Keep clients coming back · Every business
What a Great Customer Experience Is Worth, According to the Research
An analysis of individual customer records found that people with the best past experiences spent 140% more than those with the worst, and the arithmetic for a small business starts with that gap.
At a glance
- In customer-level data from a large transaction business, published in Harvard Business Review, customers with the best past experiences spent 140% more than those with the poorest, after accounting for other factors.
- In a survey of more than 15,000 consumers in 12 countries, people said they would pay up to 16% more for a good experience, and 32% said one bad experience would end their relationship with a brand they love.
- For an illustrative business with 300 regulars spending $500 a year, five more points of retention and a 3% price increase together are worth about $12,000 a year.
The number and where it comes from
The 140% figure comes from an analysis of experience and revenue data from two global companies with more than $1 billion in revenue each, published in Harvard Business Review in 2014. The analysts took each customer's experience rating at one point in time, followed what that customer did over the next year and used multiple regression to account for other factors that might explain spending; in the transaction business, customers with the best past experiences spent 140% more than those with the poorest.
The same analysis looked at a membership business, where the gap showed up as loyalty instead of spending. Members who rated their experience among the two highest scores had a 74% chance of still being members a year later, while members with the poorest experience had a 43% chance, and the best-rated group was predicted to stay about six more years against roughly one year for the lowest.
| Extra spending by customers with the best past experiences, compared with the poorest (Customer records, transaction business (HBR, 2014)) | 140% |
|---|---|
| One-year retention, members with the best experience (Customer records, membership business (HBR, 2014)) | 74% |
| One-year retention, members with the poorest experience (Customer records, membership business (HBR, 2014)) | 43% |
| Price premium consumers say they would pay for a good experience (PwC survey, 15,000+ consumers, 12 countries (2018)) | Up to 16% (18% in the U.S.) |
| Share who would leave a brand they love after one bad experience (PwC survey, 12 countries (2018)) | 32% |
Sources: Kriss, Harvard Business Review, 2014; PwC Consumer Intelligence Series, 2018.
Both sources come with limits an owner should keep in mind. The 140% figure is a correlation from one large company's records, controlled for other factors but not an experiment, and the PwC figures describe what people say they would do, which may differ from what they actually pay. The direction is still consistent across both, and it gives an owner reason to track experience alongside revenue.
Working it out for your business
The value of a better experience shows up in two places a small business can measure: how many regulars return next year and what price they accept without leaving. The formula is (regulars × points of retention gained × yearly spend) + (revenue from regulars × price change).
| Regular customers (Assumption) | 300 |
|---|---|
| Average yearly spend per regular (Assumption) | $500 |
| Yearly revenue from regulars (Calculated (300 × $500)) | $150,000 |
| Retention gained from a better experience (Assumption) | 5 points |
| Regulars kept who would have left (Calculated (300 × 5%)) | 15 |
| Revenue kept (Calculated (15 × $500)) | $7,500 |
| Price increase customers accept (Assumption (well under the 16% people told PwC they would pay)) | 3% |
| Revenue from the price change (Calculated ($150,000 × 3%)) | $4,500 |
| Total yearly value (Calculated ($7,500 + $4,500)) | $12,000 |
Illustrative example; replace every assumption with your own numbers.
Widget note for the site: a lean in-column calculator with three sliders (regular customers, average yearly spend, points of retention gained) and one result, the yearly revenue kept. The price line stays in the static table.
The example counts only one year. A regular who stays also refers friends and returns the year after, so the full value is larger, though the conservative version is easier to set beside the cost of a change such as reminders, a follow-up call or a better checkout.
How you compare
- Your retention: count the customers who visited in the first half of last year, then the share who came back in the next twelve months; this is your own version of the 74% and 43% figures.
- Your price room: if you have not raised prices in two years and your rebooking rate is steady, the PwC figures suggest experience may be supporting more of your price than you are charging for.
- Your bad-experience rate: 74% of consumers in the 2023 National Customer Rage Study, a survey of 1,000 U.S. adults, had a product or service problem in the past year, so a count of the complaints you hear about is likely an undercount.
About this research: The spending and retention figures come from an analysis of customer-level data at two large companies published in Harvard Business Review; the price premium and walk-away figures come from PwC's 2018 consumer survey and describe stated intentions. The worked example is illustrative.
Sources
- Kriss, P. The Value of Customer Experience, Quantified. Harvard Business Review, August 2014. Customer-level experience and revenue data from two companies with revenue above $1 billion; multiple regression.
- PwC. Experience Is Everything: Here's How to Get It Right. Consumer Intelligence Series, 2018. More than 15,000 consumers in 12 countries.
- Customer Care Measurement & Consulting with the Center for Services Leadership, Arizona State University. 2023 National Customer Rage Study. 2023. 1,000 U.S. respondents.
Related reading: The Experience Library: The Most Memorable Things a Small Business Can Do for Its Customers, and Why They Work · Small Touches That Make Customers Come Back: A Checklist by Business Type · What to Do When Something Goes Wrong: How Small Businesses Win Customers Back
Work with osNOVA on what your customer experience is worth
We help owner-run service businesses measure their own retention and price room, then design the moments and follow-up habits that keep more regulars coming back, starting from what you want more of, whether that is more regulars, steadier revenue or the confidence to raise prices.
Email hello@osnovaops.com about your business
Or leave your email and we will reach out
Tell us what kind of business you run and what you want more of.
Not ready to talk? osNOVA runs free live events for owners.