Happy Customers Lead to Happy Investors

A great customer experience is rewarded by both Main Street and Wall Street, new research from Watermark Consulting found.

An analysis of stock market returns showed that firms that lead in customer experience posted an average shareholder return that was more than 260 points higher than the S&P 500 market index, while widely loathed ones lagged the index bymore than 175 points. This vividly illustrates the payoff businesses enjoy by delighting their customers as well as the penalty incurred for disappointing them.

"Being good to customers really does pay dividends," said Jon Picoult, founder of Watermark Consulting. "Over the long term, beloved businesses are seeing shareholder returns that average 5.4 times greater than their less customer-centric competitors."

While customer experience has garnered greater C-suite attention in recent years, many companies still resist investing in it, viewing the benefits as soft and intangible and the the payoff as uncertain, but the Watermark study suggests that those judgments could be very shortsighted.

"Many companies claim to be customer-focused, but in truth, they subject their customers to a whole host of aggravations and indignities," Picoult noted, citing poorly designed websites, complicated purchase processes, hidden fees, unintelligible product instructions, interminable waits for customer service, infuriatingly unhelpful AI chatbots, confusing billing statements, and overall poor responsiveness as examples. "These are among the common markers of frustrating, loyalty-sapping customer experiences, and the Watermark study shows that companies ultimately pay a price for that," he stated.

Conversely, firms that consistently impress customers reap the rewards through enhanced loyalty, stronger word-of-mouth, increased referrals, greater wallet share, and more cost efficient operations.

Picoult summed up the findings by highlighting their relevance to public and private companies alike. "The message here is clear: A great customer experience pays off in the long run, enabling companies to combat commoditization, differentiate from the competition, and pave the way for exceptional financial performance."