CX Value Creation: A Strategy for Growth

In the highly competitive world of business today, it has become crucial for companies to create an engaging customer experience in order to succeed. As businesses work towards implementing a customer-focused approach, they are recognising the significance of a strong strategy for creating Customer Experience Value in order to achieve profitable growth.

The implementation of this approach not only assists in providing outstanding customer experiences during crucial touchpoints of their journey but also serves as a crucial factor in showcasing the measurable business worth of these endeavours, as calculated through Return on Journey Investment (ROJI).

Incremental growth in the customer journey leads to improved customer experience.

The Influence of Customer Experience Value Creation Efforts on Company Growth

1. The Role of CX in Generating Sustainable Business Value

Top businesses understand the importance of prioritising the customer in their approach. By providing an exceptional customer journey, these companies can increase their worth by a noteworthy 125-400%+. As per research conducted by KPMG and EQUiTOR in India, tapping into the power of CX can help brands in nine different industries to unlock approximately USD200 billion in value that they may have overlooked before.

Between 2016 and 20212, CX leaders in the United States experienced revenue growth that was more than twice the amount achieved by CX laggards.

2. The Role of CX in Setting Businesses Apart

The experience provided to customers is vital in both gaining and maintaining their loyalty, as well as building a strong customer base. According to studies, more than half of a consumer's decision to purchase is influenced by the experience they anticipate from a brand, rather than the brand's reputation itself. Therefore, by surpassing customer expectations and meeting their needs, businesses can improve the likelihood of their brand being recognised, recalled, and considered in purchasing scenarios.

In the field of private equity scale-ups, firms typically prioritise cost optimisation and business process optimisation to increase EBITDA. However, they often overlook the potential of their current customer base. A satisfied customer base can lead to fewer customer losses and higher customer loyalty, which greatly impacts a company's long-term success.

3. The Influence of Customer Experience on Business Performance

A brand's ability to retain highly satisfied customers can result in repeat purchases and a higher customer lifetime value (CLV). In fact, McKinsey reports that 80% of value creation for successful growth companies is derived from their primary business, mainly through generating additional revenues from current customers.

The ability to provide exceptional and personalised customer experiences can also result in customers becoming advocates for a brand. When customers are highly satisfied with their interactions with a brand, they are more inclined to remain loyal and continue using that brand. Additionally, maintaining consistent customer experiences contributes to building a positive brand reputation, as 66% of surveyed individuals perceive a brand as the top choice if it consistently delivers similar experiences.

Furthermore, providing satisfactory customer experiences has the potential to decrease the expenses associated with serving customers by as much as 33%. Through the simplification of processes, enhancement of productivity, and addressing customer grievances, companies can maximise their efficiency and lower unnecessary costs. This reduction in expenses, combined with heightened customer contentment, leads to enhanced profitability.

Understanding ROI in Relation to Customer Experience

ROI is a significant measure in determining the worth of customer experience, as it evaluates the return on investment in relation to its cost. When it comes to customer experience, ROI involves analysing the financial gains (returns) from investments made to improve customer experiences, in comparison to the expenses incurred. This encompasses factors such as customer retention, decreased churn, higher customer lifetime value, and enhanced operational efficiency through streamlining processes.

My recommendation is to adopt a more detailed, journey-specific perspective when measuring ROI in order to ensure that businesses are concentrating on the appropriate actions at each stage of the customer journey. By creating metrics and KPIs for each stage of the journey and measuring Return on Journey Investment (ROJI), businesses can effectively organise their teams to focus on achieving these KPIs and drive growth through rapid and iterative methods.

Discovering, measuring, and shaping CX programs for high potential ROI

Modelling % measuring the return on investment (ROI) for customer experience initiatives can be a difficult task, as it is not always easy to directly connect expected improvements with financial results. Nevertheless, there are straightforward methods that can be implemented to assess, showcase, and strategize for potential ROI growth.

1. Establishing the right Key Performance Indicators (KPIs).

The initial and crucial step is to establish the Key Performance Indicators (KPIs) that correspond with customer experience efforts throughout the customer journey. These may encompass measurements such as Journey Conversion Rates (transitioning from one stage to the following), estimated Customer Lifetime Value (CLV), Net Promoter Score (NPS), Customer Satisfaction (CSAT), Customer Effort Score (CES), and the rate of customer churn.

