Have Companies Been Wrong all Along About How to Grow?

C Space Customer Quotient research

To learn more about Customer Quotient™ (CQ) and what it all means, download the 2016 report, What if you really knew me?.

Today’s companies employ myriad customer experience metrics. They use them to manage the business, assess the relevance and appeal of their brands, and, hopefully, better understand their relationship with customers. Sophisticated tracking systems, social media listening tools, transaction data, and a range of satisfaction and loyalty measures are used to make inferences about customers’ preferences and to detect patterns in their behaviors.

But useful as these methods may be, none represents the customer’s perspective. They focus primarily on the needs of the business, and solving for those needs, rather than the needs of their customers.

Customer Quotient™ (CQ) rebalances how we understand customer experience by creating a framework that looks at companies’ behaviors through the lens of customers. It incorporates traditional measures of loyalty and experience, but reframes them from the customer’s perspective.

CQ measures how customer-inspired companies – across industries – behave and how customers would experience and describe those behaviors. Through developing this research, we identified five key brand behaviors that predict loyalty outcomes and are clearly linked to profit and growth:

  1. An open and genuine interest in dialogue with consumers, as opposed to continual, even incessant, messaging and requests for feedback
  2. An appreciation of relevance; speaking the customer’s language and sharing their values
  3. An empathic understanding of consumers’ needs and preferences and an ability to exercise better ‘customer intuition’ than competitors
  4. The ability to deliver superior customer experiences, respecting customers’ time, appreciating their loyalty, and making customer service everyone’s job, regardless of function or level
  5. The desire and ability to provide emotional validation, creating a sense of belonging and making people feel smart and proud for being customers

This year, we collected data from nearly 20,000 US consumers (and in a parallel effort, more than 4,000 consumers in the UK market), replicating analyses from 2015 and observing year-over-year changes in the US across 20+ industries.

With respect to growth, here is some of what we learned this year.

CQ remains a powerful predictor of both advocacy and intent to purchase

The five brand behaviors (listed above) that compose CQ were selected based on their ability to significantly predict two key outcome variables: whether or not respondents recommended a brand or company to a friend or family member, and whether or not they intend to continue purchasing. Our data shows that this is as true today as it was in 2015. CQ appears to be a powerful predictor of these key business performance indicators.

CQ is clearly – and positively – related to profitability

Last year, we were able to link CQ to improved return on assets (ROA) and revenue growth. This year, we replicated and expanded on those findings: CQ is positively and significantly related to profitability, with a one point increase in CQ associated with a 0.3% – 0.5% increase in ROA. This may seem quite modest, but if one calculates what this means materially for companies, it can be billions of dollars. For a company like Google, for example, this would mean between $2,029M and $3,382M in revenue and between $442M and $737M in net income.

Barriers to Customer Inspired Growth still exist for most

The concept of customer centricity is now a common business buzz phrase, and interest in the topic has ballooned in recent years. What company would claim it doesn’t want to be customer-centric? Indeed, Google data show searches of ‘customer centricity’ up by 150% in the last five years, and searches for ‘how to be customer centric’ up by 800%. And in our research, year-over-year, we see a clear and consistent link between having good intuition about your customers and desirable outcomes: advocacy, profit, and growth.

Despite the demonstrated connection between customer intuition and business outcomes, however, many companies are not sufficiently in touch with their customers. Many pay lip service to customer centricity without being truly committed. Even if you are committed, customer centricity efforts can still flounder in execution; because successfully making your customers feel like you ‘get’ them depends upon more than understanding. Real results require action: infusing the organization with powerful customer insights and working across functions and silos to bring those insights to bear on the business.

As industries become commoditized and as companies within those industries struggle to differentiate their offering from competitors’, the subtle, emotional, and intangible brand behaviors CQ defines become ever more important. Ultimately, whether or not a company intuitively “gets” its customers may be the most important differentiator in a fractured, crowded marketplace. Developing this kind of intuition is the ultimate path to growth.

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