How to prove CX programme ROI without treating customers as walking walletsby
Proving the ROI of your customer experience programme has never been more important for CX leaders. But often it focuses too much on money, and not enough on the customer.
Among the challenges faced by customer experience (CX) leaders, particularly in a year as challenging as this, is to demonstrate the return on investment (ROI) of their efforts. Unfortunately, the way many answer this question leads their CX efforts in the wrong direction, away from the customer-centric mindset that CX requires.
Asking “how much money do we make from this effort?” is an inherently company-centric question. It isn’t focused on the customer at all; in fact, this question turns customers into wallets and annoyance. The question does not ask what we get by improving our customers and their relationship with our brand, but instead probes how much money we can extract from their wallets and how much we can reduce costs to lift short-term income.
CX leaders must answer the ROI question in a way that doesn’t merely turn CX into another strategy for lowering costs or lifting acquisition. Instead, leaders need an approach that demonstrates how the company profits when customer expectations are understood, their needs are met, and their relationships strengthened.
The way to keep the focus on the customer while still demonstrating the ROI opportunity to business leaders is to follow three steps:
- Ensure the right customer feedback that reveals customer perceptions and satisfaction is collected.
- Analyse the data to demonstrate how the organisation achieves its business and financial goals through improved customer satisfaction.
- Ensure that the right data and measures are delivered to the right people within the organisation.
Step one: Start with data on customer perception
The starting point is to make sure you have customer-sourced information about customer perception. This is typically derived through Voice of the Customer (VoC) surveys asking questions about customer satisfaction (CSAT), customer effort score (CES), or net promoter score (NPS).
Too often, organisations focus on tracking and improving their CSAT, CES, or NPS scores without really recognising why doing so is important. Certainly, everyone understands that lifting customer satisfaction is important in a competitive marketplace, and no one would suggest better ROI can be delivered by diminishing customer satisfaction. Yet, despite the recognition of the importance of customer satisfaction to the organisation, CX leaders frequently report difficulties securing and retaining budgets due to questions of ROI.
To demonstrate the ROI of strong customer relationships, you must be able to associate your VoC data to individual customers. If you anonymise or aggregate your CSAT, CES or NPS data, you will struggle with the next steps.
Step two: Combine and analyse your VoC and operational data
The next step in the process is to find and use operational and financial data at the customer level. Most typically, CX leaders will seek to collect and import data on retention, sales growth, number of products acquired, cost to serve, or referral volume. More advanced organisations will use customer lifetime value models that consider all these metrics and more, combining them to derive the expected future lifetime value of each customer.
Once you combine these two datasets - the VoC scores provided by customers and the financial or business data of those same customers - the point of this analytical exercise becomes clear. With this data unified, you can begin to analyse the differences in business and financial value associated with customers who are satisfied versus dissatisfied.
For example, one Gartner client that collects NPS from its small-business clients found that detractors churned 69% more frequently than promoters. It further found that promoters refer 50% more business than detractors. Finally, the company calculated that annual upspend (for additional seats, products, and features) was 270% greater for promoters than detractors. Adding these three factors together, the company was able to demonstrate a profound difference in the financial value delivered by promoters versus detractors.
Step three: Get the right data to the right people
While calculating the difference in business value between your most and least satisfied customers is a start, more can be done to make this relevant to different leaders within the organisation. Less mature CX programmes often focus on a single high-level dashboard for leaders, but more mature CX programmes “democratise” the data by disseminating it widely in useful and pertinent ways.
While senior leaders may find the relationship between customer satisfaction and retention persuasive, that may not be enough to make this analysis relevant and engaging to leaders of business units and key functions. By framing the benefits of CX aligned to the goals of each leader, we make this analysis more relevant, engaging and convincing. Research demonstrates that organisations drive more customer-centric decision making by showing leaders why being customer-centric is in their own best interest and not merely in the best interests of the entire firm.
For example, you might show digital leaders that highly satisfied customers are more likely to trust, adopt and engage with the company’s digital platforms. Or, the leader of a customer care group may find it important to understand that your most satisfied customers call less often or are more likely to engage with the company’s online self-service tools. By analysing the relationship between customer satisfaction scores and a variety of business metrics, CX leaders can show the ROI of CX in terms of the outcomes for which each leader is responsible.
You’ll note that this approach keeps the focus on the customer - their perception and satisfaction with your products and services. We are not merely calculating how much the company can make or save from a given CX effort but instead proving why lifting CSAT, CES and NPS scores benefits the organisation’s growth, margin and bottom line.
By taking this approach, we keep the focus on the customer while demonstrating that customer satisfaction is a business driver worth investment.