2. Creating a Baseline

Prior to implementing any enhancements to the customer experience, it is crucial to set a baseline for the selected key performance indicators (KPIs). This will serve as a benchmark for assessing the effectiveness of the improvements.

3. Ranking Value-Generating Initiatives

It is essential to take the necessary steps of generating a comprehensive inventory of value-adding plans, evaluating their impact compared to the current state, and arranging them in order of value and feasibility. A crucial aspect is to eliminate the majority (80%) of current initiatives that do not contribute significantly to the value when assessed against the baseline. This is a common issue in many organisations.

4. Defining Investment

It is essential to identify the precise investments made in improving customer experience. This may involve investing in technology, training, staff, or enhancing processes.

5. Determining ROJI and ROI

The overall Return on Investment (ROI) can be determined by calculating the Net Benefits (Total benefits - Cost of Investment) for each stage of the customer journey as well as for the entire journey. Additionally, it is crucial to take into account the lasting effects on customer loyalty, brand image, and customer lifetime value when evaluating the ROI of initiatives aimed at improving customer experience.

6. Developing a Prioritised Customer Value Creation Roadmap

After determining the potential return on investment for customer experience projects, the next task is to create a plan that organises these projects into programs based on their ability to work together efficiently (such as having the same teams, technologies, and data). This approach allows for a practical and business-focused perspective.

Realising ROI: Executing the CX Value Creation Roadmap

After developing the roadmap, the next crucial step is to efficiently convey the information to key individuals such as executives, shareholders, and employees to get organisation-wide buy-in. The following steps can be taken to achieve this goal:

1. Creating an Engaging Storyline

A convincing narrative can be developed to showcase the positive effects of the customer experience roadmap on the organisation. Real-life instances and personal stories can be utilized to demonstrate how the roadmap's efforts will enhance customer satisfaction, loyalty, and revenue.

2. Incorporating Business Objectives

Highlighting the connection between exceptional customer experiences and larger business objectives, such as increasing revenue, expanding into new markets, and driving profitability, is essential. This effectively communicates that customer experience efforts are valuable strategic investments, rather than just expenses.

3. Sharing Data and Metrics

It is important to present data-based evidence of return on investment (ROI), which should include key performance indicators, before-and-after comparisons, and financial metrics. Utilising visual aids such as charts and graphs can enhance the accessibility and effectiveness of the data.

4. Utilising Customer Reviews

One way to showcase the benefits of enhanced customer experiences is by using customer testimonials and success stories. These stories have the ability to add a personal touch to the data and emphasise the tangible results in the real world.

5. Developing the Cost-Benefit Analysis

A detailed analysis of costs and benefits should be conducted to compare the expenses associated with customer experience investments to the resulting gains. This will demonstrate the impact of these investments on reducing costs or increasing revenue.

The Evolving Role of CXOs in Creating Value

The role of Chief Experience Officers (CXOs) is becoming increasingly important in showcasing and promoting the return on investment (ROI) of outstanding customer experiences. These individuals offer strategic guidance for customer experience projects, ensuring they align with the organisation's overall goals. Additionally, they are responsible for determining how resources should be allocated for customer experience improvements. As their decisions directly impact the cost aspect of the ROI calculation, they must prioritise investments that provide the greatest value to customers.

Furthermore, chief executive officers (CXOs) play a crucial role in ensuring employee engagement and contentment, ultimately impacting the customer experience. When employees are actively involved, they are more inclined to deliver exceptional service, thus leading to increased customer satisfaction and return on investment (ROI). Additionally, CXOs utilise data-backed insights to make well-informed choices regarding improving the customer experience. By analysing data, they can identify areas of concern, patterns, and opportunities for enhancement, guaranteeing that resources are allocated where they will yield the greatest results.

Summary

The importance of having a strong strategy for creating a valuable Customer Experience is becoming more evident in the business world. A well-designed strategy not only improves customer satisfaction and loyalty, but also leads to tangible advantages such as higher profits, lower expenses, and a competitive edge. Additionally, it allows companies to accurately assess and prove the return on investment for their customer experience initiatives, thus proving their strategic significance.

Amidst the constantly changing business environment, organisations that place importance on customer satisfaction and dedicate resources towards creating a strong value-generation plan are expected to surpass their counterparts, attain long-term growth, and establish a distinct advantage.