How to prove that fixing CX problems cuts costs
I recently described how to tie CX to revenue in a measurement system. Admittedly, it’s a little complex (though very doable; we do it regularly at Forrester with our Customer Experience Index).
There’s an alternative approach to proving the economic value of CX, and it has some advantages: The math is simpler and it’s harder to argue against. What’s more, you’ll be measuring something that executives like in good times and love in bad times: cost savings.
The Relation Between CX And Cost Savings Is Easy To Explain
Let’s start with yet another business principle that everyone will agree with: Some customers cost more to serve than other customers.
Often your costlier customers are costlier because they have more problems. When customers have problems, they reach out to your contact center with more calls, emails, texts, social media outreach – you name it. Every one of those contacts costs you money to handle and resolve. What’s more, your costs can skyrocket if you also “make good” with refunds, credits, or some other form of compensation
So, when you improve CX by tracking down the root causes of customer problems and then eliminating those problems, you make customers happier and save your company money. It’s a beautiful thing – everyone wins.
How can you find the problems and get a sense of how many customers they affect? Follow a formula that has worked at many companies. I think it’s fair to say that it saved Sprint, as detailed in a case study from Outside In.
Your New Best Friend: The Head Of Your Contact Center
According to Forrester VP & Principal Analyst Kate Leggett, a world-class expert on contact centers:
“The call center should be mined for insights from all customer interactions. It’s a knowledge bank of customer sentiment, product issues, competitive information, and operational inefficiencies that can all be used to deliver better CX.”
Many (maybe all) contact center execs are eager to help out and prove that they’re valuable to the business, not just a cost of doing business. So, what’s the problem? Here’s Kate again:
“We have done many projects where the contact center wants to share data with the rest of the organization, but the CX team is unaware, or unwilling to work with the contact center.”
I’m going to assume that if you’re reading this post and haven’t tapped into customer insights from your contact center it’s because of lack of awareness, not unwillingness. With that in mind…
What Information To Ask For And How To Use It
When customers reach out to your contact center, the center assigns a “reason code” for the call – they call it “classifying a case.” This is not only a best practice, it’s a standard feature of every customer service solution. The chances that your contact center doesn’t do this are slim.
A human agent can do the classification manually or an AI can do it automatically. Each company typically has their own classification system (a.k.a. taxonomy) – you’ll have to get schooled on how your company classifies cases.
Now here’s the cool part: Whatever customer service solution the call center uses can generate reports that surface the most frequent reasons for calls. What’s more, your contact center knows the average cost per call. That means you can prove how much each type of problem costs your firm by multiplying the number of calls for that problem by the cost per call.
With a little additional homework, you can create a business case that’s about as straightforward and compelling as a business case ever gets.
Bring The Numbers Together In A Simple ROI Model
First, you need to do root cause analysis to make sure you understand what is really causing those problems that the call center is reporting. That can be as simple as applying the 5 Whys methodology. For example, let’s say people are calling to complain that their bill is incorrect (a very common problem), and your root cause analysis determines that the bills are actually correct but poorly designed and therefore confusing to customers (a very common root cause for this problem).
Second, you need to scope a project to fix the root cause of the problem. Your solution with the bill problem is probably to redesign the bill to make it clearer. That will require you to pay a designer and possibly a copywriter, and maybe you’ll have to do some coding if the bill is online. All those costs are easy to quantify.
Next, assume about how many of the calls your project will eliminate. It’s unrealistic to assume that you will get rid of 100%. So, have a discussion with stakeholders to reach agreement on a safe number that no one will say is wrong, like 50%.
Finally, multiply the total cost of all those calls by your safe number (in this case, 50%). The result is your projected benefit. Because we know that ROI = Benefit – Cost/Cost, you can even forecast ROI. Notice that the only math you did to get here was addition, subtraction, multiplication, and division.
Do The CX Improvement Project, Measure The Actual Result
Back to metrics! Once you have completed the project, wait a month and then get another report from the contact center showing the latest number of calls with that reason code. This will tell you whether your project fixed the problem, and how much of the problem you fixed. By subtracting the new total cost of the calls (# of calls * cost per call) from the old total cost from a comparable time period, you’ll be able to report how much money you saved the business.
The way to report that to your execs would be to lead with the benefit, like so: “We are saving the business $50,000 per month. We were spending an average of $100,000 per month on calls of this type before our fix. Now we are spending $50,000 per month on calls of this type.”
You’ll want to monitor the situation over time to ensure that the problem doesn’t reappear, and start looking for new problems. Your call center is a gift that keeps on giving because new problems surface from time to time even as you’re working on your backlog of old problems.
That’s how to tie CX to cost savings in a nutshell. There is more I could say on the topic, but you can implement this approach for yourself with just the information in this post. Do yourself a favor: try.
To understand the major dynamics that will impact firms across industries next year, download Forrester’s Predictions 2020 guide.
This post was written by Vice President, Research Director Harley Manning, and originally appeared here.
Forrester (Nasdaq: FORR) is one of the most influential research and advisory firms in the world. We help leaders across technology, marketing, customer experience, product and sales functions use customer obsession to accelerate growth. Through Forrester’s proprietary Research, Consulting, and Events, leaders from around the globe are...