The world’s largest companies have a thorny problem in common. Airlines, insurers, telcos, utilities, and other major incumbents are all struggling to achieve sustainable, profitable growth in a world in which their offerings are increasingly commoditized. Alongside mounting competition from their peers, they face disruption from nimble digital-native firms that are targeting their customers with innovative, convenient, and often personalized offers.
Frequently, their response is to take on the attackers at their own game—that of acquiring customers as aggressively as possible. But as they obsess about new customer acquisition, many incumbents are neglecting their most powerful competitive advantage: their vast existing customer bases.
Two key numbers from McKinsey’s work underscore the case for a shift in focus. On the downside, compensating for the value of one lost customer can require the acquisition of three new customers. On the upside, 80 percent of the value creation achieved by the world’s most successful growth companies comes from their core business—principally, unlocking new revenues from existing customers.
These companies have honed a powerful strategy for driving profitable growth that their most nimble and disruptive competitors cannot emulate: providing a distinctive customer experience (CX), consistently and proactively, that entices existing customers who choose their brand. These customers change their behaviors, and such behavior changes can be measured by concrete financial metrics like share of wallet, repeat purchases, or net revenue retention (NRR).1
We call this strategy “experience-led growth.” To succeed with it, companies start by defining their desired financial outcome and then prioritize the CX improvements that will deliver that outcome. They have the boldness to rethink their corporate culture and operating models, to ramp up innovation and technology adoption, and to build new CX measurement and analytics capabilities. Sometimes they must reexamine and redefine their very reason for being.
Shut up and listen to your customers
A mobile telecom operator faced an existential crisis: its customers were deserting it as competitors promised better network coverage and enticed switchers with cut-price offers. Attempts to use contracts to lock in customers backfired, creating resentment that caused many to defect anyway. The company tried to counter its competitors’ aggressive acquisition tactics with its own eye-catching offers to new customers—but excluded existing customers, compounding dissatisfaction.
The CEO had a wake-up call on his morning commute when he listened in to customers’ calls to the telco’s call centers. Their frustration shocked him—and spurred a turnaround that saw his team line up and tackle pain point after pain point. The company eliminated contracts and allowed anytime upgrades, made every new customer offer available to existing customers, and improved its network. In parallel, the company reinvented its approach to service.
The results were dramatic: as customer satisfaction ratings jumped from worst to first in the industry, customer churn rates were cut by 75 percent. Over a three-year period, the company’s revenues nearly doubled—outstripping its key competitors’ revenue growth threefold. As the CEO said: “It’s amazing the things you can do when you shut up and listen to your customers.”
This story is a classic case of experience-led growth. Growth is always hard to achieve, especially for incumbents. But those that get growth right deliver 30 percent higher TRS and nearly double the shareholder value than their industry peers, on average.2 Our research shows that strategies focused on delighting customers allow companies to earn greater value from their current customer base—which results in concrete financial outcomes.
That’s why there is such a strong correlation between companies’ CX ratings and their revenue growth. In the United States, for example, McKinsey analysis shows that companies that are leaders of CX achieved more than double the revenue growth of “CX laggards” between 2016 and 2021. The revenues of CX leaders also rebounded from the COVID-19 pandemic more quickly than those of other companies (Exhibit 1).
Growth outperformers take the long road
Growth outperformers are much more likely to know their customers personally, to have a compelling growth story to tell their employees and shareholders, and to use predictive analytics to deliver the right messages to the right customers at the right time. A clear focus on long-term growth makes them outliers, as most companies optimize for shorter-term profit.
Indeed, a common factor in companies that fail to achieve sustainable growth is that they put too much focus on short-term acquisition measures, and insufficient investment in customer engagement and retention, thereby falling into the “acquisition trap.” CX leaders, by contrast, are masters at the art of “cultivating” growth from existing customers by making it enjoyable to use ever more of the company’s products and services over time (Exhibit 2).
We have observed that successful experience-led growth strategies—those that increase customer satisfaction by at least 20 percent—can deliver a range of significant financial benefits. In particular, they can increase cross-sell rates by 15 to 25 percent, boost companies’ share of wallet by 5 to 10 percent, increase cross-sell rates, and improve customer satisfaction and engagement by 20 to 30 percent.
Experience-led growth strategies, in our experience, rest on three pillars (Exhibit 3):
- Setting a clear growth aspiration and purpose, and a roadmap that links CX to value.
- Committing to transforming the business with decisive action through redesigned customer journeys, products, services, and business models.
- Enabling the transformation through new mindsets, capabilities, technologies, governance, and effective CX measurement.
In the next sections, we shine a spotlight on each of these imperatives in turn—and for each of them we explore the successes and lessons learned from CX leaders across sectors.
