CX as Your Competitive Advantage

CX as Your Competitive Advantage

Ayan Chatterjee, Vice President, EyeCareLeaders, 0

The Rajahs, Maharajahs & Emperors of yore used to protect their prized cities & assets with deep moats & high walled forts. All in an attempt to stave off the raiding hordes of barbarians at their gates. In the modern world, companies do the same thing. However, instead of moats, they use pricing, innovation, distribution power, cost management as both defensive and offensive strategies. A mix of these constitute their competitive advantage. To that mix we now find 'Customer Experience', or 'CX' as it's popularly referred, as a critical component. With constant conversation around recession and indicative economic uncertainty, customer retention is key to consistent cash flow & profitability. Hence investing in the customer's experience with the company translates to investment in the company's growth engine. A Salesforce survey of 13,000 customers & 4000+ business users across 29 countries states that 88 percent of consumers & business buyers alike say experience matters as much as products.

Customer loyalty has also been proven to increase the likelihood of sales as customers are served better across each touch point in their journey. In fact, a customer survey shows 94 percent of customers say good customer service makes them more likely to make another purchase. In the absence of any glue tying the client with the company, they are more likely to churn borne out by customer stats that state 71 percent reported switching brands just in the last year. As Brian Solis wrote in Forbes, “Commerce is about community and community is about relationships. The better you treat your customers, the more likely you are to retain them, the more likely they are to return, and of course, the more likely they are to spread the word”.

A Strong Foundation: Converting CX to a Competitive Advantage
If you were asked to cite two examples of companies that have used customer experience (CX) as their competitive advantage, chances are you will name Amazon & Netflix. They have clearly demonstrated benefits of having customer centricity as the prime determinant for every decision & strategy. And its catching on. As per research firm Statista, 44.5 percent of organizations worldwide revealed that they perceive CX as a primary competitive differentiator. But securing a competitive edge isn't a cakewalk as some might think. To ensure it doesn't fester in the realms of spirited board discussions, it is important to understand & measure the business impact of your CX activities. You start by defining the value proposition in the context of your business strategy. And once you set up your CX program, you start tracking the impact with the help of the following metrics. As you start acing these, you will soon see your CX transforming to your Competitive Advantage.

Four Key Metrics to Measure the Financial Impact of CX
Customer Satisfaction
Heads up! Don't mistake Customer Satisfaction for Customer Experience. Customer satisfaction or what I like to call the 'Happiness Quotient', is one of the measures to tell you if your CX strategies are working. It should be measured both quantitatively (think NPS/CSAT) and qualitatively (through reviews, direct feedback, interviews, focus group feedback, online mentions). Industry level benchmarks are generally available for you to baseline yourself against your competitors. To exhibit financial impact of customer experience, you will need to identify how each part of the experience (touchpoint for e.g. the contact centre or website) influences a particular response and apply a scoring system. Mapping the entire customer journey & scoring each interaction helps identify & measure friction points in a journey. It also highlights points of happiness which is what you want more of. Advanced tools like behavioral analytics and conversion funnels can help you understand the 'why' behind the response & scores.
Customer Lifetime Value (CLV) & Average
Order Value (AOV)

As you know, CLV refers to the quantity of revenue a client generates throughout the duration of their relationship with the company. Look at how it's calculated by multiplying the value of the customer to the business by their average lifespan. Companies with ARR/MRR (annual recurring revenue/monthly recurring revenue) business models are definitely dependent on a positive CX for their longevity. The metric helps you identify core customers that generate the maximum return (remember the 80:20 rule?). Clubbing with customer journey scores helps you identify factors that increase stickiness & revenue opportunities. Improving CX relates to improving trust. That in turn helps increase the average order value as customers open up to upsells & cross-sells. Increase in CLV & AOV values will definitely indicate your CX efforts are paying off.

A Salesforce survey of 13,000 customers & 4000+ business users across 29 countries states that 88 percent of consumers & business buyers alike say experience matters as much as products

Order Frequency
Chances are that you won't break even if a customer only purchases from you once. So you want them to keep coming back! Retention rates are connected to order frequency and value. For example, a Bain & Co research cited that average repeat clients spent about 67 percent more on apparels in months 31 – 36 of their relationship shopping with them than in months zero to six.

Some Interesting Stats
Adobe estimates that repeat customers are 9x more likely to convert than first timers. Big Commerce data revealed that the most loyal 10 percent of customers spend 3x more per order than the other 90 percent, while the top 1 percent spend 5x more than the other 99 percent. Not only is there a direct link between customer experience & profitability, it's cheaper too. Repeat purchases from existing customers relate to direct savings on CAC (customer acquisition costs)onboarding, follow up & promotions since they are less likely to require a lot of push to make a purchase.

Sales through Promotions
Most businesses employ promotions to reel in new customers. While a valid customer acquisition tactic, it is not a sustainable or financially viable sales strategy over a long term. Clients that only buy during promotions cannot be qualified as 'Most Valuable Patrons'. If the client has an exceptional customer experience, their affinity to the brand would increase, their referrals will increase & they would need lesser financial incentives to make a purchase. If your audit throws up an increasing number of clients making purchases only during promotions chances are that your CX efforts need to be ramped up.

Not only does great Customer Experience help companies retain their clients, but it also converts them to'Promoters' ambassadors of the brand. Staking their own reputation to promote the product/service /company to their friends & family. Think about the last time you did that for anyone.

However don't take their love for granted. Customers expect personalization, quick response & a great experience every step of the way. Gone are the days when they would turn a blind eye to your repeated infractions. Once they leave, it is extremely difficult (not to say expensive) to earn back their trust and get them back to your product or service. If you don't stay ahead of the curve, your business will not prosper. Finally Be patient. This process takes time. So, keep realistic expectations. Start small but stay the course. After all, 'A journey of a thousand miles starts with a single step’.

Ayan Chatterjee, Vice President – Marketing, Eye Care Leaders
Marketing & strategy professional, Ayan has gained vast cultural diversity through operating varied businesses across the United States, UK, Asia & the Middle East and he has demonstrated history of leading a successful multimillion dollar business.