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, CCXP
I'm an experience (XM) management catalyst; helping organizations improve results by engaging the hearts and minds of their employees, customers, and partners. I enjoy researching and speaking about these topics. I lead the Qualtrics XM Institute, which is the world's best job. We're igniting a global community of XM Professionals who are inspired and empowered to radically improve the human experience. To achieve this goal, my team focuses on thought leadership, training, and community building. My work is driven by a set of fundamental beliefs: 1) Everything starts and ends with human beings, so you need to understand how people think, feel, and behave; 2) XM is a discipline that needs to be woven throughout an organization's entire operating fabric; and 3) Building the XM discipline requires a combination of culture, competency, and technology.

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

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

  2. Pingback: BofA + Merrill, The Customer Experience Angle « Customer Experience Matters

  3. Pingback: Aspect Contact Center: Unplugged Blog » Blog Archive » Aspect and Tellme Join Forces

  4. Pingback: Forrester’s 2008 Customer Experience Rankings « Customer Experience Matters

  5. Pingback: never mind your customer « Fredzimny’s Blog

  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?

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: