Linking ROI With Customer Experience

Defining a tangible return on CX is one of the biggest barriers in the business. Leaders often fail to make progress on improving their customer experience because they cannot demonstrate the value of their efforts. But, careful preparation of a business case can earn funding, buy-in, and forward movement for these initiatives.

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Let’s understand how this works on a granular level and then use that for global applications.

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Defining The Explicit Value Of CX

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Simply put, you can build the connection between CX and ROI by first identifying the actions taken by your customers that directly contribute to the success of your company and then monitoring customer satisfaction over time to calculate the monetary value of their reactions to various interactions with your company.

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Construct a working hypothesis based on the most important outcomes for your customers. Your first step should be to pinpoint the actions and results of your customers that are crucial to the success of your business.

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For example, in the telecommunications industry, happier customers should be less likely to cancel their service, have fewer problems that require customer service calls, and purchase more products. On the other hand, the primary goals of the airline industry going forward are to reduce the cost of serving customers and increase their share of trip revenues.

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The specific hypotheses you come up with to measure the value your business produces will change depending on your industry, but the principle remains the same. Connect the customer’s words and actions.

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The next step is to establish a connection between customer feedback gleaned from satisfaction surveys and actual changes in behavior.

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To get started, compile a customer-level data set consisting of survey responses from customers who were asked to rate their level of satisfaction or propensity to recommend your products or services.

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Most businesses can connect survey responses to existing customer or prospect records with just an email address or other identifier. Extract two to three years’ worth of monthly data for each priority outcome measure from your customer database.

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For instance, a pay-TV provider compared two years’ worth of monthly data on customer retention, the cost to serve, revenues, product upgrades, and referrals with historical willingness-to-recommend survey responses at the customer level. Such a connection will serve as the backbone of your analysis of customer feedback.

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The Road To Financial Benefits

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Leaders in customer experience know their initiatives are critical, but they risk losing support from upper management if they can’t articulate why their work will ultimately benefit the business. So, here are a few tangible ways you can express the upward shift.

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1. Improved Customer Experience Boosts Sales

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?“Customer Experience Drives Revenue Growth” by Forrester found that customer experience leaders had a compound average revenue growth of 17% over five years. Moreover, CX laggards had a 3% growth.

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In 2015, Bain & Company found that customer experience leaders outperform their markets by 4%–8%. According to Bain & Company, improving customer experience turns customers into promoters who buy more, stay longer, and tell their friends.

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2. Uplifted Loyalty

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Customer loyalty from an excellent customer experience drives revenue growth. Customer Experience data shows that getting hold of a new customer costs five times more than retaining one. According to Marketing Metrics, selling to new prospects is 5-20%, while selling to existing customers is 60-70%.

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Murphy & Murphy estimate that a 2% customer retention boosts profits as much as a 10% cost cut. Thus, many companies improve customer experience to retain customers.

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3. Worthwhile Long-Term Results

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Over a ten-year period, above-average customer satisfaction companies had four times the shareholder return of below-average companies. Moreover, It was stated that it takes three to eleven months for a noticeable shift in customer satisfaction levels to impact a company’s bottom line.

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The time period is lengthy, and there are likely to be variations from one industry to the next in terms of the speed and ease with which services can be switched. Investments in the customer experience will pay off in the long run, but it will take time to see a return on your money.

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Deciding The Direction Of Your Investment

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Customer experience investment strengthens customer-company relationships. Non-customer-centric companies send messages they think customers want without asking. This approach wastes a lot of money on marketing and products that don’t sell.

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However, customer experience helps organizations produce exceptional products and avoid future troubles.

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Today, most companies use feedback loops between customer support and product design. The contact centre sends product issues to product designers so they can fix them. If many customers report a bug or confusion, the team can make changes to improve the product and meet customer needs. That input is priceless.

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You see, unhappy clients cost more to serve because it takes considerably more time and effort to build goodwill. Investing in positive experiences rather than recovering from bad ones pays off. CX leaders bridge departments to build customer relationships and develop the contact centre.

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How To Improve The Numbers

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Start with NPS or CSAT scores for customer experience analysis. Measuring these metrics over time will reveal trends, but without digging deeper, you won’t know how to improve performance.

