In today's cutthroat marketing environment, optimizing customer experience (CX) is a key element in building sustained business success. By tapping into advanced analytics, CX leaders can gain the rapid insights necessary to develop customer loyalty, make employees happier, achieve revenue gains of 5 to 10%, and reduce costs by 15 to 25% within two or three years, reports management consulting company McKinsey & Co.
Yet simply pouring resources into CX efforts without having a way to accurately predict ROI is both fruitless and wasteful. In a recent report, Capturing the ROI of CX, market research firm Forrester noted that a compelling financial story is necessary to secure funding and executive buy-in for CX initiatives. The top agenda item for leading CX professionals, Forrester explained, is to demonstrate that money spent on CX delivers positive business results.
Building the model
The best way to create a compelling CX business case is to start with the end in mind, advised Alan Mayer, senior vice president, customer advocacy, for Dell Technologies, in a recent interview. "Understand where your customers place value, what their goals and objectives are, and look holistically at what gaps could be filled." By asking questions and gaining a true understanding of each customer's persona, desired outcomes, industry, and market segment, it becomes possible to identify areas that need attention. "Internally, it's important to align these [insights] to business goals and financial outcomes," he said. "Have a closed-loop process with owners, actions and outcomes and, of course, customer and business data to build a successful business case."
The best way to measure CX is by using the traditional "test group/control" method, where a treatment group is exposed to some manipulation or intentional change in an independent variable of interest. "Measuring customer experience ROI can be tricky, because it's often difficult and expensive to create and implement tests in certain environments, such as when updating a website to improve customer experience," suggested Todd Thompson, senior vice president of data, insights, and customer experience for RRD Marketing Solutions, a multichannel business communications services and marketing solutions provider.
Any CX business case measurement strategy should focus on the overall goal. Begin by examining past metrics. "Any great measurement strategy will include historical benchmarks, so I recommend starting with a measurement that's already in place as an organizational standard," said Antonia Hock, global head of The Ritz-Carlton Leadership Center, a consultancy dedicated to helping companies enhance their customer experience.
Thompson noted that there are two necessary approaches to tracking ROI. One way is by measuring financial metrics, including customer profitability, lifetime value, average purchase size, and customer referrals. He also suggested measuring attitudes and perception, such as net promoter score, brand perceptions, purchase intent, and satisfaction.
There's a quantitative and qualitative balance when it comes to measuring ROI. "While the quantitative score is valuable, there's really rich data in qualitative feedback as well," Mayer advised. "When conducting a verbatim analysis [real-life spoken or written responses from customers], you can get an understanding of customer sentiment and the impact of that sentiment on their overall experience."
Constant testing and learning is essential when aiming for maximum CX ROI. "If we think there’s an opportunity, we build as much as we need, to learn as much as we can, as fast as we can," said Bryan Ennis, vice president of product at car shopping service CarMax. "During this process, we're able to get a sneak peek into what potential ROI could look like so we can continue the process or go in a different direction as needed," he explained.
The key to successful ROI measurement of any kind is consistency and flexibility. "Measurement should never be one-and-done," Ennis stated. "When evaluating customer experience ROI, it’s important to keep a close eye on what’s happening within the funnel." Which customers, for instance, are dropping off? At what point do customers need more assistance? "Watch interactions and conversions closely," he suggested. "By doing so, you’ll be able to more easily identify what’s working and where you may need to pivot."
If you truly understand your business, your industry, and your customers, you’ll find success in securing buy-in for your CX strategy, Mayer noted. "Bring in the right senior stakeholders and demonstrate that CX is a company-wide responsibility," he advised. It's always important to understand the needs and preferences of customers, colleagues, and other stakeholders. "When you understand where challenges exist, and what [stakeholders] are trying to achieve, the ROI for CX becomes clear," Mayer concluded.
For more about using data to improve an organization's bottom line results check out these articles.