The Importance of Customer Experience

Written by Dylan Max on Nov 23, 2022
Why great customer experience is so important

Customer experience has become a critical differentiator for companies looking to stand out from the crowd. In today’s fast-paced and highly competitive business landscape, quality customer experience has become even more important.

Customers have more choices and higher expectations than ever before. They want convenience, personalized service, and seamless interactions across multiple channels and touchpoints. Providing a positive customer experience is not only essential for retaining existing customers, but also for attracting new ones. Brands that can pull off creating a positive customer experience will win big in the end.

This blog post will explore the importance of customer experience and how it can be used as a competitive advantage to drive growth, increase brand loyalty, and ultimately, improve the bottom line.

What is the difference between customer experience and customer service?

Both of these terms are related to how customers interact with a company or brand, but they have distinct meanings and implications for businesses.

The main difference between customer experience and customer service boils down to the scope of customer interaction. Customer service refers to the assistance and support provided to customers before, during, and after a purchase. It is focused on helping customers with specific issues or problems they may have. 

Simply put, customer service is a subset of customer experience and one of the many factors that contribute to the overall customer experience.

What is customer experience?

Customer experience, also known as CX, refers to the overall perception and attitude of a customer towards a company or brand. It encompasses all interactions and touchpoints a customer has with a company, including customer service, but also includes factors such as product quality, branding, and marketing. 

This can include everything from the first time a customer hears about the company, to browsing its website or social media, to making a purchase, and even after the sale when they may need customer service or support. Customer experience encompasses all aspects of the customer journey and can be influenced by factors such as ease of use, personalization, convenience, and overall satisfaction.

In simpler terms, customer experience is how a customer feels about a business or a brand based on how they were treated and how straightforward it was for them to get what they needed. A good customer experience is when a customer feels happy and satisfied. A bad customer experience is when a customer feels unhappy and unsatisfied.

Customer experience is important because it can have a big impact on whether customers will return to a business or recommend it to others. Companies that focus on providing a positive customer experience can increase loyalty, improve brand reputation, and ultimately boost the bottom line.

Let’s go one step further and look at the 7 core elements of customer experience.

7 Core Elements of Customer Experience

  1. Ease of Use

    Ease of use refers to how simple it is for customers to find what they need. For example, a website with intuitive navigation makes it easy for customers to find what they are looking for.

  2. Personalization

    Personalization is the degree to which a company tailors its interactions with customers to their individual preferences. For example, a retail store that remembers a customer’s previous purchases and makes recommendations based on those can create a more personalized shopping experience.

  3. Convenience

    Convenience refers to how easy and efficient it is for customers to interact with a company. For example, a business that offers multiple channels for customer service, such as phone, email, and live chat, is making it more convenient for customers to get the help they need.
  1. Speed

    Speed is how quickly a customer can complete their desired actions or get help when they need it. For example, a fast-loading website or a quick-response customer service team will create a positive customer experience.

  2. Emotion

    Emotion refers to how a customer feels as a result of their interactions with a company. A positive customer experience evokes positive emotions such as satisfaction, while a negative customer experience evokes negative emotions such as frustration or disappointment.

    Typically, a good formula to measure sentiment is: Sentiment = Reality – Expectations

    If Expectations are higher than Reality that would trend to a negative customer experience and vice versa.
  3. Consistency

    Consistency is important for customers to have similar, if not the same, experiences no matter how they interact with the company. The more consistent the experience, the higher the customer experience will be overall. McDonald’s is a prime example of brand consistency. No matter where you go in the world, you can expect McDonald’s to have the same taste, seating, and food selections.
  1. Innovation

    Innovation is important because customers are living in a changing world and brands must keep up with the times. Innovation is not reserved for products but also for customer experience. For example, using Artificial intelligence or machine learning to enhance customer service speed and quality.

By isolating customer experience into these 7 elements, companies can better focus on improving each one. Those that do it well will create a positive, memorable experience for customers that will keep them coming back.

Why is customer experience important?

