Customer experience and product instructions (part 2)

Posted on Mar 3, 2014 | 0 comments

In the last article, I discussed customer churn  and how it’s a bad thing. I also talked about the cost of acquiring customers.

In this article, we’re going to look at resell and incremental spending and how they impact the company bottom line.

An average company loses between 10 – 30% of its customers annually – McKinsey

Incremental spending

Incremental spending is when your customers like your product(s) or services so much, they buy more. This is a good thing for many reasons, but it’s especially good in terms of dollars for 2 reasons:

1. Higher lifetime value

2. Cheaper customers

Higher life time value means the customers stay engaged with you and continue to spend money with you. The longer you can keep a customer, the more that customer is worth to you in dollars. That’s called the Customer Lifetime Value (CLTV).

For example, I’ve been with the same cell phone company for the last 15 years. They should love me, as my lifetime value to them is in the 10s of thousands of dollars. I would expect them to be my best friend.

Why should they be my best friend? Because I’m cheap to them. They don’t need to spend any marketing or sales dollars to keep me. Year after year, I give them $xx dollars and they make no effort to get it, except to keep the cell network alive, which they don’t do for me specially. I’m the perfect customer from their point of view. My CLTV is very high.

When you have a high customer churn rate, every customer costs a lot to get and to keep. The goal is to pay to get people in the tent and then keep them there, spending money every month/year/some period of time.

The probability of selling to an existing customer is 60 – 70%. The probability of selling [more stuff] to a new prospect is 5-20% —Marketing Metrics

The experience is important

My experience with my cell phone provider is not always puppies and cupcakes but it’s also not at all bad. Generally, they do what I need done quickly and efficiently. Unless someone gives me a compelling reason – such as a dramatic reduction in price and identical coverage – I’m probably theirs for life.

A 2% increase in customer retention has the same effect as decreasing costs by 10% – Leading on the Edge of Chaos, Emmet Murphy & Mark Murphy

This is why looking at the total customer experience matters. All touchpoints matter to the customer.

3 levels of happiness

Craig Menzie talks about the 3 levels of customer happiness: Meets Needs, Easy, and Enjoyable. Think of it as a pyramid, he says:

First, and the base of the pyramid, is that an experience must meet a customer’s core needs. Next, it must be easy for them to accomplish their goals. And last, and most difficult, the experience should be enjoyable. If an experience isn’t inherently something that actually can be enjoyable — think renewing your car insurance — then the top of the pyramid is about creating delight from an experience that could be really awful.

My cell phone company certainly Meets my Needs, when I need to interact with them, they typically make it Easy. occasionally, when my rep can play with me in the store, it’s Enjoyable.

With this pyramid in mind, and the CLTV in mind, you see how the further up your company can move, the more your customers value increases.

And this applies to our products, too

So how do we make our products enjoyable? Because one of our biggest touchpoints with our customers is the products.

Obviously, we need to build products that meet the need. But that’s not enough, given that most products are commodities now. How do we move our customers to the top of that pyramid? How do we control the customer experience when we’re not there to herd them up the pyramid?

One of the ways to do that is quality product instructions. Product instructions are a big (and frequent) touchpoint and no one in Customer Experience is looking at them.

Customer experience is looking at support centers and making those pleasant touchpoints (which is important), but what if we can get people to help themselves before they call the expensive support center?

Next week

Next week, we’ll look at topics such as product returns and we’ll look more at how product instructions fit in.