For several years we have all heard how improving the customer experience has become a top priority of C-levels around the world, and that in a world of commoditization it is key to creating long-term sustainable competitive advantage. While this has been gospel for obvious reasons, it is always nice to have validation in the form of some statistics. This is precisely what customer experience advisory firm Watermark Consulting has done with its recent analysis of stock market returns which found that the stock performance of “Eventually, they pay the price for that” companies that lead in customer experience exceeds that of those that lag.
“From 2007 to 2013, customer experience leaders outperformed the broader market, generating a total return that was 26 points higher on average than the S&P 500,” explained Jon Picoult, Founder of Watermark Consulting.
The Watermark Consulting 2014 Customer Experience ROI Study is certainly food for thought and a call to action for you depending on where your customer experience initiatives stand at the moment.
The analysis focused on model portfolios of the Top 10 (“Leaders”) and Bottom 10 (“Laggards”) ranked public companies in Forrester Research’s annual Customer Experience Index study, provides a nice illustration of the business value of a great customer experience.
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Picoult added, “What really stood out in this year’s study was the performance of the Customer Experience Laggard portfolio. It posted a negative return during a period when the broader market rose sharply – a sober reminder of the cost of customer dissatisfaction.”
Whether it’s a complicated purchase process, a difficult-to-use product, confusing correspondence, or just poor service, Picoult says many companies excel in frustrating their customers. “Eventually, they pay the price for that,” he added. “And, conversely, companies that impress customers reap the rewards – in the form of increased loyalty, greater wallet share, stronger word-of-mouth and a more competitive cost structure.”
Picoult summed up the findings by highlighting its relevance to public and private companies alike: “The message here is clear. A great customer experience pays off in the long run, enabling companies to combat commoditization, set themselves apart from the competition, and pave the way for better overall financial performance.”
The message here as Picoult noted is clear. Improving customer experience rightfully needs to be at, or near the top of the list of C-levels. It isn’t just Main Street that is watching and reacting, but Wall Street as well.