Companies with better customer experience have more loyal customers.
While that statement may seem intuitively obvious for many people, we've used large-scale data to prove it in some recent Temkin Group research in both B2C and B2B environments. In the research report The ROI of Customer Experience, we analyzed data from 10,000 U.S. consumers and 3,000 UK consumers. And in the report 2012 Temkin Experience Ratings of Tech Vendors we examined the connection with 800 IT professionals in large companies.
Measuring customer experience
Our analysis began by looking at how consumers rate the customer experience that companies deliver. We first analyzed the results from the U.S. and UK 2012 Temkin Experience Ratings of 206 U.S. and 66 UK organizations. These ratings examine how consumers view their recent interactions with companies across three components of experience:
- Functional: To what degree were they able to accomplish what they wanted to do?
- Accessible: How easy was it for them to accomplish what they wanted to do?
- Emotional: How did they feel about the interaction?
Using those three inputs from consumers we calculated the overall Temkin Experience Ratings. Of the 272 total companies in our studies, only 15 (4 percent) received "excellent" ratings while 14 received "very poor" ratings.
To understand loyalty levels, we used the results from the U.S. and UK 2012 Temkin Loyalty Ratings. These ratings examine consumer loyalty to companies across three areas:
- Repurchasing: How likely are they to consider the company for a future purchase?
- Switching: How reluctant are they to switch business away from the company?
- Recommending: How likely are they to recommend the company to a friend or colleague?
Using those three inputs from consumers we calculated the overall Temkin Loyalty Ratings. Of the 272 total companies in our studies, only 63 received "very weak" ratings while 14 received "very poor" ratings.
Correlating customer experience and loyalty
Now that we have a measure for both customer experience and loyalty, we looked at the correlation between these scores. To normalize the levels for each company, we calculated the difference between each company's ratings to its industry average. Using this approach, every company is judged based on how it performs relative to its peers.
As you can see in the chart where we plot the ratings versus industry averages for all 272 companies, there's a very high correlation between customer experience and loyalty (for those of you who care about statistics, the "R" is .83 for the U.S. and .89 for the UK).
Our analysis went one step farther, examining the business impact of this correlation. We examined the difference in loyalty between customer experience leaders (those that dramatically outperform their industry peers) and customer experience laggards (those that fall well behind their industry peers).
It turns out that the leaders enjoy a healthy advantage in the number of loyal customers, including more than a 19 percentage point gap in customers who are likely to recommend them. As a result, a modest improvement in customer experience can result in an increase of $100s of million (or £100s of millions) for a large company.
Customer experience and loyalty for B2B technology
I'm often asked if the dynamics of customer experience that people discuss in a B2C setting hold true in a B2B environment. I've done a lot of B2B work with companies that has demonstrated the connection, but can't publish any of those findings publicly. So we decided to test the connection in research that we could share.
One of the places where B2B customer experience is different than B2C is that it's not a cohesive marketplace. Buyers across B2B environments are quite different. So we decided to examine the connection between customer experience and loyalty in a very specific market, the IT industry.
To understand this B2B space, we surveyed 800 IT professionals form large companies. Using the same questions that we used on the consumer space around functional, accessible, and emotional components of experience, we developed the 2012 Temkin Experience Ratings for Tech Vendors. As part of that study, we also looked at the purchasing plans of those companies we surveyed. As with the consumer market, we found a high correlation between customer experience and loyalty.
Our research uncovers a clear connection between customer experience and loyalty at a macro level for consumers in the U.S. and UK and for the IT large enterprise market. Does it hold true in some form in other geographies or other B2B areas? We don't have the data yet to say—no matter how intuitively obvious it may seem.