by
Overview
A recent Forrester study of customer experience (CX) found that 90 percent of respondents claimed it is a top strategic priority for their firm. However, a surprising 86 percent said their companies do not expect to get much value, or return on investment, from CX.
Statistics showing that modest increases in customer retention result in lower sales costs and higher revenue have been well-known for 25 years. More recent studies illustrate similar business results for leaders versus laggards in CX performance. So why is it so hard for a company to show conclusive evidence of ROI?
Culprits of this predicament include the silo treatment of CX management, limited to a single function such as customer service or marketing; by definition, a silo is only part of the full customer experience, so it is difficult to attribute customer behavior to a silo program. Another culprit is over-emphasis on immediate revenue opportunities without sufficient attention to long-term gains or cost opportunities.
ROI has a numerator and a denominator: The numerator is revenue and the denominator is cost. Revenue divided by cost produces your return on investment. Yet too often companies seek only to increase the numerator (revenue) and miss the rich upside of decreasing the denominator (cost). This is not to be confused, however, with austerity, cost-slashing or starving CX management of funding.
The denominator upside of CX ROI lies in company practices that are standing in the way of customers’ ease-of-doing business with the company. Each of these practices represent a "cost" because they result in lost revenue, and these costs should be included in the denominator for calculating ROI.
The reason is simple: Customers gravitate to the company that makes it easiest to do business. This is true among all the companies perpetually appearing on lists of best-loved companies. Stand out from the crowd in ease-of-doing business, and your revenue stream (the numerator) is allowed to grow more-naturally.
Statistics showing that modest increases in customer retention result in lower sales costs and higher revenue have been well-known for 25 years. More recent studies illustrate similar business results for leaders versus laggards in CX performance. So why is it so hard for a company to show conclusive evidence of ROI?
Culprits of this predicament include the silo treatment of CX management, limited to a single function such as customer service or marketing; by definition, a silo is only part of the full customer experience, so it is difficult to attribute customer behavior to a silo program. Another culprit is over-emphasis on immediate revenue opportunities without sufficient attention to long-term gains or cost opportunities.
ROI has a numerator and a denominator: The numerator is revenue and the denominator is cost. Revenue divided by cost produces your return on investment. Yet too often companies seek only to increase the numerator (revenue) and miss the rich upside of decreasing the denominator (cost). This is not to be confused, however, with austerity, cost-slashing or starving CX management of funding.
The denominator upside of CX ROI lies in company practices that are standing in the way of customers’ ease-of-doing business with the company. Each of these practices represent a "cost" because they result in lost revenue, and these costs should be included in the denominator for calculating ROI.
The reason is simple: Customers gravitate to the company that makes it easiest to do business. This is true among all the companies perpetually appearing on lists of best-loved companies. Stand out from the crowd in ease-of-doing business, and your revenue stream (the numerator) is allowed to grow more-naturally.
To address the other culprit – silos – think of CX management as a sequential flow. Like any other living system, all the components need to work in tandem in order to produce optimal results:
Continuity across the CX system is the silver bullet for maximizing ROI. There is no off-the-shelf, one-and-done solution. The CX system starts with customer feedback, which informs improvements and innovations, which earn customer trust and engagement.
Continuity across the CX system is the silver bullet for maximizing ROI. There is no off-the-shelf, one-and-done solution. The CX system starts with customer feedback, which informs improvements and innovations, which earn customer trust and engagement.
Companies have the opportunity to maximize their customer experience ROI through taking the following steps:
- Discover how big are "bad costs" caused by obstacles to customers' ease-of-doing-business.
- Compare ROI of tackling bad costs versus ROI from customer loyalty enticements.
- Collaborate cross-organizationally to end bad costs.
- Motivate everyone to proactively manage their ripple effect on customers.
- Inspire creativity broadly for novel ways to add mutual value.
- Weave customer experience excellence into everything your company does.
- Treat CX management as a flowing, integrated system within your company.
Common Problems
When companies try to improve their
customer experience management they immediately think of their front-line
employees: salespeople, customer service reps, call center reps, etc. But many
of the problems that impede superb customer experiences emanate from
manufacturing, engineering, finance or other "back-office"
functions. The decisions made by back office functions have an impact on
overall customer experience either directly or through the influence that their
policies or actions have on the customer-facing functions.
Customer experience management is not merely an issue for your customer-facing
people but for the organization as a whole. Do not be surprised to find
high-value levers for improving customer experiences among functions that
appear to have very little contact with paying customers.
