Connecting customer experience and commercial performance

Most people intuitively recognise the value of creating great customer experiences. It seems natural that organisations which fulfil their customers’ needs will be visited more often and recommended more frequently than organisations that don’t.

For business leaders, the benefits of great customer experiences are often less clear, because they struggle to see a direct link to revenue growth and shareholder value. This results in customer experience management sliding down the list of boardroom priorities, as executives focus on initiatives with more obvious commercial benefits.

To help bring customer experience to the top of the boardroom agenda, I want to draw attention to compelling research on the financial case for customer experience management. For years, one of the world’s leading research firms, Forrester, has tracked and compared the quality of customer experiences across hundreds of global brands. They refer to this ongoing study as their “Customer Experience Index”. When brands within this index are divided into “leaders” and “laggards”, the leaders stand out with stronger revenue growth and superior stock performance.

On revenue growth, Forrester found that leading companies across five different industries had an average revenue growth of +17% over six years, compared with only +3% for the laggards.

When it comes to stock performance, Watermark Consulting modelled an investment portfolio containing the top 10 brands from Forrester’s Customer Experience Index, and found it to have a total return of +107.5% over eight years. This contrasts with a return of +72.3% for the S&P market index, and +27.6% for a portfolio containing the bottom 10 brands. 

Although these findings do not conclusively prove that better customer experiences lead to better commercial performance, they do point towards a strong and positive relationship. These findings should encourage executives to push customer experience management to the top of the boardroom agenda, and find ways to more accurately measure and attribute financial benefits. Forrester show us that customer experience matters, not just because it’s “the right thing to do for customers”, but also because it’s the right thing to do for business.