Everybody knows that the Customer Experience is the heart of the business – but what is the actual impact?Read more
Return on the Customer Experience
In general, it makes good sense to analyze customer satisfaction – and intuitively delighted customers yield a higher return than dissatisfied. But establishing a clear link from these programs to financial performance might be necessary and beneficial in a world where every penny has to be prioritized. By combining Customer Experience programs and financial data we helped a client find that link.
How do we make sense of our Customer Experience program?
Our client – a large industrial packaging supplier – sought to make sense of their Customer Experience program by connecting the dots between customer satisfaction and financial performance. Doing so is becoming increasingly important in an environment where hard facts are needed to justify customer strategies and drive changes. While several years of customer satisfaction data was available, their impact on actual results remained unclear leaving questions about the actual profitability of the programs. By collecting several years of financial performance and linking to the already available data from recent years, we were able to show not only a link, but also important insights on risk and return.
Figure 1: Risk of current customer base
*Note: The loyalty segmentation is based of ag analytics’s loyalty matrix which seperates customers based on their loyalty and satisfaction.
While the current picture shows that a large part of the revenue is placed at customers categorized as Satisfied or Ambassador, 14% of the revenue is to be regarded as being in high risk of leaving. Through the Customer Experience program already in place, our client was able to pinpoint the exact customers accounting for the negative feedback and evaluate on the underlying reasons of the risk.
Assessing the return on improvement
With a picture of the current state in place, it seems obvious that improving the experience for disloyal customers would safeguard a larger part of the revenue. Nevertheless, the question remains, what is the actual return? Using the results of last year’s customer survey, we divided the customers by loyalty and analyzed their financial development over the last year.
Figure 2: Return on customer base from 2013 to 2014
Although only small movements were seen in most groups, the most dissatisfied and disloyal customers almost halved their business. If this development continues over the next year, the 7% who were categorized as high risk is expected to cut a major part of their business. This makes it essential to assess these accounts and solve their problems.
Having established a clear link from customer satisfaction to financial performance, both executives and account managers are encouraged to act on the gained insight. Furthermore, we were able to categorize the current customer base and thereby the current states of the business where large parts of the revenue are safe, but significant shares remain with disloyal customers who might defect at any time.