Customer experience is important because it can have a significant impact on a company’s bottom line. Studies have shown that companies with a strong customer experience have higher customer loyalty, which leads to increased sales and revenue. Research from Forrester found that customer experience leaders had 17% more revenue growth than their competitors. On the flip side, one study found that businesses lose an estimated $75 billion each year due to poor customer service.

As explored earlier, customer experience is important because it can significantly affect a company’s reputation and ability to attract new customers. A study by PwC found that 63% of consumers are likely to switch to a competitor after just one poor customer experience while brands with positive customer experiences have more customers who are willing to recommend their brand to others. This can be especially important in today’s digital age, where consumers can share their experiences online and influence the buying decisions of others.

Lastly, a positive customer experience can positively impact the company’s employee engagement, productivity, and turnover rate. A study by Accenture found that companies with strong customer experience also had lower employee turnover rates and higher productivity. These studies show that establishing a customer-centric culture benefits everyone.

What are the benefits of providing excellent customer experience?

Here are the top 6 benefits of delivering great customer experience:

  1. Increased customer loyalty

    When customers have a positive experience with a company, they are more likely to return for repeat business and to recommend the company to others. This can lead to a virtuous cycle of customer retention and growth.

  2. Improved brand reputation

    A positive customer experience can enhance a company’s reputation, leading to increased credibility and trust in the marketplace. This can be especially important in today’s digital age, where customers can easily share their experiences online and influence the buying decisions of others.

  3. Increased sales and revenue

    Customers who have a positive experience with a company are more likely to make repeat purchases and purchase more expensive items. They may also be willing to pay a premium for the positive experience they have.

  4. Cost savings

    Providing excellent customer service can lead to lower costs in the long run. For example, it can help to prevent customer churn, which can be expensive to replace. Additionally, a customer who had a positive experience with a company is less likely to require additional support, which can be costly for the company.

  5. Competitive advantage

    Providing great customer experience can give a company an edge over its competitors. In a market where customers have many choices, a positive customer experience can be a key differentiator that sets a company apart and drives growth.

  6. Greater employee engagement

    Companies with a good customer experience culture tend to have more satisfied employees. Employees who feel valued, respected, and rewarded are more likely to be engaged and motivated, which leads to better performance, lower turnover rate, and lower recruitment cost.

Overall, providing a great customer experience can help build strong, long-term relationships with customers and drive profitability for the business.

What are the disadvantages of poor customer experience?

When it comes to providing customer experience, it’s important to remember that poor customer experience can have serious consequences for a business. One of the most significant disadvantages of poor customer experience is lost customers. When customers have a negative experience with a business, they are less likely to return or recommend the business to others.

Another disadvantage of poor customer experience is damage to the company’s reputation. In today’s digital age, it’s easier than ever for customers to share their experiences with a business, whether it’s through social media, review sites, or word of mouth. Negative reviews and feedback can spread quickly and damage a business’s reputation, making it harder for the company to attract new customers.

Finally, poor customer experience can also impact employee engagement and satisfaction. When employees are not empowered to provide good customer service, they may not feel motivated or engaged in their work. This can lead to increased employee turnover, which can hurt the bottom line of the business.

What about brand loyalty?

Brand loyalty is the degree to which a consumer will consistently purchase products or services from a specific company or brand. It represents a level of commitment that a consumer has to a brand and it can be influenced by various factors like quality of products, price, customer service, reputation, and the overall customer experience. Brand loyalty can be measured by a few key metrics like repeat purchase rate, customer retention rate, and net promoter score. 

  • Repeat purchase rate measures the percentage of customers who make repeat purchases.
  • Customer retention rate measures how many customers remain loyal over time.
  • Net promoter score measures how likely customers are to recommend a brand to others.

By measuring these metrics, companies can gain insights into their customer base, identify patterns and make informed decisions that can increase customer loyalty.

Customer Loyalty Statistics

Several studies have shown the importance of customer loyalty and the impact it can have on a business.

