Measuring and managing customer experience (CX) has become one of the most tried-and-true ways of keeping a finger on the pulse of customer sentiment, so much so that firms will spend a combined $13.2 billion by 2021 just to execute customer experience measurement programs.
However, measuring and managing customer experience is not an expenditure, it is an investment. It should be part of a larger experience management program, which is a wider and more holistic, helping optimize all the experiences organizations provide.
Like all investments, customer experience demands a definitive return. Applying a solid customer experience management methodology produces ROI in 10 distinct ways:
1. Customer Acquisition and Retention: Acquiring and retaining customers is perhaps the single biggest health indicator for a firm. Spectacular customer experiences have demonstrated clear, positive benefits when acquiring new customers and establishing a sentiment of delight to keep customers longer. Customer loyalty creates core customer groups that can prove increasingly lucrative with adept management. But the reverse is also true: the impact that a negative experience can carry often far outweigh the impact of a positive experience.
2. Cost to Acquire and Serve a Customer: CX lowers costs, it doesn’t just drive satisfaction. The better you understand your existing customers’ experiences, the better you can understand your prospect base’s expectations. The more you build experiences and services that customers and prospects crave, the lower your costs to acquire and serve will be.
3. Customer Share: Customer penetration is critical, but it simply means increasing the number of customers you have. Share of wallet is the ultimate measure of how customers spend their money when a point-of-sale decision occurs. Inquisitive firms will find that taking care of the basic customer experience will keep detractor counts low. But firms that focus on innovating the customer experience will drive passives to become promoters, and that drives customer share.
4. Market Differentiation: Understanding what drives customer sentiment and what drives their spending is paramount, but the next strategic step must be to understand direct competitors. Market differentiation analyses allow firms to understand which share-drivers they have maxed out, which still have juice to squeeze and in which areas “white space” exists for potential differentiation in keeping with brand promises. Customer experience is inherently competitive, so always compare the experience you deliver to those the customer expects.
5. Customer Value Co-creation: Engaging customer experiences motivate your customer base to create alongside you. The financial benefits of co-creation include reduced product development costs, improved time-to-market, and increased customer willingness to try a new product and an overall better product experience for customers. These co-created experiences paint firms as responsive, accepting, and part of a “we” conversation with customers.
6. Operational Efficiency: Measuring at all relevant touch points helps to not only improve individual customer management, but it also helps identify how the touch points are connected through customer journeys. Understanding the connections leads to better process design, which creates the benefit of faster resolution for customers, and shorter service calls and lower staffing for the organization. It also values customer time and promotes future interactions with similar success, all of which benefit the overall brand experience, another key component of the wider experience management system.
7. Time-to-Value: Maybe the most miscalculated benefit of any initiative is time. Improving operations, experiences, products or marketing at rates faster than competitors--and absorbing those impacts into the bottom line--is a hallmark of competitive advantage. Detecting issues directly in touchpoints or in the market quickly allows for quick redress, before sales and profits fall. Reacting quickly and thoughtfully to customers and markets is, itself, a positive customer experience.
8. Customer Lifetime Value: This is the net present value of all future customer revenues with account for attrition and your discount rate. It’s a complex measure, but the best firms understand it and make it a central part of their balanced scorecard and track results like share of wallet, brand equity, cost to service, and word-of-mouth vs. cost to acquire.
9. Customer Churn and Customer Resilience: Reducing customer churn is always desirable and rarely achievable. Churn results from both poor touchpoint experiences (operational failures) and poor overall experiences (strategic stumbles against the market). A well-run CX program prevents customers from shifting away from your brand or abandoning it altogether by building up capital with customers who are more willing to forgive a firm should operational, strategic, or PR mistakes occur.
10. Employee Retention: Firms that deliver great experiences to customers owe that delivery to great employees. Research demonstrates that listening to employee suggestions delivers significant process improvement. These improvements then empower employees to deliver greater customer experiences, increasing their job satisfaction, increasing job tenure, and decreasing employee hiring rates and costs.
Conclusion: Start With Results in Mind
High-functioning customer experience programs choose their three most critical KPIs at the outset. While metrics may change over time to meet shifting strategic needs, establishing programs without the expectation of a return is only creating an expenditure on behalf of customers. Focus first on the rewards to make it an investment instead.