{"id":22188,"date":"2021-09-10T10:53:28","date_gmt":"2021-09-10T14:53:28","guid":{"rendered":"https:\/\/www.3pillarglobal.com\/?p=22188"},"modified":"2025-05-14T18:30:26","modified_gmt":"2025-05-14T18:30:26","slug":"how-customer-experience-impacts-retention","status":"publish","type":"blog","link":"https:\/\/www.3pillarglobal.com\/insights\/blog\/how-customer-experience-impacts-retention\/","title":{"rendered":"How Customer Experience Impacts Retention"},"content":{"rendered":"

When it comes to who they want to do business with, customers have plenty of options, and their loyalty can be easily lost. There\u2019s no denying the strong correlation between customer experience and retention.<\/p>\n

One of the best ways to fight customer churn, increase retention, and achieve growth is by investing in customer experience and using customer insights to keep improving. This is an iterative process.<\/p>\n

A recent study commissioned by Qualtrics<\/a> revealed that positive experiences directly increased purchasing and referrals and that focusing on building emotional connections with customers had the biggest impact.<\/p>\n

According to Zendesk<\/a>, 74% of customers say they\u2019re loyal to some business, and 57% share that the quality of the service they receive has a strong influence on loyalty.<\/p>\n

Luckily, with 40% of consumers<\/a> test-driving new brands in 2020, you have the opportunity to win loyalty during this transitional time as customers establish new habits and address new concerns. However, there\u2019s some urgency here. As the dust from the past year settles, it\u2019ll get harder to convince customers to switch to something new.<\/p>\n

Here are some specific examples of what better retention rates mean for your business and how customer experience factors into the equation.<\/p>\n

A Loyal Customer Base Sets the Stage for Growth<\/h2>\n

High retention rates are a healthy sign of product acceptance and not only make the industry a better place overall but also can benefit a company\u2019s bottom line on both ends.<\/p>\n

Retaining existing customers means repeat purchases, upsells, and cross-sells. These efforts result in more sales, higher customer lifetime value (CLV), and a predictable incoming revenue stream.<\/p>\n

It elevates the customer\u2019s expectation of what the industry\u2019s customer experience should deliver and helps it rise in overall quality of service to its patrons. In turn, it allows businesses to make better decisions about how to invest in their business, whether that\u2019s setting a budget, timing large orders, or launching new initiatives.<\/p>\n

Understanding the impact of customer experience on retention also saves money. Churn often causes companies to lose revenue\u2014both in terms of the loss of that customer\u2019s business (especially for SaaS\/subscription-based businesses) and the money spent to replace them. Currently, it can cost 5x more<\/a> to attract new customers than it does to retain existing ones.<\/p>\n

If bad customer experience is causing churn, you must also consider the costs associated with rehabbing reputation and revenue a business is missing out on because it\u2019s gotten harder to grow. Marketing to those consumers becomes less effective, and, as a result, the business ends up spending more money on lead generation and not reaping the rewards of revenue and customer insights.<\/p>\n

Existing Customers Spend More and Try New Things<\/h2>\n

While the right marketing plan requires jumping through several hoops, one thing is for sure\u2014it\u2019s profitable to target your existing customer base. In fact, companies that offer great customer experiences can charge 16% more<\/a> for their products and\/or services.<\/p>\n

Studies<\/a> have even shown that when customers have a history of positive experiences with your brand, they\u2019re 50% more likely to take a chance on a new product and are willing to pay an average of 30% more on that product than first-timers.<\/p>\n

Continuing to solve problems and deliver high-quality products means customers can expect new solutions to meet certain quality and usability standards, which means they\u2019ll spend less time researching other options and mulling over their decision.<\/p>\n

That said, retention starts with making sure customers are willing to return in the first place. After all, a bad experience can turn them off forever.<\/p>\n

That same Qualtrics<\/a> report also found that 94% of customers that rated an experience as \u201cvery good\u201d were \u201cvery likely\u201d to buy from that brand again. By contrast, only 18% of customers reporting \u201cvery poor\u201d experiences gave the same answer.<\/p>\n

Note: It\u2019s unclear whether these bad experiences happened after having positive experiences with the same brand or if it was the first time shopping with them. In which case, it makes sense that some would give that brand another chance.<\/p>\n

Essentially, it all comes down to building trust through consistent experiences, including service, messaging, commitment to values, product and\/or service quality, and response times.<\/p>\n

Great Experiences Generate Business<\/h2>\n

While it takes time, investing in customer experience and retention strategies can deliver some major returns and will eventually end up doing a lot of the acquisition and marketing for you (and for free). Here\u2019s how:<\/p>\n