Customer experience leaders outperform the market in the long term, according to a new study from Watermark Consulting.
Watermark Consulting, a leading customer experience advisory firm that helps companies impress their customers and inspire their employees, based its latest analysis of stock market returns for companies that lead in customer experience versus those that lag.
“From 2007 to 2013, customer experience leaders outperformed the broader market, generating a total return that was 26 points higher on average than the S&P 500,” Jon Picoult, Founder of Watermark Consulting, explained in the study.
The analysis, which focused on model portfolios of the Top 10 (“Leaders”) and Bottom 10 (“Laggards”) ranked public companies in Forrester Research’s annual Customer Experience Index study, provides a clear illustration of the business value of a great customer experience.
“What really stood out in this year’s study was the performance of the Customer Experience Laggard portfolio,” Picoult added. “It posted a negative return during a period when the broader market rose sharply–a sober reminder of the cost of customer dissatisfaction.”
Whether it’s a complicated purchase process, a difficult-to-use product, confusing correspondence, or just poor service, Picoult says many companies actually excel in frustrating their customers.
“Eventually, they pay the price for that,” he added. “And, conversely, companies that impress customers reap the rewards–in the form of increased loyalty, greater wallet share, stronger word-of-mouth, and a more competitive cost structure.”
Picoult summarized the study’s findings, stressing their relevance to public and private companies alike.
“The message here is clear,” he said. “A great customer experience pays off in the long run, enabling companies to combat commoditization, set themselves apart from the competition, and pave the way for better overall financial performance.”