March 19, 2010
We asked our researcher Andrew McInnes to run the numbers again and see whether they held up to close scrutiny. Here’s what he did:
- Reviewed the 2007 CxPi rankings.
- Identified the 10 highest-ranked public companies (CXP Leaders) and the 10 lowest-ranked public companies (CXP Laggards).
- Calculated the average annual total returns of the Leader group and the Laggard group
- Compared the results for each group to the S&P 500 index for years 2007 – 2009.
Andrew’s analysis confirmed Watermark’s findings: The customer experience leaders consistently outperformed the other two groups; the customer experience laggards consistently fell short.
Does this prove that good customer experience leads to good stock performance (or that the CxPi picks hot stocks)? No. Stock performance relies on many factors, including human irrationality.
However, the correlation does highlight a relationship we all intuitively understand: Companies that treat their customers well perform better than companies that don’t. (And it sure looks like treating your customers poorly is a very bad idea, especially in an economic downturn.)
Hopefully having some “hard” numbers will help firms see beyond the “soft” attributes of customer experience to the financial benefits these attributes help bring.
Anyone up for creating a “Customer Experience Index” Index Fund?