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The Customer Experience Cost: How Bad Experiences Cost Your Business Big Money

Imagine you’ve launched a new online delivery service. Initial orders are high. Yet, customer retention is low. Then, feedback from a user sheds light on the issue: setting up an order is too complicated for quick, everyday use.

Businesses lose approximately $1.6 trillion due to frustrating customer experiences annually.

Good customer experiences aren’t just about aesthetics or functionality. It’s crucial to connect with your users, bridging the gap between customer expectations and the actual experience they receive. Creating a customer experience (CX) that builds a connection with customers, demonstrates that you value their time and preferences, is essential in meeting and exceeding these high customer expectations.

But how do you quantify how much positive or negative CX drives the bottom line?

Customer experience influences outcomes from loyalty to spending. Yet many businesses struggle to measure its real impact. To achieve tangible change, questions arise: How do we transform CX from a ‘nice to have’ into quantifiable improvements? Poor customer service, characterized by slow response times and failure to meet customer expectations, significantly impacts customer retention and satisfaction, leading to customer disengagement and eventual departure.

And that’s what we’re going to find out.

Customer experience matters to ROI.
Customer experience matters to ROI.

How do you quantify the impact of CX?

The secret to a profitable, successful business? Create positive customer experiences by weaving them into every aspect of your business. Your customer experience (CX) begins the moment they discover you. It continues with every interaction that follows – from purchases to support requests. Good customer experience helps you to boost customer loyalty and brand reputation and cut support costs.

With gains of up to 30% in company value tied to a 10% rise in customer retention, businesses cannot afford to neglect CX improvements. Enhancing customer value through positive end-to-end experiences not only boosts retention but also significantly contributes to the overall value a customer brings to a company over time. Customer experience presents a lucrative opportunity for those who invest wisely.

Better customer experience, better bottom line. Satisfied customers stay loyal, repeat purchases follow, and acquisition costs decrease. Superior CX can justify a price premium, with customers willing to pay more for products or services that offer exceptional experiences.

How do you Measure Customer Satisfaction and CX?

Don’t choose customer experience measurement tools at random. After you’ve defined the desired successful outcome, select a metric that help measure progress toward those specific goals. Here’s a breakdown of common options organized by the aspect of the customer journey and experience they help you improve.

Loyalty and Advocacy:

  • Net Promoter Score (NPS): Measures willingness to recommend. A key indicator of overall relationship health and customer loyalty.
  • Customer Effort Score (CES): Gauges how easy it was to solve an issue, tied to loyalty as friction drives abandonment.

Immediate Satisfaction:

Customer Satisfaction (CSAT): Measures contentment, often tied to specific support interactions, transactions, and customer expectations.

Deeper Insights, Not Just Scores:

  • Churn Rate: How many customers you lose over time. High churn often points to problems needing deeper investigation and analyzing customer feedback.
  • Customer Lifetime Value (CLV): Combines revenue per customer with retention. Improving CX generally boosts this key metric.

The 'Why' Behind the Numbers:

  • Qualitative Feedback: Surveys, reviews, etc., give customers a voice beyond raw scores, enhancing customer satisfaction.

Choosing the right mix of channels and VoC data depends on your business model and improvement focus. A subscription-based company might obsess over churn but use simple CSAT per ticket. A retail focused on one-time sales may look more at NPS.

If you run into difficulty getting leadership support for a CX measurement program, make a business case for improving CX. When it comes to the bottom line, customers are willing to pay 16% more for products and services from brands with superior positive customer experiences.

Identifying and reducing friction points in CX
Identifying and reducing friction points in CX

Common points of friction or difficulty in the customer journey

Identifying and Reducing Friction Points in CX

Friction points in the customer journey often directly sabotage sales. They create obstacles that lead to frustration and abandonment. For example, an overly complex checkout process can drive away up to 87% of shoppers who are ready to buy.

Snags like this can significantly dent customer satisfaction and loyalty.

There is a common misconception: customer experience (CX) might seem vague, but it has a direct financial impact. Streamlining the customer journey and reducing friction makes it easier for customers to spend money.

What are some common CX friction points?

  • long wait times for customer support
  • complicated navigation on websites or apps
  • unclear communication from the business
  • repetitive information requests during support interactions
  • difficult checkout process

Addressing these issues reduces customer frustration and improves the customer experience. Better CX can lead to cost reduction by better meeting customer needs.

But how do you figure out what friction points your customers are experiencing?

Voice of the Customer (VoC) comes in here.

What is VoC? Why Customer Feedback is Important for Positive CX?

Voice of the Customer is the process of capturing customer feedback, expectations, preferences, and aversions. VoC guides businesses in enhancing their products, services, and overall customer journey.