  1. The probability of selling to a new customer is only 5-20%, whereas the probability of selling to an existing customer is 60-70%. (Forbes)
  2. Increasing customer retention rates by 5% results in an average increase in profits of 25% to 95%. (Harvard Business Review)
  3. Companies with the highest levels of customer loyalty have 27% higher profitability than companies with the lowest levels of customer loyalty. (Qualtrics)
  4. Businesses lose an estimated $75 billion each year due to poor customer service. (New Voice Media)
  5. 63% of consumers are likely to switch to a competitor after just one poor customer experience. (Netomi)

5 Examples of companies with excellent customer experience

Many companies are known for providing an excellent customer experience. Here are a few examples:

  1. Amazon

    Amazon is often cited as a company that sets the standard for customer experience. From their user-friendly website and mobile app to their fast and free delivery options, Amazon makes it easy for customers to find and purchase products. They also have a strong commitment to customer service, with easy-to-use tools for tracking orders and returning items.
  1. Zappos

    Zappos is an online shoe retailer that is known for its exceptional customer service. They offer a 365-day return policy, free shipping, and a call center that is open 24/7. They also have a unique culture that values customer service and encourages employees to go above and beyond to make customers happy.
  1. Ritz-Carlton

    Ritz-Carlton is a luxury hotel chain that is known for its exceptional customer service. They have a strong commitment to training and developing their employees to provide personalized service to guests. They also have a customer loyalty program that rewards guests for repeat stays.
  1. Apple

    Apple is known for its sleek and user-friendly products, as well as for its exceptional customer service. They have a strong commitment to providing customers with a seamless and personalized experience, from the design of their products to the service provided in their retail stores.
  1. Nordstrom

    Nordstrom is a retail company that is known for its exceptional customer service. They have a strong commitment to training and developing their employees to provide personalized service to customers. They also have a customer loyalty program that rewards customers for repeat purchases.

All of these companies provide exceptional customer experience because they prioritize it as a business imperative. Technology allows these strategies to flourish.

Technologies that help companies achieve great customer experience

Deploying new technology is one way to improve customer experience. Here are four types that can help companies overcome the challenges of achieving great customer experiences:

  1. Chatbots and virtual assistants: The best chatbots can provide customers with quick and efficient responses to their inquiries, 24/7 availability, personalized interactions, and can also handle multiple customer requests simultaneously.
  2. Artificial Intelligence (AI): AI-based technologies such as natural language processing (NLP) and machine learning (ML) can be used to enhance the customer experience by providing personalized recommendations, automating repetitive tasks, and even predicting customer needs.
  3. Customer Relationship Management (CRM) software: CRM systems can help companies to manage their interactions with customers, automate routine tasks, and gain insights from customer data. This can help to improve sales and marketing efforts and provide a more personalized experience for customers.
  4. Self-service solutions: these can include interactive kiosks, mobile apps, and web portals that allow customers to access information and services, such as account management, booking, and tracking, without the need for human assistance.

By leveraging these technologies, companies can improve efficiency, reduce costs, and provide a more personalized and seamless experience for customers.

Netomi can take your customer experience to the next level

By implementing conversational AI technologies like Netomi’s, businesses can provide 24/7 customer service, automate repetitive tasks, and personalize the customer experience. Additionally, conversational AI can also help businesses to improve customer engagement, increase customer loyalty, and drive sales.

However, it’s important to remember that conversational AI is not a silver bullet for customer experience. To truly take your customer experience to the next level, it’s important to have a holistic approach, which includes understanding customer needs, providing high-quality service, and continuously improving customer experience.

Conversational AI can be a powerful tool for businesses looking to improve their customer experience. By providing customers with convenient, personalized, and efficient customer service, businesses can increase customer loyalty, drive sales, and ultimately, grow their business. It’s important to start small, test and learn from it, and then scale.

Businesses that can effectively implement conversational AI will be well-positioned to provide a top-notch customer experience and stay ahead of the competition. If you’re ready to take your customer experience to the next level, consider investing in Netomi and see the results for yourself.