The One Chart Every Business Should Study

Article by Jon Picoult – Founder of Watermark Consulting and author of the Amazon bestseller “FROM IMPRESSED TO OBSESSED: 12 Principles For Turning Customers And Employees Into Lifelong Fans.”

What’s a great customer experience really worth to a company?

It’s a question that vexes many organizations, given the deep-seated skepticism that business leaders often harbor towards the idea of customer experience differentiation. A lot of lip service is paid to customer experience in the C-suite, but quite a few executives still view the benefits as soft and intangible, the payoff uncertain.

How do you convince business leaders and boards of directors that there really is an ROI to a great customer experience? The answer: You quantify it in terms they can understand – specifically, the universal “business language” of shareholder return (a measure of market value that has relevance to public or private companies). Show a CEO, a Board Chairman, or even a small business owner how they can significantly boost the long-term value of their company, and you’re guaranteed to get their attention.

It was this premise that spurred my firm’s development of our Customer Experience ROI Study. First published in 2010, the study has become one of the most widely cited analyses of its kind, and among the first pieces of research to show a connection between customer experience quality and shareholder value. The latest iteration of the study was just released, and its results are more striking than ever – as vividly illustrated by the chart below (a graphic with which every business should become familiar):

During the 16-year period analyzed, widely loved brands with strong consumer feedback ratings posted an average shareholder return that was over 260 points higher than the S&P 500 market index, while brands that received less favorable ratings lagged the index by more than 175 points. Beloved businesses posted shareholder returns that averaged 5.4 times greater than their less customer-centric competitors. (View the study’s white paper to learn more about its methodology and results.)

While it may be difficult to discern from companies’ quarterly results, the long-term picture revealed by this study makes one thing clear: There’s a prize earned for delighting customers, and a penalty exacted for disappointing them.

Of course, while these results might be intriguing to business leaders, the numbers themselves don’t address what’s likely to be the #1 question on their mind: How can my organization create the kind of customer experience that fuels such exceptional financial results?

There’s a prize earned for delighting customers, and a penalty exacted for disappointing them.

As it turns out, there’s a discrete science to it – and it’s a proven alchemy that legendary, loyalty-leading brands are experts at employing. Below are just a few examples of the philosophies and approaches those companies use to turn customer experience into their greatest competitive advantage.

1. They define customer experience broadly.

Many companies view customer experience as synonymous with customer service, but loyalty-leading brands take a very different view. For them, customer experience encompasses every live, print, and digital interaction point that customers (or sales prospects) could possibly encounter when dealing with the business: websites, marketing materials, RFP responses, purchase agreements, contracts, billing statements, physical products, assembly instructions, retail store environments, telephone/chat service, and more. Traditional customer service is but one small part of the end-to-end customer experience.

Furthermore, what great companies recognize is that with each of these interactions, they win or lose share. Each touchpoint represents an opportunity to either strengthen customer loyalty… or erode it.

A great illustration of this philosophy was Amazon’s obsession with the boxing of its shipments, which led to the development of the company’s innovative “frustrating-free packaging” strategy. While many questioned why Amazon would be so focused on a touchpoint that seemed outside of their wheelhouse, the company knew that people’s perceptions of their Amazon experience would, in part, be influenced by how easy or difficult it was to open the package they got. Like other widely admired businesses, Amazon consciously choreographs every touchpoint in their end-to-end brand experience – and customers take notice.

2. They don’t seek to satisfy customers.

This is admittedly a strange assertion: Companies that inspire customer love don’t aim to satisfy their customers? It’s true, though.

What loyalty-leading brands understand is that customer satisfaction is a one-way ticket to the business graveyard. That’s because study after study has shown that satisfied customers defect all the time.  Creating competitive advantage requires not just satisfying customers but impressing them – forging indelible impressions that shape their future behavior toward a business.

These great companies also have an astute grasp of what it really takes to impress a customer.  It’s not just about high-priced, white glove service. Given how low the customer experience bar is set (only a quarter of consumers say businesses consistently meet their basic expectations), it turns out that great impressions can be forged in surprisingly simple and subtle ways. For example, by making a business interaction far more effortless than a customer expected (e.g., Japanese clothing retailer Uniqlo’s magical, no-scan self-checkout terminals), or by tangibly demonstrating advocacy for a customer in a way they wouldn’t have anticipated (e.g., Ally Bank’s consumer-friendly approach to overdraft fees). 

3. They engage in “memory sculpting.”

What great companies recognize is that they’re not just in the business of shaping customers’ experiences, they’re in the business of shaping customers’ memories. Indeed, how people remember their experience with a business is even more important than the experience itself – because it’s those memories that will drive the repurchase and referral behavior that’s the lifeblood of any thriving business.

By capitalizing on the science of memory formation, beloved businesses ensure that customers remember the best parts of their experience, while also forgetting the worst parts. They accomplish this by strategically sequencing “peaks” and “valleys” into the customer experience, as those are the types of interactions that people remember – with their order and magnitude shaping one’s recollection of the encounter. Disney theme parks are masters of this approach, and it’s why their guests tend to remember the attractions they saw, rather than the long lines they waited in.

As this new research clearly shows, a great customer experience pays off in the long run, enabling companies to combat commoditization, differentiate from the competition, and pave the way for exceptional financial performance. And the techniques needed to create loyalty-enhancing customer experiences are specific, science-based, and very much within the reach of any company, large or small.

And as for those businesses that disappoint customers instead of delighting them? The research shows they ultimately pay a price for that, with market values that trail their competition.

It all goes to show that, while many organizations endlessly debate “What will it cost us to deliver a better customer experience?” – the more appropriate question might be “What will it cost us if we don’t?”

Jon Picoult helps companies impress their customers and inspire their employees, creating raving fans that drive business growth. Visit AAE’s website to book Jon Picoult for your next event.