Contact centers are
an important source of pure customer feedback, describing what customers
are trying to do and obstacles they're facing. Most companies use service
comments primarily for training agents who deal directly with
customers. They don't use text/voice mining of customer comments from the
contact center to educate the rest of the company.
There is a huge opportunity to stream pure customer feedback to the groups
throughout the company who could use the feedback to create breakthrough
innovations or who originated the obstacles; to increase their capability to
anticipate their ripple effect on customers, and to hold them accountable to
prevent recurrence. Service people who are liberated from solving
tedious, avoidable problems caused by other parts of the company can focus
on creating more value for the company and the customer.
As customer retention statistics demonstrate greater value over customer
acquisition, companies that are excelling in customer experience have broken
from traditional practices in hiring and compensation plans for
contact centers.
Companies rely on enticing customers to re-buy and recommend rather
focusing on superior ease-of-doing-business and creating mutual value to compel
loyalty.
While timely and relevant marketing and
sales are essential to a company's growth, the most-loved companies have
mastered operational alignment with customers' preferences so that they enable rather
than entice customers to love them.
Gains reaped from sizzle without sufficient substance are short-lived, and
often require resource investments that erode the gains. While customer
experience management is rooted in the total quality movement in the early
1990s, the excitement of customer relationship management (CRM) technologies,
experiential marketing, Net Promoter®, social media, digital marketing, and
other technologies has obscured the necessity of good old-fashioned process
improvement.
Many managers of customer experience efforts are unaware of improvement tools
such as fishbone diagrams, Pareto charts, systems thinking, change management
and the like. These tools are essential for making full use of customer
insights and differentiating a company's customer experience profitably. Customers
are more interested in pursuing their own needs rather than the supplying
company's needs. They have already paid fair market value (plus unexpected
time, stress, and effort all too often), so additional mutual value is required
for profitable customer engagement. Executives expecting immediate
revenue growth from customer experience efforts are causing undue pressure on
managers with unintended ironic effects (such as customer satisfaction surveys
that aren't convenient or satisfying to participate in, subscription renewal
campaigns that start too early and nag too often, etc.) on customer
experience.
Managers tend to see the customer
experience in terms of their own internal chimneys. Surveys and journey
mapping, data systems and policies, messaging and servicing are often unique to
numerous groups across a company. These siloed activities not only duplicate
effort and increase costs to the company, they cause a lot of confusion and
require extra effort for customers.
Customers simply want what you're selling so they can smoothly live their
lives or run their businesses, so these complications detract from the overall
goal of ease-of-doing-business. Customer experience efforts that are designed
as silos prevent management from gaining a big-picture perspective of what
is experienced. They sub-optimize potential business results by design.
The key to engagement is trust, which is earned through consistency,
reliability and predictability. Mastery of these trust elements is the reason
why certain discount brands have outperformed luxury brands in popularity and
financial performance.
In a conference attended
by customer experience managers, the breakout topic of ROI had five times as
many attendees as any other topic. Some companies have disbanded their customer
experience staff due to executives' frustrations about the value reaped. Others
are deploying customer experience in a piecemeal fashion rather than a coherent
system, hesitant to put their money where their mouth is, or impatient, or
discounting the eagerness (and feasibility) of all employees to contribute to
customer experience success.
Most customer experience efforts are aimed at near-term revenue growth:
surveys, service, social media, references, loyalty programs and so forth. In
fact, the push for ROI is so strong that in many cases the customer experience
effort actually creates discomfort for customers and in reality serves the
company more than the customer's well-being.
Customer experience ROI is often elusive due to overemphasis on silos rather
than continuity and on revenue growth rather than prevention of bad costs. It
is also elusive due to incorrect metric selection: lagging indicators are
typically relied upon to predict other lagging indicators. A lagging indicator
is something stakeholders already see, whereas a leading indicator is something
a manager can see before its result is visible to stakeholders. One of the
reasons why leading indicators are sparse is that customer experience efforts
are frequently deployed without planning internal actionability and
accountability.
ROI has been proven by numerous studies, and for companies that rise above
these common pitfalls, they're seeing strong business results such as
differentiation, market share growth, and increased profitability.
Popular technologies and techniques often obscure the full picture of
customer experience management.
While new technologies
and techniques increase opportunities for real-time insights and value
creation, caution is warranted in assuming that customer experience business
results can be significant and enduring with a narrow or silo focus. Some of
the most popular today are customer journey mapping, digital marketing, social
media, content marketing, self-service, and survey indexes such as Net
Promoter®.
