Using customer delight to improve company value

By: Koritos Christos, Assistant Professor of Marketing

Customer delight has become the Holy Grail of marketers’ quest for success for more than a decade now. Marketers can see the outcomes of their efforts in customer responses. But how this echoes to investors’ ears? Customer delight requires high company investments and longtime commitments that are usually at odds with shareholders key driving force, to maximize the return of their investments sooner than later. How then can marketers convince their fellows CFOs and CEOs (and through them prospective investors), that investing in customer delight will pay off?

A study by Bain & Co. shows that leaders in customer service like Google and Apple grow revenues 4 percent to 8 percent above their market. For example, Apple, who put customer-centric design and frictionless experiences, at the center of its marketing strategy cited revenues of more than $46 billion for 2014, securing a 39 percent market share.

Because customers have to have the products they love they are willing to pay more, resulting a steadily increasing revenue stream. The effect of customer delight, becomes even more pronounced on the cost side of the equation, since employees feel better when they serve satisfied customers, which makes them becoming more productive without the lure of monetary incentives. Companies that delight their customers also have the advantage of an unpaid, but extremely effective, marketing “department”. Happy customers can become some of the firm’s biggest advocates with Bain & Co. reporting that promoters have a lifetime value up to 14 times greater to that of detractors.

While many consider stock price as the only measure in order to evaluate the ROI of investments in customer service, Forrester suggests that total stock market returns can be misleading. While the total stock returns of a portfolio of customer experience leaders beat those of a portfolio of customer experience laggards, there tends to be much noise in the data. A better indicator would be to compare the revenue growth of companies with superior customer experience to that of their direct competitors with relative inferior customer experience.

Moreover, while investments professionals stress the role of fundamental analysis, which translates to company-level financial analysis, such analysis is primarily a retrospective view or a lagging indicator of a company’s ability to generate future cash flow. What it is truly a fundamental analysis is the company’s ability to create engaging, emotional, and long-lasting relationships with customers, along with management’s commitment to delighting its customers. Customer experience is the prospective view and the true leading indicator of sustainable future cash flow generation.

So, what does it take to become a leader in customer delight? Leading companies look for ways to continually enhance the customer relationship. For example, social media have created important observational positions that analysts can leverage to garner insights into companies who excel at delivering a simple and more human experience across every interaction channel.

Additionally, leaders in customer delight create exceptional value by operating with a sense of authenticity, transparency, empathy, and societal purpose. They are developing “social capital,” creating strong emotional, personalized relationships with customers. This emotional bond is the key driver of customer loyalty, which in turn is the key driver for increasing the recurring value of their relationship with customers. Amazon, for example, is known for deferring profits for the sake of innovation, but also continues to capture market share with its strong customer service and investments in new areas and products.

While not explicitly claiming to follow Mother Teresa’s famous quote “Let no one come to you without leaving better and happier”, companies championing custom delight seek every possible way to make their customers happier than ever.

article originally published at Business Partners - http://bponline.amcham.gr