Addressing customer problems effectively is crucial for retaining customers and increasing their value. Investing in solving these issues through VoC insights can significantly impact customer experience and avoid the high opportunity cost of delivering subpar service.

86% of customers will leave a brand after only two or three bad experiences. To your customers, your NPS and CSAT scores don’t matter. What matters is how your customers feel after they’ve used your product or services, and to identify causes of customer frustration and churn.

One in 26 customers will voice their complaint, while most will just churn. Treat all the feedback data like gold, whether it is through product reviews, social media chatter, or directly to customer services - to identify what is causing the frustration.

By focusing on VoC feedback, you can use the data to identify specific areas for improvement. Making customer experiences smoother and more enjoyable helps quantify the value of CX for your business.

Positive customer experiences multiply your ROI
Positive customer experiences multiply your ROI

How Improved CX Translates into Increased Customer Lifetime Value and Cost Reductions

Enhancing CX can reduce the volume of customer support queries, leading to direct cost savings in support operations and increased customer lifetime value. A positive customer experience plays a crucial role in this by not only reducing support queries but also operational costs, as satisfied customers are less likely to require additional support.

Efficient and positive interactions also boost first-contact resolution rates. It diminishes the need for follow-up contacts and further reduces costs - up to 33% reduced costs according to Deloitte.

Providing a positive experience is key to increasing customer loyalty and the likelihood of repurchasing. Positive customer experiences that lead to loyalty are five times as likely to repurchase your product. Good CX results in seven times as likely to try a new product offering, and four times as likely to refer a friend or colleague.

Customers who double up as brand advocates by generating positive word-of-mouth can lead to new business opportunities without the corresponding marketing expenses.

How to leverage technology to enhance CX and reduce costs

Leveraging AI technology such as machine learning and NLP can help you significantly enhance customer experiences and reduce operational costs.

These technologies deliver powerful benefits:

  • Deep Customer Insights: Reveal behavior and preferences beyond surface-level actions, for hyper-targeted product improvements and marketing.
  • Personalized Interactions: Enable tailored experiences, making customers feel understood, which builds loyalty and increases upsell potential.
  • Predictive Customer Service: Pinpoint potential issues before they turn into complaints, allowing proactive mitigation that builds trust.

AI-powered chatbots and virtual assistants provide immediate, 24/7 support, reducing the load on human agents. Machine learning algorithms can identify patterns in customer data. The results can help preemptively address issues and tailor experiences.

In addition to this, AI-driven Thematic Analysis of customer feedback can lead to better insights into the customers’ experience. Integrating these technologies not only elevates the customer experience but also enhances the employee experience by equipping staff with the tools they need for efficiency and engagement, thereby fostering a culture that benefits both employees and customers.

Elevating your CX for a Positive Customer Experience is a Strategic Necessity

The journey towards consistently positive customer experiences is an ongoing process. It requires continuous attention to the voices of customers and the agility to adapt to their evolving needs and customer expectations. This dedication not only enhances satisfaction among current patrons but also plays a crucial role in attracting new customers, who are drawn to businesses known for their exceptional customer service.

Every interaction and every feedback loop is an opportunity to improve customer experiences. By extension, bolster the financial health and reputation of your business.

Leveraging insightful analytics is part of this process.

Thematic analysis tools provide insights into the undercurrents of customer feedback. Data empowers businesses to address concerns. Thematic analysis can also be used to anticipate needs. You can set the stage for a proactive rather than reactive approach to customer experience management.

Use Thematic Answers to get straight to the specific customer experience insight you need
Use Thematic Answers to get straight to the specific customer experience insight you need

This type of detailed feedback breakdown goes far beyond basic NPS or a “thumbs up/down” system. AI-driven tools can translate insights into quantifiable CX improvements.

How Thematic delivers actionable CX insights

With highly unpredictable markets, tools that deliver specialized analytics offer a distinct competitive advantage by making it easy to hear and act on the voice of the customer. Here at Thematic, our mission is to make it fast and easy to hear and act on the voice of the customer.

DoorDash uses Thematic analytics platform to uncover and dive into recurring pain points that arise in their feedback. Pain points and common frustrations like delivery delays. With Thematic, they can easily drill down further: The common problems are delivery delays. Are wait times long? Is estimated delivery inaccurate? Or is communication during a delay poor?

Thematic’s AI breaks down large amounts of customer feedback to find hidden patterns and trends. The analysis process goes beyond generic likes/dislikes. The analysis gives you insight into specific areas for improvement across your customer journey. The results enable targeted, data-driven CX enhancements.

With our conversational feature, you can simply type in your question to get a rich and quantified answer on what to solve, with all the evidence.

Curious? Check out how you can boost efficiency, cut costs, and gain actionable insights from customer data with Thematic today



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Our experts will show you how Thematic works, how to discover pain points and track the ROI of decisions. To access your free trial, book a personal demo today.

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