As an example, close inspection of the "customer experience
strategy" offerings of some leading consulting agencies reveals a
limitation to digital customer experience. This may be central to a digital
business, yet the vast majority of companies' digital experience is certainly a
mere fraction of the full customer experience. Another example is the claim
of "full service offerings" by customer experience vendors: They
offer full service for what they do, but probably not full service for what the
buying company needs to fully manage their customers' experience.
Marketers at customer experience vendors frequently misuse customer experience
terms, deviating from long-standing use of those terms by practitioners and
business books and creating confusion and ultimately, skepticism and
disillusion for the field as a whole. Customer experience conferences are often
focused on a certain functional area, such as contact centers or user
experience or digital marketing, giving newcomers to the customer experience
role a narrow and inaccurate view of what's truly needed by their customers.
Employee engagement is recognized as a key to customer experience business
results.
There is widespread
agreement that unhappy employees do not allow happy customers. And as customer
experience technologies have been deployed, managers are realizing the need for
customer-focused culture, employees taking ownership for customer experience,
and cross-organizational collaboration to resolve issues in customers'
ease-of-doing-business.
Some managers believe that employee engagement per se is what's needed: being
productive on the job, taking an interest in the company's success,
recommending the company to potential job applicants, or participating in
gamification, such as earning points for downloading customer experience
webcasts. To grow customer experience business results, all of these engagement
levels are necessary, yet insufficient.
Since salaries and budgets are made possible by customers, it stands to reason
that the most profitable employee engagement is centered on improving
customers' well-being. Hence, employee engagement in customer experience means
that employees understand and proactively manage their personal and collective
ripple effect on customers. It means that customer experience criteria –
actionable at the employee level – are woven into job descriptions, performance
reviews, training, team recognition, staff meetings, ops reviews, all-hands
meetings, and executive messages, decision-making, and behaviors.
Wide recognition of six core competencies for customer experience
management is driving more holistic strategies for business results.
There is a growing
awareness of six core competencies that are emphasized in the Customer
Experience Professionals Association certification exam. These competencies
include:
The key to excelling in all six competencies is to view them as a sequential
flow, with VoC driving strategy, culture, and experience design. Organizational
adoption and metrics are involved in deployment of each of these competencies.
The growing number of people achieving CXPA certification is a sign that the
field is transitioning in the near future to embrace what's required
for optimal customer experience ROI.
Companies are appreciating the need to make business process improvements
for customer experience excellence.
The use of change
management, systems thinking, Lean Six Sigma, teamwork, and similar management
tools is recognized by companies that are seeing greater business results
through customer experience management. These business process improvement
methods direct employees in systematic (step-by-step) analysis and resolution
of customers’ issues. And they encourage systemic (holistic,
cross-organizational) treatment of issues to fix weaknesses once and for all.
In addition, these methods are being used to make customer-centered thinking
and doing a way of life, and to create new value for customers and the
company’s future growth.
Examples emphasizing business process improvement were evident in a study of
best practices for business-to-business customer experience management
conducted by ClearAction. Companies with best financial performance showed more
commitment to centering employees and the business on customers. Their
best-in-class differentiators stemmed from:
Target Audience
Risks & Opportunities
- Concentrating
on the re-buy might produce short term gains, but in the long
term it's not as valuable as concentrating on producing mutual value with
customers.
- Companies
become over-dependent on their front line, customer service people who
aren't receiving what they need from the back offices.
- If
you're not looking company-wide at the way you manage customer
experiences, then you're allowing each division, functional area or
region to manage the customer using their own ad hoc methods,
and probably confusing customers in the meantime.
- Inconsistency
can erode customer trust or prevent it from taking root.
Opportunities
- Cost savings
through removing or revising parts of processes and policies that
aren't serving you or your customer.
- By
addressing those costs once and for all, you prevent them from playing
into your financial statements quarter after quarter.
- Happier
employees, which makes happier customers.
- Less
turnover and lower costs associated with employee and customer
on-boarding.
- Positive
word of mouth.
Skills
- Superb
change management skills.
- Strong
cross-organizational collaboration.
- The
ability to see from multiple angles and to form a systemic view
of the company, which enables management to see the ripple effect of its
decision-making on stakeholders.
- Ability
to engender creativity across all organizations, fostering innovation
regarding the customer experience across all functions.
- Superb
research and analytic skills.
Customer experience management is not merely an issue for your customer-facing people but for the organization as a whole. Do not be surprised to find high-value levers for improving customer experiences among functions that appear to have very little contact with paying customers.
There is a huge opportunity to stream pure customer feedback to the groups throughout the company who could use the feedback to create breakthrough innovations or who originated the obstacles; to increase their capability to anticipate their ripple effect on customers, and to hold them accountable to prevent recurrence. Service people who are liberated from solving tedious, avoidable problems caused by other parts of the company can focus on creating more value for the company and the customer.
