Is customer experience important?
Customer experience (CX) is a term that's thrown around a lot these days in the world of business—but if you're not familiar with its nuances, it can be difficult to understand where it fits into your business model
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What is customer experience?
Customers are the lifeblood of your business. This much is obvious.
However, what may not be so apparent is that customer experience matters to both customers and companies, and it can make or break your bottom line.
Customer experience, often abbreviated as CX, is the sum of every interaction a customer has with a business.
Customer experience (CX) is a term that’s thrown around a lot these days in the world of business—but if you’re not familiar with its nuances, it can be difficult to understand where it fits into your business model.
To clarify CX’s distinct characteristics and its importance to businesses, let’s take a look at how it relates to two other terms that are frequently confused with it: customer satisfaction (CSAT) and customer service (CS).
You might also have heard the term customer satisfaction. It focuses on evaluating how well a service or product meets expectations. Customer experience looks at the entire journey and relationship between customer and company.
Customer experience isn’t just about your brand or your product—it also tells us how we’re performing as people at work and what actions you should take to improve everyday life for everyone involved in doing business, including customers.
Customer service, on the other hand, focuses on the immediate issue.
Customer service is reactive and is responsible for many tasks. A customer service agent helps customers get the most out of a product or service, answers questions and resolves problems, and helps customers resolve doubts about the product or service.
Examples of customer service include:
- a help desk
- an in-store assistant
- email support
- call center agents
- live chat support and chatbots
- a community forum
Customer experience is important
It’s important, on a very basic level. Your customers are going to tell their friends and family about their experiences with your brand, and those friends and family will take the story into account when they make purchasing decisions. A bad experience means the loss of that customer and everyone who knows them.
It’s important because you can use it as a marketing tool. If you have great customer service, your business will grow through word-of-mouth recommendations. Those are some of the best marketing tools available: customers recommending you to other customers.
It’s also important because your customers may be loyal to your brand if they know you care about them. Great customer service builds relationships, which is invaluable in any industry that requires repeat business.
Different from customer satisfaction
The difference lies in the fact that customer satisfaction—while still very important—is a more objective measure of whether the business has met its promises.
For example, a consumer might be satisfied with their purchase but find that an item was a little too expensive for what it provided.
Customer satisfaction is a way to measure if specific touchpoints of your customer experience are performing as expected.
It affects company performance
It’s pretty obvious that customer experience is important when it comes to how your customers feel about you and your brand.
But what about whether or not it affects your company’s performance?
If you look at a company’s net promoter score (NPS), which measures how likely customers are to recommend a company in the form of a 0-10 scale, you can see that there is indeed a connection between customer experience and company performance.
Companies with high NPS outperform their competitors financially. They have lower costs, higher share price, higher profit and higher customer retention.
And if you consider the fact that high NPS means higher customer lifetime value as well, then it becomes clear why companies with high NPS perform better overall.
Bain & Company established a correlation between relative Net Promoter Scores and growth (full article here).
In most industries, Net Promoter Scores explained roughly 20% to 60% of the variation in organic growth rates among competitors.
On average, an industry’s Net Promoter leader outgrew its competitors by a factor greater than two times.
In other words, a company’s NPS is a good indicator of its future growth. But the relationship is stronger in some industries than in others.
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