More Profits = Better Customer Experience, Not Lower Prices

November 14, 2010 How to Sell Online

If you want to expand your customer base and increase your profitability, then you need to focus your attention on providing a better customer experience and not on lowering your prices. The speed at which information travels has made it easier for customers to seek out vendors who can provide products and services quicker and cheaper than they are receiving with their current vendor. There will always be a company that is willing to compete on price; therefore you have to implement strategies and techniques to differentiate yourself from your competitors, while at the same time, increasing your profitability.

Competing on Price Is a Short Term Fix

Many companies choose to compete on price, offering the lowest price in order to obtain customers. The problem with this strategy is that you will always have to lower your prices in order to stay competitive. This consistent lowering of prices will dwindle away any profitability that is gained by acquiring more customers. Not to mention, you are subconsciously conditioning your customers to expect lower prices as you have based your relationship with the customer on the premise of low prices and therefore they will be quick to seek out any other vendor who has lower pricing.

Focus on Customer Experience

Customers have been known to pay a premium price on items when offered exemplary service in addition to the product. Take Starbucks for example, people go to purchase coffee from Starbucks at a premium as opposed to their local diner because they enjoy the experience that Starbucks provides and they are willing to pay as much as a 300% increase on a regular cup of coffee in order to be afforded with that experience.

What Customers Really Want

A recent survey conducted by US News and World Report claimed that the average business in America loses roughly 15% of their customers yearly. Among the 15%, nearly 68% of them opted to stop doing business with the company because of “poor or indifferent customer service.” Another 14% chose to stop doing business with the company because of “unsatisfactorily resolved disputes or complaints”. This meant that 82% of the customers that a company loses on an annual basis is a direct result of a poor customer experience. Only 9% of customers chose to stop doing business with the company because of pricing.

Don’t Lose the Customers That You Already Have

After reflecting on the data above, any business owner should be able to see the correlation between providing exemplary customer service and retaining customers. The Harvard Business Review actually reported that if companies can retain as little as 5% of the current customer base they can expect to see an increase in their profits by 25%, and in some cases as high as 95%! If we put these two components together, it should be evident that providing a great customer experience directly leads to increased profits.

In conclusion, companies will need to make a fundamental shift away from priced-based business models and moved towards customer-centric paradigms that focus more so on providing the customer with an exemplary experience at a premium price. This is a sure way to increase customer satisfaction and profitability simultaneously.

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More Profits = Better Customer Experience, Not Lower Prices

Competing on Price Is a Short Term Fix

Focus on Customer Experience

What Customers Really Want

Don’t Lose the Customers That You Already Have

Inspiration

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