Can Better Customer Experience Improve Your Bottom Line?

Article Featured Image

Does customer experience (CX) really matter to business success—or is CX just the latest flavor of the month? Recently, Forrester completed a six-month-long study to answer that question by examining the relationship between customer experience and revenue growth. Why revenue growth as the measure of success? Because it's the No. 1 priority of global business leaders surveyed by Forrester.

Aided by some long-suffering research associates, some top industry experts and I picked pairs of competitors in which one of each pair had significantly higher customer experience quality than the other (as rated by their own customers). We picked pairs from five very different industries: cable, airline, investment, retail, and health insurance. Then we built models that compared the CX leaders' compound annual growth rate (CAGR) in revenue with that of the CX laggards between 2010 and 2014.

The results are intriguing. With cable companies, airlines, investment firms (both full service and direct), and retailers, a clear correlation exists between superior customer experience and higher revenue growth. But the magnitude of the difference varies widely by industry, with cable coming out on top: 35.4 percent CAGR for the CX leader versus 5.7 percent for the CX laggard. And with health insurers, the results are virtually even—superior CX doesn't seem to matter much when it comes to revenue growth.

Why doesn't CX always correlate with revenue growth? And why does the correlation vary by industry? CX drives revenue by driving customer loyalty, but CX-fueled customer loyalty only comes into play when customers have the freedom to switch their business among competing companies and some of those companies provide superior experiences—so customers can switch, and there's incentive to do so.

As an example: Many investment firms are eager to do business with high-net-worth customers, and there is a big difference between the experience provided by the CX leaders (like Edward Jones and Charles Schwab) and the CX laggards. Therefore, superior customer experience drives substantial revenue growth for investments firms.

In contrast, most people get health insurance from employers, who subsidize 75 percent of premiums. Sure, consumers could drop those plans, go to an exchange, and switch to a different provider. But that's not happening today because consumers won't willingly quadruple their costs, even for a big improvement in CX. So right now, CX doesn't drive revenue growth in that industry.

For CX professionals looking to drive revenue growth (or avoid revenue loss), here are three steps to take now.

Map yourself and your competitors against the CX–revenue growth equation. Can your customers move freely to another provider? Do your direct competitors offer much better (or worse) CX, or are you at parity with them? The answers to these questions can help determine where you’re positioned now and whether there's an opening for you, a current competitor, or a new disruptor to gain a competitive advantage based on superior CX.

Assess your potential. Can your company seize a CX-fueled opportunity? Or will you have to settle for defending yourself against another firm that can? The answer may depend on how much business discipline you bring to CX today and whether you’ll produce CX innovations in the future.


Craft your CX strategy. Identify business objectives and opportunities. Is revenue growth your primary goal, and if so, can your company achieve it? Companies that fall in the upper-left section of our grid (see figure) and can answer yes to these questions should try to break from the pack of “me too” competitors. But companies in the lower-left part of the grid can invest wisely in CX by crafting a strategy that instills customer experience discipline to manage service costs, as in the healthcare industry, while readying their firms for accelerated efforts when disruption eventually ramps up—as it did in the cable industry.

Harley Manning is a vice president and research director at Forrester Research, serving customer experience professionals. Harley’s research, analysis, and opinions have appeared in The Harvard Business Review, Forbes, TheEconomist, and FastCompany.

CRM Covers
for qualified subscribers
Subscribe Now Current Issue Past Issues