5 Reasons Why Startups Must Invest in Customer Experience

Rukham Khan
Rukham Khan

Last updated on

October 6, 2023

We are in the midst of a revolution. A revolution that is silent but one that is too big to ignore. In case you haven’t already noticed, you are spending more on products or paying more to services that treat you well. Mind you — treat you well and not just provide you with good quality products and services.

Customer experience has become a major differentiator across all industries. From hospitality to airlines, customers are willing to shell out extra dollars to get better service. In fact, the PwC Future of Customer Experience Survey found that customers are willing to pay up to a 16% price premium on products and services, plus increased loyalty.

graph on price of good customer experience

Source: PwC

Now, here is the thing. Customer experience is totally different from a product or service. Having a good product or service is fundamental to business growth. Customer experience is an emotional element that puts the customer at the center of everything that the business does. Its motive is to deliver delightful experiences to customers every time they interact with the brand. Be it online or offline, customer experience is what makes the customer feel special and puts a smile on their faces.

This point is better proven with a real-world example.

The case of Blockbuster and Netflix

Remember Blockbuster? Over the last decade, the video rental stores went bust with the uprising of Netflix. At the onset, both brands serve content to their customers. However, there were several things about Blockbuster that annoyed customers. Netflix, on the other hand, turned all these annoying things about blockbuster to their advantage.

The table below shows how Netflix was able to win over millions of customers and Billions in revenue by delivering a better customer experience than Blockbuster.

Source: Strategy Journey

Turns out if a non-descript startup can deliver a better customer experience to an underserved market, it can become the 800-pound gorilla of the industry.

If you are a startup and have ambitions of entering and establishing a presence in any industry, customer experience cannot be ignored.

5 reasons why your startup must invest in customer experience

Startups want to grow fast and big. Unfortunately, they do not have the time, budget, or other resources necessary to do this. However, delivering a great customer experience can help them grow faster and bigger. It can be a catalyst to their growth story. Here are five reasons that prove it right.

1. CX as a differentiator more powerful than pricing or quality

Bad experiences are driving customers away. Almost 19 percent of customers said they only give a brand one chance to fail before they leave. In other words, it takes only a single negative incident for customers to feel like abandoning a brand they have grown to love and move to a competitor. Loyalty has become a fragile concept in the 21st century.

However, customer experience can help cement loyal customer relationships. Circling back to the PwC Future of Customer Experience report, customers are willing to pay more for a superior experience. CX is a differentiator that is more powerful than pricing or quality.

Data from InMoment suggests that 80 percent of customers “grew to love” a brand over time; the cumulative effect of great products, service, buying experiences, positive reviews, and recommendations from others. It is worth noting that price and quality are not big influencers of buying decisions as they are often considered to be.

2. CX drives long-term loyalty

It takes time to unearth a finding like this. Someone actually did a study of how customer experience correlates to long-term customer loyalty. The study brought to light some staggering results.

To begin with, more than 50 percent of loyal customers will purchase more products. Also, 77 percent of consumers say they’ve held relationships with specific brands for 10 or more years. (InMoment’s 2018 US Retail CX Trends Report).

Darshan Somashekar, who runs the gaming platform Spider-Solitaire-Challenge, experienced how strong customer support creates loyalty and moves key metrics. “We reduced our customer service response time to two hours for inquiries for our spider solitaire games. As a result, we found that those users returned to our site 36% more than the average.

Needless to say, returning customers are so easy to maintain. You do not have to spend too much time or energy selling new products to them. Also, there is no need to set up an elaborate product training and customer support system to cater to their needs. They are already in the ecosystem and know how to operate your products on their own. This loyalty stems from great customer experiences that could have been doled out over a long span of time — say like, five years or even a decade.

3. CX helps reduce Customer Acquisition Costs (CACs)

One of the popular and well-known facts in sales and customer service is this: Acquiring a new customer can cost five times more than retaining an existing customer.

To acquire a single new customer, a business has to pull several marketing levers. Right from paid advertising to inbound marketing, these levers deliver varied results. Also, they are not instant business-generating machines. They take time, require consistent efforts, and also a decent budget allocation to achieve the business goals.

Compared to all this, retaining existing customers is a job easily done. All that the business has to do is continue delivering a positive customer experience.

Source: Tedgoff

In fact, there is another popular statistic that says that increasing customer retention by a meager 5% can result in profits increasing by 25-95%. In other words, customer experience can actually maximize your profits tremendously if only it is given adequate focus. Sometimes it may require hosting webinars for your customers, creating extra content to help your customers understand use cases of your product/service, or possibly offering online courses as a value add for your customers.  As a startup, this can be easily done as the number of customers and volume of transactions would be moderate facilitating easier management.

4. CX helps with $0 marketing

Until the iPod was launched, consuming music was more of a chore. It was never easy to procure music albums. If at all they were bought, playing them at your convenience was never easy. The music players of the 90s were chunky boxes whose user experience was almost non-existent.

The iPod changed all of that. It gave the promise of keeping and playing 1,000 songs in your pocket. It also came with iTunes which was groundbreaking music management software at that time. With iTunes, Apple rewrote how music was purchased, consumed, and even published.

And guess what the biggest story was? Although Apple did a grand launch event, it was able to dial down on subsequent marketing spend. They just had to announce a newer version and customers were already lining up to buy new iPods and within a couple of yours, Apple's revenue propelled to 8 Billion Dollar mark.

Great customer experience is $0 marketing. It is something that customers are yearning for. Once they find where to get it, they will easily replace their old choice with the new choice.

This is good news for startups as it can help win over underserved customers who are looking for better alternatives to existing products or services that they could be using.

5. CX can attract talent

Every startup faces one inherent challenge — hiring and retaining great talent. Most job seekers want to work for companies that they believe to have the same mission or at least share the same beliefs as they do. Unlike the previous generation, the current generation of millennial employees is very specific about this.

Also, the millennial generation is also extremely focused on giving and receiving a great customer experience. They also look forward to being part of organizations that take customer experience seriously. They understand that, in a way, they are also customers of some business.

For a startup, focusing on delivering a great customer experience can put it on the radar of professionals who are passionate and want to contribute to the cause. It simplifies the chore of attracting talent.

Conclusion: CX is much more than a passing fad

There have been many milestone events in history before. Some of them changed the world as we know of it forever. While some others just moved as passing fans. Customer experience belongs to the former kind. It is not a passing fad. It is a major element that is going to define how businesses will treat customers and what customers will come to expect from businesses in the near future.

For startups entering fiercely competitive marketing, CX can be a serious differentiator. It can help them win over loyal customers from competitors without spending insane Customer Acquisition Costs. Also, if done right, it can continue to yield business while keeping marketing costs to a bare minimum. As icing on the cake, CX can also help attract the right talent that can take the startup to the next level of becoming an enterprise.

Author Bio

Rukham Khan

Rukham is the Content Lead at Mailmunch. He believes trust should be the basis for all marketing communications.


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