Image Source: Unsplash
In today’s highly competitive business landscape, companies of all sizes and industries face the challenge of achieving sustainable, profitable growth. Traditional strategies focused on new customer acquisition are no longer sufficient in a world where offerings are becoming increasingly commoditized and digital-native firms disrupt the market with innovative and personalized offers. To overcome these challenges, companies need to shift their focus towards their most powerful competitive advantage: their existing customer base.
The Power of Experience-Led Growth
According to McKinsey, compensating for the value of one lost customer can require the acquisition of three new customers. On the other hand, 80% of the value creation achieved by the world’s most successful growth companies comes from unlocking new revenues from existing customers. These companies have mastered the art of experience-led growth, a strategy that revolves around providing a distinctive customer experience (CX) consistently and proactively.
Experience-led growth is a powerful strategy that sets successful companies apart from their competitors. It allows them to entice existing customers to choose their brand, leading to behavior changes that can be measured by concrete financial metrics such as share of wallet, repeat purchases, or net revenue retention (NRR). Companies that prioritize customer experience and delight their customers are able to achieve greater value from their current customer base, resulting in significant financial outcomes.
Shut Up and Listen to Your Customers
One classic example of experience-led growth is the transformation of a mobile telecom operator that faced an existential crisis. The company was losing customers to competitors who offered better network coverage and enticing cut-price offers. In an effort to retain customers, the company used contracts to lock them in, but this strategy backfired and created resentment among customers.
The CEO of the telecom operator had a wake-up call when he listened in to customers’ calls to the call centers during his morning commute. The frustration expressed by customers shocked him and prompted a turnaround in the company’s approach. The company eliminated contracts, allowed anytime upgrades, made every new customer offer available to existing customers, and improved its network. Additionally, the company reinvented its approach to service.
The results were remarkable. Customer satisfaction ratings jumped from worst to first in the industry, and customer churn rates were reduced by 75 percent. Over a three-year period, the company’s revenues nearly doubled, outpacing its key competitors’ revenue growth threefold. This success story emphasizes the importance of listening to customers and addressing their pain points to drive growth.
The Link Between CX and Revenue Growth
There is a strong correlation between a company’s CX ratings and its revenue growth. McKinsey’s analysis shows that companies that are leaders in CX achieved more than double the revenue growth of “CX laggards” between 2016 and 2021 in the United States. Furthermore, CX leaders rebounded from the COVID-19 pandemic more quickly than other companies.
Growth outperformers are more likely to know their customers personally, have a compelling growth story, and use predictive analytics to deliver the right messages to the right customers at the right time. These companies prioritize long-term growth over short-term profit and cultivate growth from existing customers by making it enjoyable to use more of their products and services over time.
The Three Pillars of Experience-Led Growth
Experience-led growth strategies rest on three pillars: setting a clear growth aspiration and purpose, transforming the business through customer-centricity, and enabling the change by reimagining culture and capabilities.
- Setting a Clear Growth Aspiration and Purpose
Companies executing experience-led growth strategies start by defining a clear vision for their desired financial outcome. Instead of driving CX for its own sake, these companies prioritize the customer experiences that will deliver the desired outcomes. They also identify the metrics they will use to measure success, such as share of wallet, repeat purchases, or NRR.
For example, a major logistics company set a bold aspiration to become the logistics player of choice for both its business customers and their end-customers. The company aimed to build long-term, value-generating relationships with customers by providing exceptional experiences. This aspiration was closely tied to additional revenues targeted in the hundreds of millions of dollars.
- Transforming the Business: Reinventing Customer-Centricity
Leaders in companies executing experience-led growth strategies understand the pain points that hinder growth and translate their ambitions into redesigned customer journeys and an effective cross-functional operating model. They are adept at expanding revenue pools by inventing new offerings and experiences.
A global B2B power-tools company recognized the need for a step change in its approach to CX to remain ahead of competitors. The company set a clear aspiration for its CX transformation: faultless reliability, accessibility, and transparency. It redesigned customer journeys, identified key moments of truth, and implemented actionable “voice-of-the-customer” metrics. These efforts led to tangible improvements in customer journeys and continued double-digit annual revenue growth.
- Enabling the Change: Reimagining Culture and Capabilities
Large companies implementing experience-led growth strategies must shift their organizational cultures and build new capabilities. These capabilities range from design thinking to cross-functional collaboration to effective use of CX measurement insights, ensuring sustained improvements in wallet share, cross-sell rates, and retention rates.
A major regional healthcare provider embarked on a multi-year transformation by training employees on agile ways of working and implementing powerful new advanced analytics capabilities. The company developed a customer data hub that aggregated millions of records from multiple data sets. This enabled the provider to build machine-learning models that triggered proactive interventions based on data-driven analysis. The improved capabilities enabled the company to sustain the benefits of its transformation over time.
The Benefits of Experience-Led Growth
Successful experience-led growth strategies can deliver a range of significant financial benefits. According to McKinsey, these strategies can increase cross-sell rates by 15 to 25 percent, boost companies’ share of wallet by 5 to 10 percent, and improve customer satisfaction and engagement by 20 to 30 percent.
Companies that prioritize customer experience and embrace experience-led growth deliver 30 percent higher Total Return to Shareholders (TRS) and nearly double the shareholder value compared to their industry peers, on average. These companies achieve sustainable revenue growth by providing exceptional experiences to their existing customers.
Conclusion
In a world where offerings are increasingly commoditized and disruptive digital-native firms target customers with innovative and personalized offers, companies must shift their focus to their existing customer base. Experience-led growth is a powerful strategy that allows companies to unlock new revenues from existing customers. By providing a distinctive and proactive customer experience, companies can drive sustainable, profitable growth.
To succeed with experience-led growth, companies must set clear growth aspirations and link them to value. They must transform their businesses by reinventing customer-centricity, redesigning customer journeys, and expanding revenue pools
Do You want the Inside track? Let’s talk!
A no obligation discovery chat where I will provide specific examples and valuable takeaways you can use immediately to deliver PRAGMATIC CX success.
“This course provided a terrific holistic framework for how I can more richly think about how MOTs connect to Customer Experience and Customer Journey Management. It’s a terrific program that I’d recommend and encourage Professionals to strongly consider.”
L.G. Lavengood Outstanding Professor of the Year Award (2022)
Jim Lecinski, Professor, Kellogg School of Management
(Jim is the creator of ZMOTs and Micro MOTs as a VP at Google 2006-2018)
Connect with Steve: https://linktr.ee/SteveTowers