Gone are the days when companies could achieve all their growth goals by plunging ever-increasing sums in paid customer acquisition. Today, the real goal is sustained profitable growth, and its main driver is your customers, the people buying from you, and the ones looking to buy.
It’s clear that paid customer acquisition is getting harder. As search and social media platforms lock down access to new customers, savvy companies are looking at ways to improve customer value and grow their businesses. If you’re not already doing the same, you should be. A recent PwC survey shows 45% of CEOs believe their company will not be viable in 10 years if they don’t change.
When it comes to defining which businesses succeed or fail, customers are now in the driving seat. Unfortunately, this shift has left many companies “behind the curve” as they stop growing or can’t hit their profitability goals.
This is the main reason that the way companies grow needs to change, and that’s what we’re focusing on in this article - how to use your Customer Experience (CX) to improve expansion, loyalty, and acquisition for long-term sustainable growth.
The shift towards Experience-Led Growth
Today, customer experience is even more important than ever. Here’s why: as paid acquisition costs continue to increase, interest rates have risen, and customers demand better services, more businesses are finding it harder to achieve profitable growth.
In fact, a June 2022 research showed paid customer acquisition costs for some brands have grown 3.2x over the last ten years. Businesses have little room to improve these faced with the ever more competitive platforms such as Google, Meta, Tiktok and others. What’s worse, even when they do figure out how to make their paid strategies work, any advantage is competed away very quickly leaving them without a durable advantage.
Fortunately, there’s a viable solution to the increased risks to business growth, and it’s available to every business – using customer experience to unlock new revenues with XLG. To do that, brands must refocus their growth strategy from paid acquisition to consistently enticing existing customers to spend more in each transaction, purchase more often, and refer new customers. CX improvements with the requisite measurement and analytics capabilities are essential for success.
What is Experience-Led Growth?
From Amazon to Uber to HelloFresh, there’s no doubt that CX is the key to unlocking long-term profitable growth. But how do you turn that into a growth strategy?
While recently a lot of companies have focused on growth at all costs, Experience-Led Growth (XLG) strategy is built on harnessing what matters most to your best customers.
Instead of trying to acquire new customers from a specific channel, XLG is focused on creating long-term, valuable relationships with existing customers - and ultimately getting more profit for every dollar invested in customer acquisition over the long run.
And XLG is not just another a buzzword - according to McKinsey, who coined the term, CX leaders grow 2x faster and achieve higher profit margins than their peers.
But this success has a nuance behind it: XLG is hugely successful but it can demand completely opposite decisions from companies in the same industry. You need to understand what your customers value the most and continuously improve.
The right approach will be unique for every business, the key is to understand the key drivers of the experience and consistently work to improve them. For Costco and Ikea, this means keeping the prices low, for Uber, this means improving convenience, for Hermes - driving exclusivity
Why Experience-Led Growth is important to your business
What does XLG look like in practice? Successful XLG strategies increase customer satisfaction and engagement while delivering solid financial benefits such as:
- Generating Word of Mouth growth
- Boosting Share of Wallet
- Improved Retention
- Lower Costs of Service
It’s not as simple as deciding to become customer-focused, investing in some CX technology and then sitting back, waiting for the returns to roll in. A key component of XLG is to identify critical business use cases and measure earned growth, the revenue generated by returning customers and their referrals.
Customer satisfaction information spread far and wide
Airbnb adopted this strategy which catapulted them to becoming a listed industry leader long before XLG was coined as a term. It’s not hard to understand why Airbnb rates customer experience as the most critical factor to their success. Only when they zeroed in on the all-powerful customer reviews were they able to ensure exceptional experiences for both hosts and guests.
The problem for Airbnb is that consumers don’t contain their enthusiasm or disappointment about their customer experience in one place. It’s not enough to focus on the reviews left on each Airbnb listing. Being able to track and measure all the many ways consumers review a property across myriad review sites and social media channels is where XLG can be transformational to business goals.
Separating good business from bad to boost revenue
The best XLG has to offer is often counterintuitive - for example, businesses shouldn’t be afraid to lose customers. In fact, retail giant Asos discovered a key consideration for profitability was to lose underperforming customers. They discovered that 6% of their active customer base was costing the company an eye-watering £100m per year. Asos was able to make changes in their CX to maximize the value of good customers and ditch the ones costing them money. Having deep insight about which customers contribute to your business goals – and which don’t – is another reason why XLG is a core growth strategy.
Don’t Miss Your Business Goals
I don’t know a single CEO who doesn’t want to deliver the best for their customers. Those leaders who shift their strategy from growth through acquisition to experience-led growth will achieve the financial benefits they want while fostering long-term, sustainable revenue growth driven by satisfied customers.
