According to a research conducted by McKinsey and Company, 25% of customers will leave after just one bad experience.
Most businesses are not designed on big enough margins to sustain this kind of a hit – yet they risk it every day because they believe in their product or service more than their customers’ experience.
From my own research and in countless discussions with CEOs and business owners, most leaders focus more effort on strengthening their products or services, not investing in their customers’ experience. McKinsey tells us this is the wrong way to think in today’s highly competitive and commoditized world.
The problem that exists today is there are significantly more choices for customers in the market today – both B2C and B2B. Where a customer might have had 2 or 3 companies to choose from in the 90’s and early 2000’s, today they might have close to 50 in that same category. With this many choices, prices have been squeezed and margins cut to remain competitive.
Unless a company has a definite “first mover advantage” in a product category, they are selling products and services offered by many different competitors. Very few companies enjoy this “first mover advantage” so they are competing with other products and services based on price, availability, delivery, and terms. Unless you are the best in these areas, the customer goes somewhere else – unless the customer experience you provide is incredible – then the customer shop based on their experience rather than the commodity elements.
I have met very few companies – probably could count them on one hand – that could survive if 25% of their customers walked away today. It would be such a significant revenue hit it would throw the rest of their business into a tailspin. Most likely to a point of going out of business. I think this is too high of a level of risk most leaders would find unacceptable if they really analyzed their businesses.
On the other side of this issue is very positive news and lots of opportunitys for those leaders who realize this and want to build their company around the customer experience.
Other McKinsey research shows revenues can increase as much as 10% while costs can decrease by as much as 25% – coupled together this represents significant gains in margin/profitability! Other research shows even higher numbers – bottom line being there is tremendous upside for companies that become customer obsessed and focus their entire business around delivering an incredible and remarkable customer experience.
I choose to focus on the upside rather than the potential downside. I see this as an incredible opportunity for those leaders who are “forward thinking” enough to get it, understand it is happening (based on their own industry indicators), and do something about it. Those leaders who “grab the bull by the horns” and see this as the incredible opportunity will not just lead their industries, they will dominate their industry.
There has never been a better time in history to take advantage of such an imbalance between where companies are today and the opportunity to excel into tomorrow. The online revolution has created this opportunity for all of us – including you and your industry, regardless of what it is. It really doesn’t matter if you are B2B or B2C and it works in virtually every industry category. The key is to recognize this exists and take advantage of it while you can be the leader, rather than playing catchup.
And if you are a leader, the other side to think about is the 25% of the customers your competitors will be losing due to their unimpressive customer experience. Who is going to pick up all these customers that are defecting – you and your company!
You can now put your company in a position to take over all these defecting customers, show them what an incredible experience looks like for them, and bring them into your customer base where you can treat them to something incredible.
This is your opportunity today!
As a leader, you can increase your risk by ignoring the research – which might cost you up to 25% of your customers because of the experience issues that might occur in your company. Or you can take a leadership role in your industry and be the safe haven for all these unhappy customers and bring them into your business and treat them royally. Both sides of this equation are happening right now – it’s up to you to decide which side of the 25% you want to be on today and into the future.
About the Author
Blaine W. Millet is the co-author of the leading edge book, “Creating and Delivering Totally Awesome Customer Experiences”. He also has over 25 years experience working with companies in the areas of strategy, customer experiences/loyalty, business operations, sales and management.