As customer retention statistics demonstrate greater value over customer acquisition, companies that are excelling in customer experience have broken from traditional practices in hiring and compensation plans for contact centers.
Gains reaped from sizzle without sufficient substance are short-lived, and often require resource investments that erode the gains. While customer experience management is rooted in the total quality movement in the early 1990s, the excitement of customer relationship management (CRM) technologies, experiential marketing, Net Promoter®, social media, digital marketing, and other technologies has obscured the necessity of good old-fashioned process improvement.
Many managers of customer experience efforts are unaware of improvement tools such as fishbone diagrams, Pareto charts, systems thinking, change management and the like. These tools are essential for making full use of customer insights and differentiating a company's customer experience profitably. Customers are more interested in pursuing their own needs rather than the supplying company's needs. They have already paid fair market value (plus unexpected time, stress, and effort all too often), so additional mutual value is required for profitable customer engagement. Executives expecting immediate revenue growth from customer experience efforts are causing undue pressure on managers with unintended ironic effects (such as customer satisfaction surveys that aren't convenient or satisfying to participate in, subscription renewal campaigns that start too early and nag too often, etc.) on customer experience.
Customers simply want what you're selling so they can smoothly live their lives or run their businesses, so these complications detract from the overall goal of ease-of-doing-business. Customer experience efforts that are designed as silos prevent management from gaining a big-picture perspective of what is experienced. They sub-optimize potential business results by design. The key to engagement is trust, which is earned through consistency, reliability and predictability. Mastery of these trust elements is the reason why certain discount brands have outperformed luxury brands in popularity and financial performance.
Most customer experience efforts are aimed at near-term revenue growth: surveys, service, social media, references, loyalty programs and so forth. In fact, the push for ROI is so strong that in many cases the customer experience effort actually creates discomfort for customers and in reality serves the company more than the customer's well-being.
Customer experience ROI is often elusive due to overemphasis on silos rather than continuity and on revenue growth rather than prevention of bad costs. It is also elusive due to incorrect metric selection: lagging indicators are typically relied upon to predict other lagging indicators. A lagging indicator is something stakeholders already see, whereas a leading indicator is something a manager can see before its result is visible to stakeholders. One of the reasons why leading indicators are sparse is that customer experience efforts are frequently deployed without planning internal actionability and accountability.
ROI has been proven by numerous studies, and for companies that rise above these common pitfalls, they're seeing strong business results such as differentiation, market share growth, and increased profitability.
As an example, close inspection of the "customer experience strategy" offerings of some leading consulting agencies reveals a limitation to digital customer experience. This may be central to a digital business, yet the vast majority of companies' digital experience is certainly a mere fraction of the full customer experience. Another example is the claim of "full service offerings" by customer experience vendors: They offer full service for what they do, but probably not full service for what the buying company needs to fully manage their customers' experience.
Marketers at customer experience vendors frequently misuse customer experience terms, deviating from long-standing use of those terms by practitioners and business books and creating confusion and ultimately, skepticism and disillusion for the field as a whole. Customer experience conferences are often focused on a certain functional area, such as contact centers or user experience or digital marketing, giving newcomers to the customer experience role a narrow and inaccurate view of what's truly needed by their customers.
Some managers believe that employee engagement per se is what's needed: being productive on the job, taking an interest in the company's success, recommending the company to potential job applicants, or participating in gamification, such as earning points for downloading customer experience webcasts. To grow customer experience business results, all of these engagement levels are necessary, yet insufficient.
Since salaries and budgets are made possible by customers, it stands to reason that the most profitable employee engagement is centered on improving customers' well-being. Hence, employee engagement in customer experience means that employees understand and proactively manage their personal and collective ripple effect on customers. It means that customer experience criteria – actionable at the employee level – are woven into job descriptions, performance reviews, training, team recognition, staff meetings, ops reviews, all-hands meetings, and executive messages, decision-making, and behaviors.
The key to excelling in all six competencies is to view them as a sequential flow, with VoC driving strategy, culture, and experience design. Organizational adoption and metrics are involved in deployment of each of these competencies. The growing number of people achieving CXPA certification is a sign that the field is transitioning in the near future to embrace what's required for optimal customer experience ROI.
Examples emphasizing business process improvement were evident in a study of best practices for business-to-business customer experience management conducted by ClearAction. Companies with best financial performance showed more commitment to centering employees and the business on customers. Their best-in-class differentiators stemmed from:
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