How Customer Experience (CX) Impacts Retention

Giorgina Gottlieb | March 22, 2019

Women draws graph of projected profits on white board

At the most basic level, for a business to succeed, it must make a profit — revenue needs to exceed expenses. When it comes to generating this revenue, companies tend to concentrate their manpower and other resources on bringing in new customers — but that can be a mistake. “The difference between companies that grow and those that don’t is customer retention,” explains Toma Kulbyté, a content marketing specialist. “The more customers that you can keep and continue to sell to, the more likely you are to achieve your business goals.”

The research backs her up. Some studies show that it’s five to 25 times more expensive to acquire a new customer than to retain an existing one. In addition, companies are more likely to be successful in selling to existing customers — the sales success rate is 60-70 percent compared to just five to 20 percent for new customers. Moreover, industry analysts predict that 20 percent of an organization’s existing customers can be responsible for 80 percent of its future earnings.

As you’d expect, all of this can have a significant impact on a business’s bottom line. A mere five percent boost in customer retention can result in 75 percent higher profitability, while a 50 percent increase in retention can double a business’s growth. And the cost of failing to retain customers is equally steep — American companies face losses of nearly $137 billion per year as a result of “avoidable consumer switching.”

The Battle Against Churn

Given the figures outlined above, it’s no wonder that companies consider fighting churn a top priority. As startup founder Ryan Farley writes,

“‘If you could wave a magic wand and change anything about your business, within reason, what would you change?’ One of my advisors asked me that recently. My answer was easy: ‘I’d reduce customer churn.’ He wasn’t surprised. He said that he gets the same response 90% of the time he asks that question.”

In case you’re not familiar with the term, Hubspot defines customer churn as the “percentage of customers that ceased using and purchasing your organization’s products or services during a specific time frame.” In other words, churn is the opposite of customer retention. And it turns out that the “secret weapon” in the battle against churn is customer experience (CX).

The Power of CX

To be more precise (and to continue the metaphor), CX is a double-edged sword when it comes to churn. While a positive experience can boost retention, a negative experience will increase the likelihood of churn. According to CX expert Esteban Kolsky, two-thirds of customers changed brands as a result of poor CX. But research from Oracle indicates the churn risk may be even higher, reporting that 89 percent of customers have left a company for a competitor after a negative support interaction. And it’s not just a problem that affects B2C businesses; Zendesk reports that 66 percent of B2B customers have stopped doing business with a company following a bad experience.

How to Improve CX to Boost Retention

Admittedly those figures are pretty scary, but the silver lining is that they provide an action plan for fighting churn. After all, if churn is caused by poor CX, then it’s clear that companies simply need to provide better experiences in order to avoid churn and boost retention. And the data supports this conclusion, with Kolsky reporting that 85 percent of churn could have been prevented with improved CX.

But this raises the question: how exactly should companies work to improve their CX? Given that customer experience includes all of a customer’s interactions with a company plus their perceptions of those interactions, there’s too much ground for businesses to cover all at once. So let’s dig back into the data to examine which aspects of CX have the biggest impact on retention.

Omnichannel Strategy

A survey of the available research indicates that a successful omnichannel strategy (or lack thereof) is one of the key CX factors affecting retention. As we explained in a previous post, the term omnichannel refers to the various methods available to customers for contacting service providers with questions and issues. Examples include phone, email, text, chat boxes, and social media.

Today’s customers not only expect businesses to offer support on each of these channels, but also to provide a consistent experience across all of them. There’s nothing worse than initiating a support interaction on one channel, only to be told you need to contact the company via another channel and then having to re-explain the entire issue.

It’s no wonder, then, that Aberdeen Group reports that “companies with the strongest omnichannel customer engagement strategies retain an average of 89 percent of their customers, as compared to 33 percent for companies with weak omnichannel strategies.” And don’t forget to include social media in that strategy. According to Gartner, a company’s churn can jump by as much as 15 percent simply for failing to respond to customers on that channel alone.


Another significant CX factor in the fight against churn is transparency. Sprout Social has found that when a crisis strikes, 85 percent of customers will stand by those companies that have established a record of being transparent. Even better, nearly 90 percent will give such companies a second chance following a bad experience.


The third most important CX factor affecting retention should come as no surprise: speed. When customers are feeling frustrated or confused, they want an answer and they want it now. And the consequences of not providing a fast resolution are steep. According to Kolsky, 67 percent of churn is the result of companies failing to resolve a customer’s issue during the first support interaction. Good thing most businesses consider First Contact Resolution a key metric for support teams!

Keep Calm and Fight On

By now it should be clear how critical retaining existing customers is to business success and that good CX is the best weapon for fighting churn — particularly if companies focus on implementing an omnichannel strategy, being transparent, and providing fast issue resolutions.

But there’s one more factor to keep in mind: only one in 26 customers who are unhappy will actually complain. “The rest, they just leave,” Kolsky explains. What that means is that companies should not interpret the absence of negative feedback as a sign that they are providing excellent CX. Instead, they must actively solicit customer feedback on a regular basis and then analyze the results to understand the current state of their CX efforts and how to continue improving.