If you are like other CX pros, at some point in your CX career you’ll encounter the “money question.”
Your CEO will ask you: “What's an improvement in our customers’ experience worth in dollars and cents?” And it’s likely that you won’t have a (good enough) answer, as 50% of CX leaders Forrester surveyed have not yet modeled how CX quality influences customer behavior.
We know great CX drives revenue. But to make the case, you need a more nuanced and sophisticated understanding.
Forrester recently used its Customer Experience Index (CX Index™) and modeled the revenue impact of improving CX, asking these three questions:
- What is a customer’s loyalty (retention, enrichment and advocacy) worth in revenue dollars?
- Is there a relationship between CX quality and loyalty-based revenue?
- How does the relationship between CX and revenue potential differ by industry?
In response, we found nuanced insights into the relationship between CX and revenue. Here are three key discoveries:
- Advocacy loyalty is a small share of the overall revenue impact. That’s because not every recommendation will result in net new customers. For one thing, if the recipient of a recommendation is already a customer, then the recommendation is moot. Therefore, the higher a company’s market share, the lower the chance that a recommendation will reach someone who isn’t a customer already and result in a net new relationship. Additionally, the recipient must need the services that were recommended. For example, Amazon offers easy access to a broad range of products — more than 250 million in all. In contrast, Etsy offers about 40 million products, many of them “vintage goods and craft supplies.” That makes the likelihood that a customer can find something she wants on Amazon higher than on Etsy.
- CX and revenue potential don't always move in lockstep. In some industries, such as banks, the revenue upside gets progressively bigger with higher CX scores. In others, like wireless service providers, the opposite is true!
- Results and implications differ by industry. Take, for example, wireless service providers. Because revenue potential tapers off at high levels of CX, wireless service providers should improve the worst experiences instead of refining already good experiences. This should be a great incentive for most large wireless service providers, which each have about a third of their customers who say they have very poor experiences.
So what does this mean for CX leaders who are trying to make the case for CX investments? To sharpen your argument, you must:
- Size the opportunity for your brand.
- Give executives a timeline for when to expect revenue gains.
- Bolster your case by adding the non-revenue benefits of improving CX.
- Add rigor by monitoring competitive CX moves.
- Stay alert for signs of impending disruption.