Many small and midsize businesses (SMBs) are fortunate enough to find a thriving market niche for their products and services. When this happens, most firms ride the wave as long as possible, knowing that it might eventually crest and take away any chance of growth in the future.
Many firms subscribe to such a risky mindset because they are typically privately held and prefer to position themselves as a sound investment for a potential sale, initial public offering, or additional funding. Because many investors view revenue gains as an indicator of viability, companies are challenged to secure preferred growth numbers first before improving other aspects of the business.
The IDC InfoBrief, “Improving Customer Experience: The Competitive Imperative for Small and Medium Businesses Worldwide,” confirms this reality, revealing that the majority of companies surveyed in both developed and emerging economies cite revenue growth as a top priority. Interestingly, customer loyalty was not prioritized as strongly.
While revenue is important, customer experience, acquisition, and loyalty also play a critical role in driving business growth. These components help ensure that a product or service offering can withstand the end of a revenue-building wave until another one surges ahead.
The connection between revenue growth and customer experience
The battleground for customer acquisition has evolved into a highly crowded and commoditized marketplace. Take Uber, for example. Just eight years ago, the small digital startup with no capital and assets developed a business model that empowered customers to use a smartphone to get a ride. This unique customer experience disrupted the taxi industry. Four years later, the company expanded into 35 cities worldwide and continues to grow to this day. However, Uber is also facing stiff competition as Lyft basically follows the same business model, and taxicab companies deliver their own version of a mobile app.
Very quickly, digital startups and traditional rivals can commoditize the services of an industry disruptor by making the digital experience no longer unique. To stay competitive, companies must differentiate itself by ensuring the service experience—such as driver skills, car condition, and overall safety record—are better than its competitors’.
The annual Watermark study provides further proof of the importance of customer experience in revenue growth. Although this report analyzes large corporations, some parallels are still relevant for small and midsize firms. First, companies that rank high in customer experience outperform the market, while laggards in this area significantly underperform. Plus, businesses with better customer experiences have higher valuations.
Revenue growth is essential, but customer experience ensures continuity
Understanding the relationship between customer experience and revenue growth is critical to secure a competitive advantage in an ever-changing marketplace. A small and midsize business may offer an innovative product or service never before seen and deliver it with greater nimbleness and speed than the rest of the industry. But make no mistake, the market space will be eventually flooded with competitors that can offer the same—just with a better customer experience.
To learn how your business can better prepare for the digital economy, check out the IDC InfoBrief, “Improving Customer Experience: The Competitive Imperative for Small and Medium Businesses Worldwide,” sponsored by SAP.