The consistent delivery of a positive customer experience is the holy grail of the business world, and consumers instinctively return to brands and businesses that provide it. However, understanding the actual value of a good customer experience is a much more difficult thing to quantify than you might imagine.

For the most part, businesses that focus on providing customers with a good experience do it because they perceive it as an essential part of their company philosophy; in other words, they do it because they inherently consider it to be the right thing to do. Other companies see more value in investing in other areas — offering better value than competitors, getting ahead in the research and development game, lowering costs, and so on. However, a new study by the Harvard Business Review sheds some interesting light on the impact that customer experience can have on a company’s bottom line.

The Harvard Business Review study looked at two multinational businesses with valuations in excess of $1 billion. One business primarily relied on subscriptions to generate revenues, while the other was transaction-based. The study considered direct customer feedback, then looked ahead to see how that feedback impacted their spending behavior over the course of the following year while correcting for outside influences which may have impacted future repeat business.

The study’s main conclusion found that customers who reported the highest levels of satisfaction contributed 140 percent more repeat business than those who reported the lowest levels of satisfaction. The transaction-based business posted the following specific results:

  • Customers who rated their experience in the 1 to 3 out of 10 range generated an annual per-customer revenue increase of 1.0x.
  • The 4 to 6 range resulted in a 1.3x increase.
  • The range resulted in a 1.5x increase.
  • The range resulted in a 1.8x increase.
  • The range resulted in a 1.9x increase.
  • The 10 range resulted in a 2.4x increase.

Thus, without exception, the more positive a customer’s experience, the greater the increase in their repeat spending over the course of the following year.

Similar results were seen in the subscription-based business. Here, a slightly different metric was used. Customers rated their overall experience on a scale of 1 to 10, and the study then predicted the length of their future membership with the company. Again, upward trends in predicted future membership correlated with higher satisfaction scores. The difference between the low end and the high end of the scale represented increased future subscription rates of more than six years.

The prevailing view in the business world is that it takes significant resources to consistently deliver a superior customer experience, and that those resources simply aren’t always available. However, as part of the study, the Harvard Business Review spoke to executives in both participating companies and uncovered some surprising information.

Executives in both companies said that delivering a strong customer service experience actually reduced overall costs in the long run. In other words, while it does take an initial investment to create good service infrastructure and establish the right kind of company culture, that investment pays ongoing dividends without continuing to drain resources.

Moreover, something that many businesses fail to consider is the fact that it is dissatisfied customers who cost them money. They’re the ones who return products, and they’re the ones who tie up customer service reps with complaints. The Harvard Business Review study underscores the fact that businesses who invest in creating a good customer experience put themselves in a win-win situation; they reduce their service costs while making it more likely that the customer will offer return business in the future.