Why customer centricity is key to financial health
Owners and CEOs must appreciate the massive value of brand resonance among customers.
One of the biggest challenges in strategy consultancy is closing the gap between executive focus on customer centricity and the execution teams. Owners and CEOs fully appreciate the massive value of brand resonance among the customer base. One could argue that almost all management efforts is to close that gap. The friction occurs because the rank and file in many companies still tend to focus on a "sales era" culture - Build it and they will come.
The focus on happiness is a reflection of customer-centricity - to understand what people and businesses want and to enable it for them. Rather than undefined statements about the subject of customer centricity, this article lays out 10 statistics from diverse sources to demonstrate the key role that it plays.
USD 1 trillion. According to research from Accenture, US companies risk losing $1 trillion in revenue if they fail to maintain customer relevance, forcing consumers to seek alternative brands. Once gone, more than one quarter of the consumers are unlikely to return. This is based on a survey of 400 C-level executives. Companies that maintain customer relevance are also 3x more likely to achieve above-average revenue and profit growth.
5x as likely to buy again from, 7x as likely to try a new product from, 5x as likely to forgive and 4x as likely to refer a company that is high on customer empathy. (CloudCherry blog based on The Temkin Group Ultimate CX Infographic, Oct 2018). When building a company, the imperative is to keep understanding what the customer wants and find ways of fulfilling the need effectively and profitably.
It's 5x to 25x more expensive to acquire a new customer than to retain an existing one. This is based on a Harvard Business Review study. And yet it's quite common to see companies burning investor money on "buying" new customers in the name of scale, rather than refining the proposition to the level where a small number is delighted. Legend has it that Uber was initially so focused on quality and customer experience that they celebrated when just 25 limousines signed on to transport customers within a small area around Mission Street in San Francisco.
Seventy per cent of customers will buy again from a company that provides outstanding customer service, according to American Express, in a 2011 survey. It reflects the philosophy of the company. This is possibly the reason why American Express holds on to its high-net-worth and corporate customers with almost unbreakable tenacity.
Sixty per cent more profitable. That's the impact on profitability of companies that are focused on customers versus those that are not. In fact, the blog posted by Steven MacDonald goes on to claim that customer centricity trumps data, innovation, collaboration and agility as contribution to profitability. This is again an important statistic for all the startups that intend to build their companies on buzzwords such as "data is the new oil," "innovate-or-die" and other such motherhood-and-apple-pie statements.
Ninety per cent of marketers say that making marketing individualised is a priority. They want to move beyond segmentation to true one-to-one personalisation in a real-time context. That's according to the Teradata 2015 Global Data-Driven Marketing Survey. So, what does it take to make this happen? Walk in to a Starbucks coffee shop or a McDonalds and the answer is immediately apparent. The ability of a brand to cater to individual choices is critical to success. This is equally applicable to business customers.
Sixty three per cent of CEOs want to rally their organisations around the customer as a top investment priority this year, according to PwC. This is the gap referred to at the beginning of this article. Although there is overwhelming intent, it doesn't always translate to execution.
Twenty one per cent more likely to do business with a company - millennials are that much more sensitive to a positive customer experience than other demographics. That's according to a 2017 American Express survey. This is a direction that is well-recognised by the payment industry. Millennials are highly sensitive to their payment experience.
Seventy two per cent of businesses say improving customer experience is their top priority. That's according to Forrester. This is another area where startups could profitably focus on. From customer engagement to CRM, to other ways to delight the customer, companies are looking for support.
A 5 per cent increase in customer retention rates increases profits anywhere from 25 per cent to 95 per cent. This statistic is based on a Bain & Company study. In a way, this supports the statistic about the cost of customer acquisition versus retention. But from a P&L perspective, it shows the value of investing incrementally to get multiplier results.
There it is. Ten statistics on why customer centricity is critical for financial health.