So far in this series on the wonders of Customer Success, we have focused on the qualitative benefits.
Sharing knowledge. Learning from customers. Connecting teams.
As we have mentioned before, an eCommerce customer who cost $9 to recruit in 2013 now costs $29. And that’s far ahead of inflation, which would have raised that cost to just $11.
Why the spike? Crowded marketing, a legion of substitutes, and lower switching costs than ever before.
Facing financial outcomes like this, it can be hard to focus on how well your team is communicating. In reality, the financial upside of stellar Customer Success might be more impressive than any other benefit we have discussed so far.
You can’t afford not to create incredible customer experiences that boost the top and bottom lines.
The Financial Benefits of Customer Success
Let’s talk numbers.
Customer Retention = Cost Reduction
Give yourself five minutes to figure out how to reduce costs by 10%. How much work would that be?
Maybe you’re renegotiating a key supply contract, or are imagining economies of scale that are another round of funding away. Or, worst of all, the prompt is laughable because there’s no way to carve another 10% out.
Or you could reduce customer churn – how many customers you lose in a given period – by 2%. In fact, research from Leading on the Edge of Chaos shows that a 2% reduction in lost customers is the same benefit as a 10% reduction in costs.
The Premium Premium
A report by Defaqto Research showed that more than half (55%) of customers will pay extra to guarantee better service. This connects directly to our previous article about how most customers leave because of bad service experience.
In other words, customers will pay a premium for premium experiences. This doesn’t require luxury, exorbitant support, or exclusive access. Instead, customers value a worry-free experience, easy self-support, and a Customer Success team who wants to solve the customer’s problem… fast.
Retention is Frugal
Customer acquisition is becoming more expensive. But it turns out that acquiring a new customer is actually 5 times more expensive than retaining that same customer, according to Forbes.
This is a simple inversion of the idea than a 2% improvement in retention is the same as a 10% reduction in costs. Why did we repeat a version of this idea?
In a world of 8 billion people, it’s easy to assume you have an infinite market. Except that not everyone is your market. Customers are less willing than ever to return to a product they abandoned.
Your market shrinks every time you lose a customer. Then you spend 5 times as much to win a new customer who you’re not investing enough to keep.
That’s a formula for failure.
Loyalty Grows the Basket
McKinsey & Co puts it all together for us: Repeat customers spend twice as much per year with you.
Or, loyal customers keep spending with you. This improves your revenue, reduces costs, turns customers into champions, and builds better defenses against competition.
If these benefits sound like a fairy tale, you’re right. Let’s explore a few of the dark surprises.
The Financial Costs of Customer Success
There aren’t many risks, but they are worth noting.
Put bluntly, it’s easy for Customer Success teams to get carried away footing the bill for a frustrated customer.
If the Lifetime Value of the customer is estimated at $10,000 but you have already spent at least that much team time supporting them, you may have a bottom line problem.
This problem compounds when your team is busy supporting perpetually needy or unhappy customers instead of supporting ideal customers.
The direct consequence of needy or unhappy customers is frustrated teams. It seems to them like certain customers just cannot be pleased. They consume disproportionate amounts of time.
This wears on a team that prides itself in happy customers.
Eventually, your team could become frustrated and choose to find another role or company.
Misalignment with Sales, Marketing, and Product
Not every customer is right for your company. They may be misaligned on value, support, or even mission and vision. And that’s OK. In fact, there is a mechanism for fixing this problem: customers fire themselves.
But if your team is overly committed to retaining customers at all costs, you remove this mechanism.
This mismatch will become apparent as you bring the Voice of the Wrong Customer to discussions with Sales, Marketing, and Product. At its most extreme, Product starts building for a small number of highly vocal customers who do not represent your ideal audience.
That’s a downward spiral.
How to Win the Top and Bottom Line
Follow the simple strategies in our articles. We have listed them here for easy reference:
- Create a bridge between customers and the company
- Use customer feedback to fuel innovation
- Connect functions within your company
- Proactively teach the customer’s perspective to other functions
Today, we explored the financial benefits of great customer experiences and how to earn them.
Join the Conversation
Extelli lives in the world we’re discussing here… and we would love for you to join the conversation. Check out our post about this topic on LinkedIn.