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Here are some ways to better understand your customers and boost customer experience program ROI.

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1. Client Segmentation

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Classifying your customers into subsets according to shared traits and habits allows you to learn more about them as individuals and as a whole. Recognizing that not all customers are alike, or “buyer personas,” can aid in spotting untapped markets for revenue growth.

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2. Examine Historical Trends

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After amassing a sizable dataset, you can examine the information for trends that reveal what has worked and what hasn’t in the past. Is there a universal sentiment among a subset of customers regarding a certain functionality? Is there a specific demographic where churn is particularly high for you? What did their in-depth responses reveal about how they felt about your brand?

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Consequently, data can be used to evaluate your customer service initiatives in relation to predetermined standards. You will be able to identify successful initiatives and areas where improvements can be made to boost returns.

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3. Employ Text Analytics To Evaluate Qualitative Data

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Text analytics software can analyse qualitative data from surveys, customer conversations, online reviews, social media conversations, and more, saving time and effort over manually sorting support tickets and listening to phone recordings. You can save both time and effort processing massive amounts of data and customer feedback by using this cutting-edge technology.

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Designing The Roadmap To CX Success

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With a solid business case, you can create a transformation road plan. Customer-experience initiatives often fail due to slow or unclear impact. Thus, improving near-term quarterly profitability can overshadow customer-satisfaction objectives.

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Successful efforts build road maps that ring the cash register in the short term, fund themselves in the medium term, and have a long-term impact based on a model of consumers’ priorities to mitigate that risk. The following are some useful steps in developing that road map.

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1. Estimate Each Initiative’s Value, Time, And Cost

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Exploring customers’ priorities should reveal the value of proposed initiatives and help narrow the list. With that, combine the severity of an incident or opportunity (such as its magnitude, positive or negative impact, or when it occurs) with its frequency to calculate an initiative’s expected value.

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A telecom company would consider a phone’s technical failure severe but rare. Surprise billing changes are less severe but occur frequently. Addressing consumer billing shock usually adds value.

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2. Separate Portfolio-Balancing Initiatives

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Balance and succession require two dimensions. First, policy-driven initiatives will simplify billing or change customer credit criteria. Others, like field technician training or retail bank customer service, require a frontline rollout. Policy efforts can be centrally directed and implemented faster than field-driven programs that must be phased in. A well-planned roadmap balances both types of projects.

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Second, some efforts will affect most clients, while others will be major opportunities for a few. Companies must ensure that most customers experience the change. Thus good sequencing balances both. Common blind spots include overemphasizing extreme incidents and opportunities.

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3. Design A Successful And Self-Funding Roadmap

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Operators will have adequate data to construct a well-sequenced road map if they know the projected value, cost, and effect timetable for each effort, as well as which initiatives can be handled from a centralised location and which must be rolled out in the field.

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If leaders have access to reliable data, they can prove the worth of starting with a small group. When you have done research on what matters to your target audience, developing a business case is usually a breeze. You can use the money saved from your quick wins to fund investments in more permanent solutions, like updating your systems or eliminating IT bottlenecks.

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An Example To Remember

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Let’s go back to the 90s to see how customer experience matters.

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Mastercard, the largest credit card company in the world, encountered a major issue in 1997. Their products were losing ground in the market as customers shifted their spending to those of their rivals.

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So in an effort to rebrand its image, Mastercard launched this now-famous “Priceless” advertising campaign.

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For 23 years, Mastercard’s “Priceless” campaign has defined the brand. Why did this message work? Because customer experience was collected. Great customer experiences are invaluable for customers and businesses, unlike things.

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Ironically, firms are seeking to value “priceless” client interactions. Customer experience ROI helps marketing and customer service teams strategize and make vital business decisions.

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In the end

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Customer experience ROI is more than simply a fancy number. It’s an effective tool for setting priorities for upcoming initiatives, gaining support for a customer-centric approach, and boosting morale all around.

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Connecting the dots between the metrics you already measure and the monetary metrics discussed in this piece is the key to determining the return on investment in your customer’s experience. You may gauge the efficacy of your customer experience initiative by comparing client feedback with the aforementioned contextual data.

Disclaimer: Views expressed are solely my personal expression based on publicly available information and do not associate with any specific organization, institution, or?group of individuals.