Customer Loyalty and The Costs of Bad Customer Experience

Guest Blog By Route Jan 23, 2020 • 3 min read

Trick question: does it cost more to attract a new customer or retain an existing one? 

Ok, it’s not really a trick question. Being in eCommerce, we’ve all heard this question presented in some form or another. It costs disproportionately more to attract a new customer than retain an existing one. Shocker right? Not really. If you sit down and think about it, it becomes painfully apparent just how much it costs to lose an existing customer. 

The cost of losing a customer 

Depending on what industry you’re in and what study resonates with you, acquiring a new customer is anywhere from five to 25 times more expensive than retaining an existing one. Yikes. Every dollar spent on marketing and customer acquisition directly impacts profit margins and drastically hinders the effectiveness and long term viability of a business. But it’s not just the extra spending that hurts, losing a customer can have far reaching ramifications. Check out these stats; 

  • Shoppers tell an average of 15 people about a poor service experience, versus the 11 they’ll tell about a good experience.
  • After one negative experience, 51% of customers will never do business with that company again. 
  • U.S. companies lose more than $62 billion annually due to poor customer service. 

Losing a customer is rough, but when we think about what losing that customer can do to your entire business, it’s… well, rougher. 

The benefit of keeping a customer 

From display ads and emails, to promotions and discounts, every action you take to bring in a client costs money, so taking advantage of every customer (i.e. increasing customer lifetime value or LTV) is essential to building a high growth and sustainable business. Before we get into the “how we keep customers happy” part, how about we check out some positive stats? 

  • Increasing customer retention by just 5% can increase profits by as much as 75%. 
  • Consumers are willing to spend 17% more to do business with companies that deliver excellent service, up from 14% in 2014.
  • 87% of shoppers are more loyal to a retailer that quickly remedies a bad customer experience. 

You know your numbers. Run a couple in your head quickly. What would a 75% increase in profits look like? What would happen to your bottom line if nearly 90% of your customers were more loyal and shopped more often? It doesn’t take a data scientist to realize that keeping your customers happy can be extremely lucrative.

Pay attention to the entire customer journey 

At the end of the day, stellar customer experience is a lifelong commitment for ecommerce businesses. It takes time and dedication to truly understand and optimize each part of your customer lifecycle and that won’t happen overnight. But what can you do today? We have a few quick tips. 

  • Visually map your customer journey

This may seem obvious, but far too many ecommerce businesses don’t have a clear picture of their customer journey. We aren’t talking about a 10 minute whiteboard session (although that’s where it will probably start), but a thoughtful, in-depth look at every touchpoint from the minute a shopper clicks on an ad all the way through delivery and potential order resolution. 

Bonus tip: Make it shareable. Use a product like Lucidchart to bring your map to life and make sure key stakeholders have access to it.

  • Go through the buying process yourself 

Put yourself in your customers’ shoes. See for yourself what it’s like to buy one of your products. Was the process smooth? Did you encounter friction at any point in the buying process? Did you get the product in the specified time period? This will give you first hand experience, and allow you to be more empathetic with your customers. 

Bonus tip: Return the product. Go through the returns and see what it’s like to engage with your customer service teams. 

  • Prepare for fulfillment problems

No business is perfect and there is no way to prevent every single poor customer experience. Products will be sold out, packages will be stolen, Bill ordered the blue one and got the green one… these things happen, but taking proactive steps to mitigate risk is key to improving customer experience. Make sure you have access to credit for inventory challenges, offer free shipping insurance to mitigate loss, invest in communications tools to better support your customers. 

Bonus tip: Use a shipping platform to simplify the process and ensure quicker shipping turnarounds.

This is a guest post by Route, the premier post-purchase experience solution for online retailers. Through dynamic visual tracking, premium order protection and one-click claim resolution, retailers can now deliver an end-to-end post-purchase experience that delights customers and turns them into lifelong advocates. 

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