Companies that invest in customer experience dramatically outperform those that don’t, a new study from Watermark Consulting found.
Companies with the strongest CX performance generate 7.8 times higher stock returns than those with the poorest customer experience, according to Watermark, which also found that CX-leading firms outperformed the S&P 500 index by more than 400 percentage points, while CX-lagging firms trailed it by a nearly identical margin.
The findings come at a time when many companies are increasingly relying on automation and cost-cutting measures that risk degrading the customer experience, Watermark said further.
"Many business leaders publicly champion customer experience while privately questioning its return on investment," said Jon Picoult, founder and principal of Watermark Consulting and author of From Impressed To Obsessed: 12 Principles For Turning Customers And Employees Into Lifelong Fans. "This study strips away any doubt. Over the long run, the financial case for delivering a great customer experience isn’t just compelling; it's overwhelming."
Watermark also found that the performance gap between the CX-leading and lagging firms has more than doubled over the past five years, vividly illustrating how customer obsession accelerates growth over time by both lifting revenues and controlling expenses.
Picoult did offer encouragement for businesses seeking to capitalize on customer experience to drive competitive advantage: "We have found there are a discrete set of techniques that beloved brands use to create great, memorable customer experiences," he said. "And that strategic framework can be applied to great effect in companies large and small, across virtually every industry.”
Picoult hopes that the analysis will encourage business leaders to rethink the economic calculus around customer experience differentiation. "Many companies endlessly debate: 'What will it cost us to deliver a better customer experience?' But the more appropriate question really is 'What will it cost us if we don’t?'"