Walt Disney once said: "Do what you do so well they want to come back and bring their friends."
This statement shows that Disney believed that there is a link between customer experience and loyalty. But, is Disney's statement an accurate description of consumer behavior, or is it just the wishful thinking of an eccentric visionary or a phenomenon that only holds true for theme parks and movies? To answer this question, we decided to test Disney's statement.
Testing the connection between customer experience and loyalty
Temkin Group recently completed two major studies, the 2011 Temkin Experience Ratings and the 2011 Temkin Loyalty Ratings, which examine feedback from 6,000 U.S. consumers. The combination of these two reports helps us evaluate Disney's statement.
The Temkin Experience Ratings is based on consumer feedback in three areas of their experience:
- Functional: How well do experiences meet consumers' needs?
- Accessible: How easy is it for consumers to do what they want to do?
- Emotional: How do consumers feel about the experiences?
The Temkin Loyalty Ratings is based on three elements of consumer loyalty:
- Repurchase: Will the consumer buy more from the company?
- Don't switch: Will the consumer keep her business with her current provider?
- Recommend: How likely is the consumer to recommend the company?
Once we ran the consumer responses through our analysis, we ended up with a loyalty rating and a customer experience rating for 143 companies across 12 industries. To better understand how each company performed compared to its peers, we calculated the difference between their scores and the average for their industry.
Customer experience correlates to loyalty
As you can see by looking at the customer experience leaders and loyalty leaders, there appears to be an overlap. This connection becomes even clearer when we map all 143 companies on a scatter chart with customer experience and customer loyalty as the axes.
It doesn't take an advanced degree in statistics to see that these two measures are correlated. The companies that have the better customer experience ratings also have more loyal customers.
So Disney was right; when companies treat their customers well, they will come back and bring their friends. And, with the growth of social media, consumers can tell significantly more people than Disney ever imagined.
Customer experience drives $100s of millions
Once we found that customer experience and loyalty were correlated, we built a model to understand how an increase in customer experience will affect revenues. Here are some of the things that we found:
- Customer experience leaders have almost 13 percent more customers that are likely to recommend them than customer experience laggards.
- Customer experience leaders have almost 11 percent more customers willing to buy more products from them than customer experience laggards.
- Over three years, $1 billion companies that modestly improve their customer experience can increase revenues between $179 million (for health plans) and $308 million (for hotels).
Customer experience links to loyalty; now what?
If customer experience is that connected to loyalty and revenue, why do so many companies, and industries, continue to deliver such poor customer experience?
Here are three possible reasons for the inertia:
- Customer experience is a new discipline. While people have been talking about customer experience for many years, there wasn't much they could do about it. We are starting to see the tools, practices, and processes emerge that provide companies with a real opportunity to improve.
- Executives don't quite understand. Many executives think of customer experience management as the icing on the cake of their business; believing they can slap on some good experience and everything will get better. But customer experience improvement requires broad cultural and operational changes as part of a multiyear journey.
- Customer lock-in dampens signals. It's no surprise that Internet service companies, TV service companies and health plans are at the bottom of the customer experience list. Rather than earn loyalty on an ongoing basis, they often try and lock in customer through contracts. This allows them to ignore the underlying discontent with their customers.
The entire practice of customer experience management is just beginning to emerge as a bona fide professional discipline. As the profession evolves, more companies will figure out how customer experience affects the loyalty of their customers and they will be better suited and significantly more motivated and committed to do something about it.
Closing thoughts on Disney
Walt Disney was a true visionary. He clearly understood the connection between customer experience and loyalty-decades before the current customer experience movement made the linkage fashionable. But that wasn't the only lesson that Disney can teach us today. One of his quotes is great advice for companies that want to improve loyalty with customer experience: "All your dreams can come true if you have the courage to pursue them."
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About the Author: Bruce Temkin is customer experience transformist and managing partner of Temkin Group, as well as Chair of the Customer Experience Professionals Association. He blogs at Customer Experience Matters