Customer experience trumps advertising
If anything, the available evidence suggests that creating a great customer experience matters more to growth than acquiring new customers. I was struck by just how much this is true when watching the MMA Great Debate video featuring Dr. Dominique Hanssens when he reviewed the elasticities of various elements of the marketing mix. He highlighted the growing importance of online product reviews, noting that review valence had an elasticity of 0.69 and review volume 0.35, both trumping advertising at a meager 0.1. (These numbers represent the average increase in sales from a 10% increase in the variable being measured.)
Both, not either/or
Now, let me be clear, these numbers do not suggest the entire marketing budget should be diverted into boosting customer experience. Like most things involving marketing, the answer is not either/or, it is both. You want effective marketing to maximize acquisitions, and you want a great customer experience to minimize defections (and encourage positive word of mouth). While customer reviews may be more influential than advertising, they may not achieve the same breadth of exposure, might just be the last check for someone already predisposed to purchase, and are unlikely to be read independently from other impressions that might have been gained from advertising.
Alignment pays dividends
And advertising can contribute to a great customer experience by enhancing people's perceptions of their experience. It is impossible to divorce our current experience from prior impressions. But that raises an important point, there is no point in over-promising to new customers if existing customers find that portrayal to be unrealistic. It will simply undermine their confidence in the brand. If existing customers feel you do not care about them that opens the door for a competitor to step up and offer a better experience.
By focusing on a strategy of aligning its service around customer needs, communication provider O2 in the UK managed to grow its market share, moving from number three brand to number one over the course of five years. O2's customer-focused strategy was a total contrast to established competitors locked in a short-term, acquisition-led sales battle, but it was successful not only because it helped keep existing customers but because it attracted new ones as well. How come? Because the marketing and customer experience were aligned. If advertising inclined someone to choose O2, then asking existing customers what they thought of the company would probably encourage them to follow through on that inclination.
The downside of poor customer experience
Most service companies are well-insulated from the sort of churn that afflicts many packaged goods brands through contracts, switching barriers, and switching costs, but by focusing single-mindedly on customer acquisition they sometimes ignore the risk and costs of customer defections. In 2019,
Microsoft's Global State of Customer Service report found that 58 percent of respondents said that they had stopped doing business with a company because of negative customer service experiences in the past year. And in addition to lost revenues, lost customers result in higher replacement costs, lost advantages of scale, and the potential for negative reviews and WOM.
Put the customer's needs first
While it is going to be counter-productive to try to retain every customer (not to mention impossible), all you are really trying to do is reduce the probability of losing customers (or at least, the most profitable ones). Make it easy for people to do business with your company. Put their needs first, and make the experience a positive one, do not just try to minimize the cost of providing a basic service. Fix the obvious issues like long wait times, labyrinthine customer service systems, and annoyingly scripted calls. If possible, find ways to shortcut the renewal process, and add value, do not simply remind people of what they might lose or offer discounts. Oh, and communicate that experience in your advertising, it will likely please both existing and new customers.
There is an adage: a bird in the hand is worth two in the bush. When it comes to growing brands maybe it should read,
'A bird in the hand means you only have to find one in the bush.'
What do you think? Please share your thoughts.
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