In an earlier blog about recession-proof marketing strategies, I talked about how there is a direct correlation between a company’s growth and its focus on customer experience during a recession. But what does focusing on customer experience mean, and why is it important?
The cost of acquisition
Marketing is expensive. Even global brands that are the market leader in their category spend heavily on advertising to retain and grow their market share. ‘Coca-cola’ is the second most widely recognised word globally after ‘ok,’ but even with their ubiquitous brand, they spend $4b a year on advertising.
To grow their market share, many brands focus on acquiring new customers, yet studies have shown that it can cost five times more to attract new customers than to simply keep your existing customers.
Prescription for cutting costs
But how can brands reduce acquisition costs and continue to grow? The answer seems relatively simple, and I’ve alluded to it already – look after the customers that you have. Make sure that they have a great experience whenever they interact with your brand’s products or services. In 2001 Business strategist Fredrick Reichheld wrote a paper explaining that in downturns, when many companies are tightening their belts, they often miss their most significant opportunity to keep costs down. In ‘Prescription for cutting costs,’ he explains that in the financial services sector, a 5% increase in customer retention produced more than a 25% increase in profit.
How to predict loyalty and growth
How can brands measure customer loyalty? Reichheld believes that brands can easily get bogged down by measuring too many metrics, which he calls ‘analysis paralysis.’ In 2003 the Harvard Business Review published one of Reichheld’s papers, where he introduced a new model for measuring customer loyalty, which he called the Net Promoter Score (NPS). The NPS score measures how likely a customer would recommend a product or service to others. He argues that it is the only metric that could accurately predict customer loyalty and organisational growth.
The only path to profitable growth may lie in a company’s ability to get its loyal customers to become, in effect, its marketing department. Fredrick Reichheld
The cost of treating your customers badly
It makes perfect sense that looking after your customers is good for business. Sadly some organisations have lost their way, often as a result of putting profit ahead of their purpose and people. To understand the potential ramifications of offering a poor customer experience to your customers, I’d like to tell you a story about one airline, a man and his guitar.
In 2008 the musician Dave Carrol booked an internal flight with United Airlines. As the plane was preparing to depart, he looked out of the window and noticed the baggage handlers were being careless with the luggage. He worried about his guitar, his most prized possession, which he had checked in earlier. When he arrived, his worst suspicions had been confirmed. His guitar was broken. Every member of staff that he spoke to was unsympathetic and indifferent.
Despite multiple attempts asking United Airlines for compensation or at the very least an apology, he decided to take matters into his own hands. He joked that he was too poor to sue them, so he chose instead to write a song called ‘United Airlines breaks guitars.’ The video soon went viral, which is a fantastic feat, given this before Facebook and Twitter had taken off. The negative publicity surrounding United Airlines caused its stock to fall 10% – an estimated loss of $180m. Today the video has had over 20 million views.
You’d have thought that United Airlines would have learnt their lesson, but in 2017 they were in the headlines again when they refused to let two young girls board a flight as they were wearing leggings and for using force to drag a man off an overbooked flight.
Taking bad customer experiences to Twitter
Thanks to social media when brands fall short of their customers expectations they can simply air their grievances online to the world. In late April, millions of Virgin Media customers lost their internet. Losing your internet is inconvenient at the best of times, but during lockdown, you can imagine how distressing many found the situation. Looking at Twitter, most complaints directed at Virgin Media were at the lack of support and customer service:
Don’t see why #virginbroadband is trending ? I’ve been with them for 2 years and it’s been complete shit from the get go. Nothing new here at all.
— scott (@ScottMichl_) April 28, 2020
— rich (@rjgux) April 28, 2020
— Mark Fearon (@MarkFearon6) April 28, 2020
Can’t say I’m surprised #virginbroadband is down,we dumped them a couple of years ago coz they were hopeless & customer service was nonexistent.If they were a car,this would be it!#virginmediadown pic.twitter.com/HFwqHjqSmL
— Den Brimmell (@BrimmellDen) April 28, 2020
Sadly this poor customer service was not an anomaly. In a survey of over 12k customers, over 85% rate Virgin Media as ‘bad’. With price comparison websites making it easier than ever to switch utility providers, customers can easily leave Virgin Media and take their custom elsewhere.
“If you don’t appreciate your customers, someone else will.” – Jason Langella
Hopefully, now you’ll see that focusing on customer experience is a win-win for everyone. Not only are your customers more likely to have a good experience with your brand, but they’re also more likely to be loyal and recommend you to their peers, which in turn helps you keep acquisition costs down.
By having your customers’ needs at the heart of what you do, you’ll be able to grow. This is something that Amazon does particularly well. They’ve made it incredibly easy to purchase anything, seamlessly, and it arrives, often before you know it. Amazon’s founder, Jeff Bezos, believes that brands should treat their customers in the same way that they’d treat guests at their party:
“We see our customers as invited guests to a party, and we are the hosts. It’s our job every day to make every important aspect of the customer experience a little bit better.” – Jeff Bezos
Further reading: ‘The One Number You Need to Grow’
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