How To Prove The ROI Of Customer Experience
The key is using data to prove the ROI of CX and paint a convincing story
One of the biggest obstacles change-makers face in pushing their organizations towards customer centricity is convincing executives that the investment will yield a return. Compared to things like sales and marketing, customer experience is often seen as a “softer” part of business. Sales can be directly tied to revenue growth, and marketing campaigns are linked to the number of leads they convert and customers they acquire.
But what is the ROI of customer experience?
The key to getting executives on board with customer experience is to prove it helps the bottom line. Tying customer-focused initiatives to money and statistics shows a better story than anecdotal proof. The ROI of customer experience is actually quite staggering. Consider this:
- Customer-centric companies are 60% more profitable than companies that don’t focus on customers.
- Brands with superior customer experience bring in 5.7 times more revenue than competitors that lag in customer experience.
- 84% of companies that work to improve their customer experience report an increase in their revenue.
Clearly, when done right, investing in customer experience brings a strong return on investment. The key is using data to prove the ROI of CX and paint a convincing story. Research from Forrester revealed the three main areas of focus for CEOs: revenue growth, profit growth and stock price. Any program that doesn’t contribute to these three areas, especially during the current economic uncertainty, is on the chopping block. To keep funding and gain future support for new programs, CX leaders must be able to clearly link customer-focused initiatives to financial growth.
Proving ROI comes down to focusing on the right metrics and properly analyzing data to make effective decisions. In 2020, more than 40% of all data analytics projects will relate to an aspect of customer experience. To showcase the ROI of customer experience, changemakers need to connect money and data to key aspects of the customer journey.
Prevent Future Issues
Investing in customer experience builds a powerful lifeline between customers and the company. Companies that aren’t customer-centric tend to send messages they think customers want without actually getting their input or feedback. This approach can lead to huge amounts of wasted resources on marketing and products that simply don’t resonate with customers.
Customer experience, on the other hand, helps companies proactively deliver great products and prevent future issues. The most customer-centric companies utilize feedback loops between their customer support and product design teams. As customers call the contact center with issues about a product, representatives send that information to the product designers so they can adjust the product. If numerous customers are reporting a glitch or a confusing part of a product, the team can make adjustments to make the product more effective and in line with what customers actually want. That kind of feedback is invaluable.
On top of that, unhappy customers cost more to serve because they require more time and resources to build goodwill. Instead of spending money to recover from a bad experience, proactively spending money to create positive experiences pays off incredibly. Investing in a strong experience to build customer relationships and develop the contact center pays off when CX leaders act as the bridge to create clear communication between departments.
Build Long-term Customers
How valuable are your customers? Customer lifetime value, or CLV, connects a dollar amount to each person of how much they will bring the company over their lifetime.
CLV proves the value of increasing a relationship with each customer. Measuring customer loyalty can be as simple as a survey that asks customers how likely they are to make a return purchase or refer the company to friends. From there, tie a dollar amount to customer loyalty using CLV. A customer with a high CLV and a high degree of loyalty leads to long-term financial gains for the company. Investing in building and strengthening that relationship is key.
Some experts suggest focusing on a small group of your most valuable customers and surrounding them with relevant products and services. The general rule of thumb is that it costs five times more to create a new customer as it does to retain an established one. It makes more sense to focus on one area, get to know that customer base and continue to sell them relevant products and services.
CLV leads to a better understanding of each customer and fuels personalization. According to research by McKinsey, when brands get personalization right, marketing spend can deliver five to eight times the ROI and lift sales by 10% or more. Analytics like CLV help companies be better listeners, provide more relevant experiences and be where their customers are at the right time.
Prove The ROI Of CX
Customer experience leaders understand the importance of their programs, but if they can’t clearly communicate the benefit to the company to executives, they run the very real risk of losing support. Consider these strategies to prove and communicate the value of CX to gain funding:
- Lead with the financial benefit to the company. It’s a classic good news before the bad news approach. Executives will focus on the first dollar amount you share—if you begin by sharing how much the program will cost, they will likely get hung up on that, no matter the potential benefit. Start by sharing how much money a CX program will save or earn the company before talking about how much it will cost.
- Show the benefit over time. CX changemakers know that investing in customers leads to long-term gains, especially as customers remain loyal and recommend the company to family and friends. Executives care about how quickly they’ll get their investment back, but they also want to know that the return will keep coming for years to come. Show the value of CX over time by focusing on CLV and long-term referral benefits.
- Be clear and concise. Forrester recommends getting your pitch down to a one-sentence business case. State what you want to do, how much it will save or earn the company and then how much it will cost. A clear lead keeps executives focused on the benefits, which you can then support with additional details.
- Tie CX to time, not just money. Many executives agree that customer experience is a good thing to invest in, eventually. They fail to see the urgency behind the initiatives, especially during the current economic downturn when many leaders are looking to cut funds. Add a timeliness approach to customer experience by showing how much money the company is losing each month on negative calls and lost sales.
There’s no denying that focusing on customer experience brings strong benefits to companies and impacts the bottom line. The problem comes when trying to convey the impact to the people who hold the purse strings. Focus on data and analytics, target the right customers and put customers first in everything you do to drive metrics and showcase the strong ROI of customer experience.