Customer Experience and Customer Lifetime Value
Guest Post by Howie Bick
Customer experience is an important topic for businesses in all industries. The experience that your prospects and customers have has a major impact on whether they become paying customers, look for other alternatives, or become repeat customers.
Focusing on your customer experience can be an incredibly powerful tool that helps you stand out amongst your competitors, turn your paying customers into repeat customers, recruit more brand ambassadors for your brand, and help you create a competitive advantage within the marketplace.
Customer Experience Influences Customer Lifetime Value
One of the key metrics being tracked today among businesses is customer lifetime value. Customer lifetime value is an important metric to understand, because it gives you insight into how much each customer is worth to you and shows you how much you can afford to pay to acquire new customers.
Part of a customer’s lifetime value depends on the type of customer experience they’ve had. Whether they’ve felt the company went above and beyond, the type of customer service they were provided with, if the company delivered on its promises, and if they feel they got what they paid for.
Customer experience can be a great asset for your company because happy customers who are pleased with each business transaction and the goods or services you provided turn into repeat customers. Repeat customers mean higher customer lifetime values, and more potential future spending as well.
If customers are happy with the experiences they’ve had, you also have the potential to turn them into brand ambassadors. If any of their friends, family, or colleagues come to them with a similar problem or issue that they once had, and you were able to provide a solution for them, you may be able to turn a satisfied customer into a brand ambassador who recommends you to friends and family.
Maximizing Your Marketing Spend
Companies are always looking for more ways to become more efficient or effective with the marketing dollars they spend. They might believe creating a new campaign, overhauling the branding, or changing the message they communicate might generate a strong return on their investment, but they might be better served to look at their customer experience.
Companies that provide a great customer experience, and place an emphasis on each customer being happy and satisfied, have the potential to generate more revenue from each customer they already have.
The marketing dollars they’ve already spent to acquire the customers they have can produce more revenue and income, rather than spending more for more customers. You can also keep the financial analyst happy by freeing up some of the marketing budget to invest into other areas of the business, while still seeing an increase in ROI on your marketing dollars from previous campaigns.
Poor Customer Experience Can Make Customer Acquisition And Growth More Difficult
Part of the reason behind many companies’ success has been their hyper-focus on their customers, and the customer experience they provide.
Customer experience has the potential to be something that can fuel a company’s growth, bring in more revenue, continue the stream of income they have, and keep the number of customers they have growing. Or it can be something that pushes customers away, towards competitors, and makes it difficult to grow or expand.
A difficult customer experience, where customers are bombarded with many different options, a slow lead time, and a lot of ambiguity, can move customers to look for other alternatives, and discourage potential customers from becoming paying customers.
Acquiring new customers is an incredibly difficult feat already, with the number of options that are available in the market and the number of competitors that are out there already. Companies that have complex experiences where there are lots of options, vocabulary or terms people may not be familiar with, or slow processing times, can make customer acquisition even harder.
Customer Experience Can Become A Competitive Advantage
Companies are always looking for new ways to create a competitive advantage for themselves. One of the ways companies can do that is by creating a customer experience that blows away the competition, and continues to produce the result customers are looking for.
If your company is able to reduce the amount of time it takes to submit an order, process an order, provide customers with superior customer service, or deliver superior results, you can create a competitive advantage. Customers will be drawn to your company, motivated to bring you more business, and continue producing more income for your business.
You can also use a superior customer experience to elevate your brand reputation or image. If people know your brand for delivering great results, or being easy to use, people will start to associate you with those types of results, which will bring you more customers, and more business.
The experiences customers are having, and the way they are feeling during and after their interactions with a business, can provide good insight into where you stand with them personally, how you’re competing within the market, and where you might be able to improve or enhance your customers’ journey.
Customer experience has the capability to influence the lifetime value of each customer, with those who are satisfied potentially spending more, and becoming repeat customers.
Companies who are able to generate more revenue from the customers they’ve already acquired can generate more value from their marketing budgets. But having a difficult customer experience can make acquiring new customers more difficult, and can make growing your company a taller task.
All in all, customer experience is something that can be an incredibly valuable asset for any company that produces benefits over and over again, or it can be the reason why customers choose a competitor, making it tougher and tougher for a company to compete.
Howie Bick is the founder of The Analyst Handbook. The Analyst Handbook is a collection of 16 guides created to help current and aspiring Analysts advance their careers. Prior to founding The Analyst Handbook, Howie was a financial analyst. Image by Peggy und Marco Lachmann-Anke from Pixabay