Proof that better customer experiences mean better results

If you’re looking for more evidence to show a sceptical stakeholder that better customer experiences mean better results, the recent wave of financial reporting yields a helpful trend.

Not so long ago, updates were all about how a business was coping with the headwinds of tough economic times, exposure to foreign exchange movements, provisions and restructuring costs.  By comparison, little was said about how a business was improving things for the element that generates the bulk of revenue – customers.

In what is emerging as a push-pull scenario, that balance is changing.  One the one hand, companies are doing some great things on the customer agenda and are rightly and proudly shouting about it.  They know they need to be very aware of how what they do impacts on their customers in order to survive, let alone thrive.

On the other hand, investors want to know more.  They too know the commercial value that comes from having more customers coming back more often, spend more on higher margin products and telling everyone else to do the same.   In considering the future value and predictability of the business, they also now want to know how things are being made better and easier for customers.

The back-story to this week’s results from low-cost airline Ryanair is a well-documented but great example.

Ryanair CEO Michael O’Leary and CFO Neil Sorahan deliver the Q1 results FY16 to investors

A few years ago, despite a very clear proposition they were not liked.  People tolerated them to a point but their apparent contempt of passengers played into the hands of competitors like Easyjet.  Having managed the cost-base to the bare minimum the wavering of higher-value customers was a serious threat.

In response, the “Always Getting Better” initiative was launched with a view to stopping doing the things that irked passengers unnecessarily and to do what they value better.

In its latest results announced this week the airline confirmed it has 380 new aircraft on order.  It has one of the strongest balance sheets in the industry.  Load factors, margins and forward bookings are rising. And it flew over 100 million people in the last year.

But what really stood out in this week’s video briefing by Michael O’Leary was how high up the agenda customer experience now is.  Once not apparently even on the agenda, customer experience is given the spotlight right after the opening headline performance numbers and before an update on fuel hedging, the wider strategic view and financial details.

Not only is the renewed focus on customers having an immediate and beneficial impact, it also helps protect the business in future when the market gets tough.  Two years in to the Always Getting Better programme, it is described as performing “extraordinarily well”.   The increases in load factors and forward booking are, Mr O’Leary asserts, a sign that customers are responding positively to the programme.  And, we are told, that such is the strategic role now played by customer experience at Ryanair that the commercial interest in Aer Lingus is deemed no longer relevant.

Greggs’ focus on in-store customer experience pays dividends

Over in a very different sector, but citing the same focus on customers in its strong results this week, is UK food-on-the-go retailer Greggs.   Despite a 6% increase in sales, growth in its Balanced Choice range of healthy food options and benefiting from low inflation leaving more money in people’s pockets, it is not complacent.  Reporting its operational highlights to the market, CEO Roger Whiteside shares and celebrates what Greggs is doing to achieve ‘great customer experiences’ – one of the four cornerstones of its business strategy.

Elsewhere, the reverse is true.  Market analysts who see little growth potential or who are surprised by lacklustre results often cite brands being ‘out of touch’ with their customers and not being organised to serve them properly.

In Japan, Honda chief Takahiro Hachigo recently told markets about how he will rebuild the company following a wave of product recalls that has eroded trust and production targets that have left it with excess capacity in a mature market.  Mr Hachigo’s plan is not about aggressive growth for the sake of it or chasing headline target numbers.  The focus now is on understanding customers better to “deliver their dreams”.  Quite what that looks like remains to be seen, but paired with an ambition to “strengthen communication with people on the ground” the message to investors that it will be about organic, customer-led growth rather than an obsession with metrics, is clear.

Giving investors confidence in a predictable business was also the subject of an interview I did recently with Dan Moross of MOO.  The online printer of business cards and stationery enjoys rave reviews from customers, attracts top talent and is regarded by industry commentators as an exemplary start-up.

Key to it all though, is the culture where their people are given the tools, processes and permission to help their customers any way they can.  On a per transaction basis the margins might be shaved, but that is more than made up for in the greater volume of customers attracted by what they hear about MOO.  Are investors happy with that approach, I asked Dan. “Absolutely” was the emphatic reply.  Read that interview here.

The focus on customers is not the whole story for many companies.  But, not only is it giving them a good story to tell, investors want to hear how it will help them – and that goes for those sceptical stakeholders too.