Build loyalty through emotionally resonant, revenue-generating CX

How recent research proves that highly-rated CX leads to increased customer loyalty.

Uncovering the link between CX and loyal customers

Illustration by Isaac Claramunt.

No matter what industry you’re in, customer experience matters now more than ever. CX tools such as Net Promoter Score surveys and new AI technologies that quickly analyze feedback have provided detailed proof of the link between customer experience, emotion and loyalty. With the right data-gathering and analysis tools, companies can now see that link in action and craft tailored, company-wide CX strategies for growth.

Uncovering the link between CX and loyal customers

The 2018 Temkin Group study ROI of Customer Experience set out to understand the connection between customer experience and loyalty. Researchers asked 10,000 US consumers about their experience with 318 companies, including airlines, car rental agencies, hotels, supermarkets and wireless carriers. After analyzing the feedback data, the study found that across 20 industries, CX not only correlates highly to loyalty, it can deliver up to $1 billion in revenue over three years.

Here, we’ll dive deeper into the study’s data to uncover exactly how CX influences customer loyalty, from building trust to prompting repurchasing.

Emotional impact leads to repurchasing, and more

A strong emotional connection during the CX journey drove the largest increase in loyalty.

How your company makes a customer feel can spell success or failure for your latest product or service. Temkin’s CX specialists evaluate customer experience based on three components: success (how well experiences meet customers’ needs), effort (how easy it is for customers to do what they want to do) and emotion (how customers feel about the experiences). While all three elements impact customers’ loyalty-related behaviours, including trust in a company and repurchasing, the Temkin study confirmed the power of emotion: a strong emotional connection during the CX journey drove the largest increase in loyalty.

Comparing two datasets—the Experience Ratings scores of the 318 companies and how likely consumers were to repurchase from those companies—the study showed that 87% of customers who gave a high rating to “emotion” were “very likely” to repurchase from that company. Those same customers who highly rated emotion were also “very likely” to trust, forgive and recommend that company, as well as try its new offerings.

Loyalty’s role in CX-related ROI

When it comes to how loyalty affects a company’s revenue generation, the stats show measurable gains. Along with gathering data on customers, the Temkin study’s researchers built a model to estimate how improved CX could impact the revenue of a typical $1-billion company in 20 industries. They found that over three years, the companies stood to gain $775 million, with software companies gaining the most at $1 billion in CX-related additional revenue.

Go further with your own Customer Experience ROI model

The Temkin study ROI of Customer Experience provides a sweeping picture of the link between CX and loyalty, and a starting point for understanding and using your own CX data. By building a Customer Experience ROI model for your company, you can 1) use existing metrics and your CFO’s involvement to more reliably project revenues and financial models, 2) rely on truly defendable, conservative estimates of the benefits of CX, rather than attempting to convince with higher, less defendable estimates, and 3) construct a compelling, action-oriented explanation of the model’s results and how they impact CX strategy.

How Net Promoter Score links to loyalty

For companies, the most frequently used metric of customer loyalty is Net Promoter Score, a calculation based on direct customer feedback from a simple survey. NPS shows customer satisfaction levels and is a reliable predictor of a company’s growth.

CX strongly correlates to NPS: companies in the highest quintile of the study’s Experience Ratings were 10.6 points above their industry average.

The Temkin study found that CX strongly correlates to NPS: companies in the highest quintile of the study’s Experience Ratings were 10.6 points above their industry average. Further, there was a 21-point difference in NPS between consumers who had a very good experience with a company and those whose experience was poor. While the NPS score has long been an important factor in CX strategy, this finding strengthens its value.

Create data-driven CX strategies to increase loyalty

CX prescribes that every customer transaction be timely, personal, memorable and relevant to the customer. Since every transaction is unique to its customer, it follows that the key drivers of customer loyalty are also unique to each transaction. For CX strategizing, it’s crucial to identify, gather and analyze these drivers, which constitute a huge amount of complex quantitative and qualitative data. This is where advanced technology comes to the rescue.

With new AI data analysis tools, you can make the most of your NPS. These tools rapidly mine quantitative as well as qualitative, emotion-based customer feedback from surveys, website forms, email and other sources. Combining NPS and AI analysis lets you better understand the correlations between customer transactions, customer experience that’s tied to emotion, and the most common and critical drivers of loyalty.

As the Temkin study shows, a high-quality, emotionally resonant customer experience has a major impact on customer loyalty. Ultimately, maintaining and growing a loyal customer base positively affects a company’s outcomes, whether they’re a software provider or a new car dealership. For your company to enjoy these outcomes, use data analysis of customer feedback—especially the more complex emotion-based feedback—when crafting your CX strategy.

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