The Holy Grail: A Link Between Customer Experience And Loyalty

I just published a report called The Business Impact Of Customer Experience that I think will have a significant impact on how companies think about customer experience. Here’s an excerpt from the executive summary:

Executives know that customer experience is important, but they can’t always tie it directly to business results. So we examined the correlation between the customer experiences delivered by 112 US firms (as defined by Forrester’s Customer Experience Index) and the loyalty of their customers. Our analysis shows that good customer experience correlates highly to loyalty.

Most of us already intuitively knew that good customer experience is good for business; that’s the basis for My Manifesto: Great Customer Experience Is Free. But there’s no longer a need to debate the issue. This research objectively shows a strong tie between customer experience and consumer loyalty. Here are some more of the specific findings in the research:

  • For all 9 industries that we examined, there was a strong correlation between customer experience and loyalty.
  • Bank customer experience was the most correlated with loyalty, followed by wireless carriers.
  • Health plan customer experience was the least correlated with loyalty, followed by investment firms and retailers.
  • Companies in the top quartile of customer experience have a much higher level of customer loyalty than do those in the bottom quartile: 15% increase in customers that are willing to make another purchase and a 18% decrease in customers that are likely to switch providers.
  • Customer experience quality was most highly connected to the purchase plans of Fifth Third’s customers and the intentions to switch of Cablevision and Nextel customers.
  • When we examined how this might affect the annual revenue of individual companies, we found that customer experience quality could cause a swing of $242 million for a large bank and $184 million for a large retailer.

In case you’re interested, here’s how we did the analysis:

  • Determined the customer experience levels of 112 firms across 9 industries based on Forrester’s Customer Experience Index (CxPi) which examined responses from nearly 5,000 US consumers.
  • Calculated the correlation between each firm’s CxPi and two measures of loyalty: 1) the willingness of customers to purchase another product from the firm; and 2) the likelihood that customers would switch business away from the firm.

What should you do now? Chart a path to Experience-Based Differentiation.

The bottom line: As my blog says, Customer Experience Matters. Really!

About Bruce Temkin
I am a customer experience transformist, helping large organizations improve business results by changing how they deal with customers. As part of this focus, I examine strategy, marketing, interaction design, customer service, and leadership practices. I am also a fanatical student of business, so this blog provides an outlet for sharing insights from my ongoing educational journey. Simply put, I am passionate about spotting emerging best practices and helping companies master them. And, as many people know, I love to speak about these topics in almost any forum. My “title” is Managing Partner of the Temkin Group, a customer experience research and consulting firm that helps organizations become more customer-centric. Our goal is simple: accelerate the path to delighting customers. I am also the co-founder and chair of the Customer Experience Professionals Association (CXPA.org), a non-profit organization dedicated to the success of CX professionals.

12 Responses to The Holy Grail: A Link Between Customer Experience And Loyalty

  1. Pingback: Information Bricolage » “Customer Experience” Linked to “Customer Loyalty”

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  6. Wim Rampen says:

    I’ve been digging into your Customer Experience correlation with Loyalty today. Since I’m currently working for a health insurance company in The Netherlands I was interested to know to what extend your remark

    “Health plan customer experience was the least correlated with loyalty, followed by investment firms and retailers”

    means that there is no correlation with Loyalty or that other elements show higher correlation to loyalty for Health insurers.

    Would be greatfull for your feedback.

  7. Pingback: Forrester’s 2008 Customer Experience Rankings « Craving Fan

  8. Pingback: Forrester’s 2010 Customer Experience Rankings « Customer Experience Matters

  9. YES! Customer service is VERY important! In my 6 years of customer experience I have learned that. In fact many forget, the customer is your bread and butter! So you need to have good service!

  10. Business owners should concentrate on giving their customers good line of service. Good customer experience tantamount to loyalty.

  11. Great point! Once a customer is not satisfied with the service, expect that they’ll tell it to their friends and you doesn’t lose just 1 customer but a lot. That’s bad networking, right?

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