchase your product, be it from advertising or a high-profile street location, is often very expensive. It’s expensive because you are not leveraging the natural growth multiplier that comes with offering an excellent customer experience that in turn lowers the price of acquiring a new customer. Because you could actually make one customer into two. And that’s a lot of money if you are just leaving it on the table.
A study from American Express found that a happy customer will share their experience with 9 people on average.
What’s more is If their experience was bad, they share it even more because people are love to share their burdens with other people – it makes for a good small talk. Plus they feel better if they can at least badmouth your horrible company in the process. Take Dave Carollo for instance, who allegedly made the United Airlines stock drop by 10% ($180mil) after he launched a viral campaign against the company because they broke his $1,200 guitar and declined to reimburse him.
According to this report from RightNow, 82% of customers have stopped doing business with a company as a result of a negative experience.
Now those 9 people that heard about a customers great experience will often share it with even more people down their foxhole. So let’s ballpark it and say that the message originating from one of your happy customers could eventually reach 20 people in total. If your general conversion rate is let’s say 5% that means you have just earned an extra sale. Essentially any customer has now doubled their Customer Lifetime Value.
That also means you have instantly doubled your revenue as well. Now if your business situation was for example verging around a break-even point where you couldn’t afford much advertising, you have now been given enough ammunition to pay for acquiring even more customers. It’s all connected in one big circle and you are seriously missing out if you are treating your customers less than excellent.
So to sum it up, providing an excellent customer experience will accelerate the natural growth of your business, usually at a relatively low cost. Think of it as one of the necessary multipliers that make any business work properly and scale appropriately in the future. One that is easy to implement and comes with minimal cost and maximal return on investment.
Have you ever wondered why our own product, The Ark WordPress theme, has considerably more sales than any other theme that was released after Ark? One of the big reasons (or rather pillars) is because we chose to care deeply about you, our customers, and in turn received your loyalty and positive mentions about our products and services to your friends and colleagues. And we sincerely thank you for that because without you and your help with personally introducing more users to our platform, we would not be able to achieve so much success.