Set an audacious aspiration—and link it to value
Leaders of companies executing experience-led growth strategies start by painting a vision—often three to five years in the future—that describes how they will deliver on their brand promise.
These companies do not drive CX for its own sake. Rather, they “flip the script” by starting with the desired financial outcome—for example, improving customer retention by six points—and then prioritizing the customer experiences that will deliver these outcomes. Companies that succeed with experience-led growth also identify the metrics they will use to measure success, such as share of wallet, repeat purchases, or NRR.
As an example of a company that set out a bold aspiration—and linked it clearly to value—consider the story of a major logistics company. After a period of sustained price increases, the CEO realized that his ability to increase prices would soon evaporate. The CEO tackled this issue head on, prioritizing CX as a path to distinguish his company from competitors and to build long-term, value-generating relationships with customers.
The company’s experience-led growth transformation started with a bold vision: to become the logistics player of choice not only for its business customers but also for those companies’ end-customers. It was an audacious goal, as most consumers are oblivious to who delivers their goods. But leaders in the company imagined a future in which their customers would renew larger contracts because their end-customers experienced care and trust.
The logistics company’s bold aspiration has spurred a radical effort to reimagine and redesign customer journeys, and to anchor customer experiences around the personal relationship between end customers and their local drivers. To support a culture of customer care and problem solving, the company rolled out an immersive culture-change program. The entire transformation—and the overarching aspiration—was closely tied to value, with the company targeting hundreds of millions of dollars in additional revenues.
Transform the business: Reinventing customer-centricity
Leaders in companies executing experience-led growth strategies take care to understand customer pain points standing in the way of growth—such as complicated buying processes, tracking and delivery issues that hinder recurring purchases, or a lack of integration between channels. They translate their ambitions for experience-led growth into customer-journey redesign and an effective cross-functional operating model for implementing these redesigned customer journeys. They are also savvy at expanding their revenue pools by inventing new offerings and experiences.
As an example of this second pillar of experience-led growth—transforming the business through redesigned customer journeys—consider the case of a global B2B power-tools company. It already had a strong foundation of CX strengths: an iconic brand and products, committed customer-facing teams, engineering “maniacs” who relentlessly focused on quality, and effective digital customer interfaces. But rising customer expectations meant that customers increasingly demanded more effort for their engagement and loyalty. In addition, the company was building an increasingly diverse product and solution portfolio—creating complexity in service, billing, and logistics. A step change was needed in how the company approached CX if it were to remain ahead of its competitors.
The CEO recognized that CX excellence had to become the top priority for his company. It began by setting a clear aspiration for its CX transformation: a commitment to faultless reliability, accessibility, and transparency. To deliver on this commitment, the company set about creating proactive solutions—such as automatic replacement of any tools that needed servicing—that would strengthen customers’ business performance and exceed their expectations.
Where previously there had been over 20 different customer journeys for various categories of client and service type, the company put in place one carefully designed life-cycle journey, and identified several “moments of truth” with the greatest impact on CX—like receiving the order on time and in full, with an easy-to-understand invoice.
To measure impact, the company put in place actionable, real-time “voice-of-the-customer” metrics—as well as relevant operational KPIs that captured process efficiency and effectiveness. Within just a few months, the new focus on CX was widely embraced by the organization. It led to tangible improvements in customer journeys, which in turn supported continued double-digit annual revenue growth.
Enable the change: Reimagining culture and capabilities
Large, incumbent companies implementing experience-led growth strategies must also devote resources to shifting organizational cultures and building new capabilities, both among executives and frontline staff. These new capabilities—ranging from design thinking, to cross-functional collaboration, to effective use of CX measurement insights—help ensure that improvements in wallet share, cross-sell rates, and retention rates are sustained over time.
An example comes from a major regional healthcare provider that launched a multi-year transformation. To enable and sustain the improvements in its financial performance, it trained its employees on agile ways of working while also implementing powerful new advanced analytics capabilities by developing a customer data hub—this aggregated millions of records from multiple data sets across five years. The new predictive analytics capability allowed the healthcare provider to build machine-learning models that use data-driven analysis to trigger proactive interventions—such as following up with patients who hadn’t seen their healthcare provider in the previous 18 months.3 This wholesale improvement in its capabilities enabled the company to sustain the benefits of its transformation over time.
The challenge of achieving sustainable, profitable growth is especially tough for large, incumbent companies. It is tempting to try to kick-start growth through acquisitions, with the risk of feeding an overheating acquisition engine of customers who quickly churn again. Experience-led growth is a radically different approach—providing an exceptional experience to existing customers that delivers improvements in key financial metrics such as wallet share, cross-sell, and net revenue retention along the entire customer lifecycle. These improvements translate directly into sustainable revenue growth.