Customer-Obsessed Companies Pull in 2.5 Times More Revenue
Some companies have undertaken a “customer obsession” focus over the past few years, and those that do it right can see a significant payoff, according to a report by Forrester Research.
“Customer-obsessed companies report 2.5 times higher revenue grown and 2.2 times better customer retention and employee engagement than non-customer-obsessed companies,” says Forrester vice president and principal analyst Shar VanBoskirk. “Those are huge advantages, particularly in an economic downturn when companies need loyalty and liquidity to stay afloat.”
And companies that become customer-obsessed earn about a 200 percent return within six years and a 700 percent return over 12 years, according to Forrester.
That’s why 72 percent of respondents from customer-engaged firms told Forrester that improving the customer experience is a high or critical business priority in 2021. Yet only 9 percent of these companies consider themselves to be fully customer-obsessed.
However, for companies to advance through the four levels of customer obsession—customer-aware, customer-engaged, customer-committed, and customer-obsessed—they will need to ensure executive accountability, fund digital business, and align marketing with customer experience. Each of these tasks has significant costs associated so companies will need to consider what it will take to reach higher levels of customer experience and service.
The payback on customer obsession initiatives largely depends on making the right initial investments, according to VanBoskirk. “There needs to be a foundation of investment that happens in the immediate term that will affect the success of later investments. Simply deciding that you want to invest in something without having the groundwork set will end up making later investments unproductive, counterproductive, and potentially wasted spend.”
A starting point, VanBoskirk maintains, is establishing a baseline of customer understanding. “There’s plenty of room to improve upon that later to get more real-time data access. But without some understanding of who your customers are and what they value, you won’t have a good direction about where you’re trying to go and what investments make sense as you advance.”
She adds that companies also need to have a good handle on themselves, what they’re good at, and where they’re trying to go. Without those baselines, they could waste much of the money they spend on customer-obsession initiatives.
Companies that adopt a customer-obsessed strategy should start to see an initial payback at the “customer-aware” stage, which Forrester says takes about three years to achieve. Each subsequent stage should take an additional three years, though companies will spend various amounts of time at each stage.
Customer-aware firms have the second largest number of employees of the four segments that Forrester studied. More than half (56 percent) of these large, low-margin companies say that improving customer experience is a high or critical priority, yet many don’t put this into practice, according to VanBoskirk. Only 21 percent of customers say that these companies are effective at meeting their needs.
The benefits of being customer-obsessed vary from industry to industry, according to Forrester. Manufacturers tend to gain the biggest benefits in terms of growth in revenue, customer retention, and employee engagement.
Therefore, industries, like manufacturing, with high customer acquisition and retention expenses, high customer lifetime value, and expensive labor costs should see the best improvements by becoming customer-obsessed.
However, the research firm also acknowledges that the biggest expense will come in moving from customer-
committed to customer-obsessed. Much of the initial cost will come from additional training for employees to understand, adopt, and execute their customer obsession strategies, according to Forrester.
Other expenses will be incurred from aligning marketing and customer experience teams with work effort and executive time spent on developing and implementing new goals as well as on ensuring sales/marketing/work effort stays in place.
Each company needs to determine the value of customer obsession, VanBoskirk says. “It takes some hard steps to mature.” While there might be a lot of sunken costs at the start, the eventual payoff can be tremendous if a company starts with the basics and progresses smartly from one level to the next.