Being able to demonstrate the ROI of customer experience (CX) platforms is one of the most difficult and pressing challenges facing professionals.
This is for two reasons, says Forrester: businesses are coping with increasing customer expectations while simultaneously facing limited resourcing around skills and operational capability.
As one senior CX analyst from Forrester said, “In 2020, the ROI of CX will take center stage in businesses.”
The Total Economic Impact of CX
To help CX professionals demonstrate the ROI of CX, Qualtrics and Forrester Consulting undertook the Total Economic Impact of Qualtrics CustomerXM report.
The findings are a must-read for any CX professional looking to demonstrate the revenue impact of customer experience and secure investment in their program.
Headline ROI findings from the report found that a composite organization, based on Qualtrics customers using the customer experience solution, achieved:
- 633% ROI over three years
- Benefits equaling $38.4M, with a net present value of $33.2M
- $24.5M in improved customer care support and service
- $12.3M in increased customer retention and reduced cost of acquisition
- $1.7M in avoided costs of previous surveys and analytics tools
- A payback period of less than 3 months
These huge numbers are more than enough to make your leaders sit-up and take notice of the benefits of CX.
Building a business case for CX
The first step to unlocking the benefits of CX is building a business case highlighting the benefits it will bring to your organization. Importantly, this business case needs to be in a language your leaders understand – essentially, you need to clearly define how your CX program will help the business succeed.
There are four stages to this journey, which is essentially building your own CX ROI calculator:
1. Define your CX objectives
Decided on the CX metrics your programs are going to track, such as NPS or CSAT. It’s crucial you track behavioral drivers as this shows whether changes are delivering financial improvements. Other metrics to track include financial loyalty objectives – like average spend or reducing churn – and set aspirations – such as becoming market leader by improving NPS by 5 points in 3 years.
This trilogy of metrics allows you to track the performance and impact of your CX program to demonstrate to the board how you are growing the bottom line through CX.
2. Establish a CX baseline
To track improvements you need to know your starting point. This is an opportunity to discover your biggest opportunities, strengths and weaknesses so that you can act accordingly. For instance, establishing a CX baseline will tell you how you perform within different groups of your customer base and how this impacts behaviors. For example, advocates of your brand might spend $1,000 more on average than detractors.
3. Calculate the CX value
Step 3 is where your ROI of CX calculator starts to come in to play. Using your CX aspirations from Step 1 and customer segments from Step 2 you can determine the business value of improved CX in these areas. For example, it can show you the dollar value of a 5 point lift in your NPS among detractors. For your board, it is the revenue gain of CX.
Efficiently segmenting your customers in Step 2 will help you pinpoint the biggest areas of opportunity and growth. This creates a compelling vision to present to your board and secure their interest and buy-in.
4. Subtract CX operating costs
The final step in securing investment in your CX program is determining its operating costs – from the resources required through to the technology required to fuel a world class CX management system. These costs will need to be subtracted from the expected revenue.
The number you are left with is the expected ROI of your CX program.
Using these four steps to build the business case for your CX program clearly outlines the expected ROI, what success looks like, and the investment and resources required.
Tips and tricks to get buy-in for your CX program
With the investment case demonstrating the business value of CX in place, there are a number of additional tactics you can deploy to secure executive buy-in:
- Competitive benchmarks & third party research – Drive action by highlighting how your company compares to industry averages
- Competitor media coverage – Shine a light on the work competitors are doing to get ahead of you in the market
- Partner with your CFO – Having this level of senior support gives your proposal credibility and financial expertise
- Monetize the opportunity cost – Highlight the consequences of not taking action to this industry trend
Expected challenges when getting buy-in for your CX program
Bullet-proof your CX investment case by proactively preparing for some of the common challenges we see arise.
- Score chasing – Tying CX metrics to incentives can sometimes lead to score-chasing behaviors. To mitigate this, align incentives with outcomes rather than results.
- Unrealistic goals – Setting targets too high can demotivate the organization. Balance creating momentum with your aspirations by having a deep insight into what is achievable and realistic.
- Implementing change – Changing the way things work can leave others feeling uneasy. Present a clear plan about how you will implement change across the business, and the positive impact this investment will have.
- Communications – An engagement plan is critical to getting buy-in. People will want to know how teams will be kept up to date and on-boarded to the new systems.
The Metrics to Measure in Your CX Program
Measuring behavioral metrics is fundamental to success in CX. They tell you what improvements to the CX translate to revenue increases so that you can prioritize accordingly.
However, the metric you choose to measure is not as important as people think. We rarely see a company succeed or fail based on the specific metric chosen. The most important thing here is the system of improvement for your chosen metric drives.
When choosing your CX metric base your decision on these five principles:
- Pick a simple metric – It’s important your employees can easily understand the metric, and that it aligns with your business goals.
- Focus on building a strong CX system of action – Ensure the metric allows you to continuously drive actionable and tangible improvements in your CX program.
- Satisfy each stage of your CX – You must be able to apply the metric to each stage of your customer journey, including immediate response, corrective action, continuous improvement, and strategic change.
- Don’t compensate in other areas – When companies establish CX metrics they often establish compensation based on them. This can become a problem if the compensation is too large, focus on individual results, or the goals become too precise.
- Have a clear sampling strategy – If you have multiple segments of customers and they each have a different profile (as many do), then your overall scores can change wildly based on the mix of those customers that are included in your calculations.
Prioritize where to invest in CX
After building CX into your planning and investment process, you will need to help teams prioritize their investments for maximum impact.
This is achieved by ranking experiences based on the value to the business and the value the engagement delivers to the customer. Plotting these rankings on a graph is a great way to visualize this stage.
For example, having 24/7 troubleshooting support for a company is of high value to the customer and business.
When allocating the value of your CX for the customer consider the impact it will have on them, how easy it is to scale, and whether it will have long-term or short-term impact.
And finally, for the business value of CX keep feasibility and viability front of mind. Decide if these behaviors are ultimately sustainable and if they will continue to improve processes.