10 Stats Expose the Real Connection Between Customer Experience and Customer Churn

May 02, 2017

The sky may just be the limit when it comes to customer experience. Just two weeks after United Airlines set an all-time low for customer service when it violently dragged a ticketed passenger off an overbooked flight, American Airlines suffered its own PR debacle when tempers flared between a flight attendant and a passenger. For United, at least, the fallout resulted in a $250 million loss in market value in one day.

Some argue crappy airline experiences will always be a given, because travelers have limited options. But then you look at an airline like Delta, which went from filing bankruptcy to landing record profits and top spots on customer affinity and employee rankings due to a new customer-first strategy – and you realize the enormous impact customer experience, good or bad, has on a brand.

Customer experience has overtaken product and price as a brand’s key differentiator. Consumers want ease, speed and consistency, and they have no shortage of options at their fingertips. Companies that fail to engage customers in the right way, at the right moment, in the right context can be quickly replaced by competitors who can.

Sure, customer churn is par for the course for any business. But relying on outdated acquisition strategies that don’t look beyond the first transaction won’t do much to keep churn rates at bay. Today marketers need to invest in strategies that strengthen and maintain long-lasting loyal relationships by offering genuine, valuable and contextually relevant experiences at critical moments in the customer lifecycle.

Need proof? The following 10 stats reveal the true connection between customer experience and customer churn.

1. Customer churn is more often due to bad brand experiences rather than bad products:

• 68% of customers defect because of a bad experience, and 78% of consumers fail to become customers in the first place due to poor service.

• Just 9% of customers part ways with a brand because they find a better product, and only 14% leave because they are unhappy with what they bought.

2. Each year, $62 billion is lost by U.S. companies following a bad customer experience — three times more than just three years ago.

3. Eighty-two percent of consumers worldwide have stopped doing business with a company following a bad customer experience.

4. For every dollar invested in improving the customer experience, businesses see a threefold return, some industries even more. In the financial services sector, for example, some companies are seeing a return of five times their investment.

5. Finding new customers costs five times more than keeping them.

6. It costs up to 16 times more to bring a new customer up to the level of profitability of a lost customer.

7. Reducing churn by 5%, businesses can increase profits anywhere from 25% to 125%.

8. Customers that are highly engaged with a brand make 90% more frequent purchases, spend 60% more in each transaction and are four times more likely to advocate the brand to colleagues and acquaintances.

9. The more you get customers to return, the greater their potential lifetime value

• After one purchase, a customer has a 27% chance of returning to your store.

• The next time a customer visits, there is a 45% chance she will make a second purchase.

• And if she comes back again, there is a 54% chance she will make a third.

10. Repeat customers spend three times more than new ones, and just 20% of them account for 80% of a company’s future profits.

Companies that don’t focus on improving brand experiences will continue to disappoint, losing customers, financial gains and their competitive edge. Brands need to know what data they have and how to make the most of it to fuel data-driven insights to optimize customer interactions, increase loyalty and drive long-term value.

Obviously, the right technology is key, and today exist customer identity solutions that integrate and synch streaming data with offline information. Data culled from CRM systems, loyalty programs, desktop and mobile activity, and contact centers all contain different perspectives. Together, they paint a detailed and accurate picture of customers, their behaviors, interests and needs. Using this information, brands can determine the best way to engage with them. For instance, a company may discover that a travel voucher isn’t as valuable to a frequent flier as an actual seat on an airplane and strategize a more personal and meaningful solution to an overbooked flight.

No matter the industry, the fallout from what’s been happening in the friendly skies should cause many brands to question their customer experience. And what they need to ask isn’t if they can afford to invest in improving customer experiences — rather, they need to ask if they can afford not to.

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Kathy Menis

Kathy is an expert in technology marketing, with 20 years of experience creating and leading strategic, results-driven marketing programs. As SVP of Marketing at Signal, she oversees all marketing initiatives, including the company’s brand, product marketing, and go-to-market strategy.

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