By Shubhi Agarwal
“Customer experience is one of the two core pillars of customer retention; the thing is, you can’t grow if your customers don’t stick around.”– Jes Kirkwood
In today’s ever-evolving landscape of customer loyalty, traditional tactics like cashbacks, discounts, and promotional offers have undergone a paradigm shift. Customers now seek more than just transactional incentives when deciding to remain loyal to a brand; they crave a sense of value and appreciation for their loyalty. Recent studies shed light on this evolving mindset, revealing that 74% of customers express loyalty to specific brands or companies, with 57% emphasising the influential role of customer service in shaping their loyalty decisions. This highlights the profound impact that the experience businesses create for their customers can have on their retention rates.
The Relationship Between Customer Experience and Loyalty
A direct correlation has been established between customer experience and loyalty. Loyal customers are five times more likely to make repeat purchases and seven times more likely to explore new product offerings, as additional reports reveal. These findings emphasise the critical role that the experience businesses deliver to their customers—both positive and negative—plays in determining their retention rates. Understanding this relationship underscores the importance of implementing effective Customer Experience Management (CXM) strategies to cultivate long-term customer loyalty.
The Significance of Customer Retention
Customer retention has emerged as a top priority for organisations aiming to thrive and grow sustainably. It is well-established that acquiring new customers is significantly more expensive than retaining existing ones, with the Harvard Business Review estimating that acquiring a new customer is 5 to 25 times costlier than retaining an existing one. Furthermore, most businesses derive a substantial portion of their revenue, approximately 80%, from just 20% of the loyal customers base they have built trust with over time. Consequently, prioritising customer retention becomes an invaluable practice for financial stability.
The Shift towards Customer Retention and CXM
In addition to the financial aspect, customer expectations have played a significant role in elevating the importance of retention. Today’s consumers expect brands to be highly engaged and capable of delivering personalised experiences. If businesses fail to invest effort in retaining customers, they risk losing them to competitors who offer superior experiences. As a result, many companies have shifted their focus toward customer retention, recognising the long-term benefits it brings. This shift has driven organisations to embrace Customer Experience Management (CXM) as a strategic approach. CXM empowers businesses to enhance customer satisfaction, build loyalty, and ultimately boost the customer retention ratio.
Let’s delve into the profound link between Customer Experience Management (CXM) and customer retention. The transformative power of CXM allows organisations to not only solidify their customer base but also cultivate enduring relationships that fuel growth and success, even in the face of intensifying competition.
Understanding customer needs and preferences: Decoding the preferences and pain points of customers is the key to building a successful path towards a greater customer experience. It enables businesses to gain a deep understanding of the customers’ requirements, thereby facilitating the development of better products, marketing plans, and customer service strategies. By actively understanding customer needs, businesses foster better relationships with their customers and win their trust. This understanding also allows businesses to identify areas for improvement in their respective products or services, ensuring continuous enhancement and alignment with customer expectations.
Seamless Omnichannel Experiences: Customers now interact with brands across multiple channels, both online and offline. Ensuring a seamless experience across these channels is vital for customer retention. Whether it’s a website, mobile app, social media platform, chatbots or in-person interaction, maintaining a consistent brand experience and providing a frictionless journey is crucial to keeping customers engaged and satisfied. CXM enables businesses to create an omnichannel approach, where customers can seamlessly transition between various touchpoints without experiencing any disruptions or inconsistencies. This consistency fosters customer trust and loyalty, which increases customer retention.
Proactively problem solving: Effective CXM involves proactive customer support that anticipates and addresses customer issues before they escalate. By leveraging technology such as AI-powered chatbots, businesses can provide instant assistance, 24/7. Proactive support not only resolves customer concerns swiftly but also showcases a commitment to customer satisfaction, fostering loyalty and encouraging customers to remain loyal to the brand. These solutions can also offer personalised recommendations, answer frequently asked questions, and resolve common problems, freeing up human agents to focus on more complex issues.
Personalisation and Empathy: Personalisation is a key pillar of CXM. Customers today expect personalised interactions that resonate with their individual needs and preferences. By leveraging data analytics and customer insights, businesses can deliver tailored experiences, such as personalised recommendations, customised communication, or targeted offers. Demonstrating empathy and understanding builds stronger relationships with customers and fosters loyalty, increasing the likelihood of repeat business.
Continuous Feedback and Improvement: CXM is an iterative process that requires ongoing evaluation and improvement. Gathering customer feedback through surveys, reviews, and social media listening provides valuable insights into customer satisfaction levels and areas for enhancement. Actively incorporating customer feedback into strategies demonstrates responsiveness to customer needs and expectations. This iterative approach enhances the overall customer experience and boosts customer retention as customers feel valued and heard.
Competitive Advantage: Implementing CXM as a core strategy gives businesses a significant competitive edge by setting them apart through exceptional customer experiences. Research shows that companies leading in customer experience outperform their competitors by nearly 80%. In fact, two-thirds of companies primarily compete based on the quality of customer experience they deliver. By prioritising CX, businesses cultivate satisfied and loyal customers who are less likely to switch to competitors, resulting in higher retention rates.
CXM for Experience-led growth
The relationship between CXM (Customer Experience Management) and customer retention is indisputably intertwined. While customer retention is crucial for a thriving bottom line, it is the outstanding customer experience that fosters loyalty. This loyalty drives retention rates and fuels overall lifetime value of a customer and business growth. Satisfied customers are more likely to make repeat purchases, refer others to your brand, and provide positive feedback, all of which contribute to increased profits. A modest 5% increase in customer retention can yield a substantial 95% increase in profits. Therefore, effective CXM strategies, based on customer behaviours and patterns, are vital for attracting and retaining customers, gaining a competitive edge, and achieving sustainable growth.
Understanding customer behaviours and leveraging consumer data through the right CXM platform serves as the foundation for developing impactful customer retention plans. When integrated with sales and marketing automation, the CXM platform becomes a powerful tool in combating customer churn and maximising the customer’s wallet share. Embracing CXM for experience-led growth is the key to unlocking long-term success in today’s competitive business landscape.
(The author is Shubhi Agarwal, Co-Founder and COO Locobuzz, and the views expressed in this article are his own)
