Why investing in Customer Experience (CX) will pay off
We all know customer experience is important, but how do you convince your colleagues and bosses to invest in it? One way to do this is by tying loyalty (and all its associated benefits) to customer experience measures.
Podcast Ep 3: An offer you can't refuse
Explore the ROI of CX for your business together with Bruce Temkin aka the “Godfather of Customer Experience.” Annually Bruce and his team examine and publish feedback from 10,000 U.S. consumers describing their experiences with and loyalty to different companies across 20 industries. We discuss the results of the 2020 edition of the annual ROI if CX report in a global context.
In the third episode of our podcast series, you can listen to our conversation with Bruce Temkin on the ROI of CX. Listen now to our podcast series here.
The connection between customer experience and loyalty
The report proves the strong link between CX and loyalty. The results show improved CX correlates to:
- Additional purchases. The research shows that there is a strong, positive relationship between likelihood to purchase more and the Customer Ratings Score with a correlation coefficient of .91
- More recommendations. There is a strong, positive relationship between CX and Net Promoter Score (NPS) with a correlation coefficient of .88
The customer experience is too valuable to leave to chance
If you accept that a human being can only interface with the outside world through experiencing things, then your company is essentially in the CX business. Each business is already an experience factory. Whether or not your company is focusing on improving the CX you are connecting with your customers through experiences each and every day.
Obviously, CX should not be left to chance and that’s why we see industry leaders design and manage it actively with a systematic approach to interacting with customers that consistently builds loyalty.
Optimising each and every interaction with your customers will not be an efficient way to invest your time and money. You need to find out where the pain points are for your customers. Do you understand what the connection is between improving those experiences and the resulting business value (for example loyalty).
You will never close the experience gap (and that’s fine)
The customer experience gap is essentially the gap between the experience a company intended to deliver when they sketched it out on a whiteboard and the experience they actually deliver to customers.
The gap will never be closed because the customer’s expectations change all the time.
Today, your customers compare you to every customer experience they have with every other brand. New developments will have you chase those expectations all the time. And that is totally fine, because it will let your company more focused on your customer and that drives loyalty. Besides there are proven processes (e.g., Continuous Improvement) to manage continually working on your CX.
Forget about wowing each and every customer, try and make sure that you track what your customers want and start delivering that. Just pick an area or customer journey that you want to improve and start working on it.
While most firms have invested in customer analytics, even the largest data warehouse and most sophisticated software can’t model the nuances of human likes and needs. That’s why firms should augment data crunching with some old-fashioned techniques like talking to customers and observing their experience.
There are many metrics that measure customer satisfaction, effort and loyalty. Find a small number of measures that tie to your business goals and are a reasonable representation of what your customers think and feel. That will keep your key metrics from drowning in a sea of numbers. Soon you will collect enough data be able to see relative movements in time and you can start asking “what have we learned?” and “how can we use those learnings to improve the experience for our customers?”
In the end all customers are emotional beings
It’s typical human behaviour to seek more of an experience you are providing them, if you deliver a string of positive interactions. That makes customers feel good, make them want more of those good ‘vibes’ and consequently drives loyalty and thus business results.
The report on the ROI is based on a survey. In the survey the researchers assessed three elements of the customer experience — success, effort, and emotion.
The report affirms that emotion is the component of the customer experience that has the biggest impact on consumer loyalty behaviour.
Consumers who gave a high rating in emotion to a company are more likely to purchase more from, recommend, forgive, try, and trust that company more than consumers who gave a high rating in success or effort.
Start building your own CX ROI model
Your business has its specific customers and metrics. We recommend companies to build their own models for calculating the benefits of CX. SQLI can consult you on this, bringing the experience required to build CX success. If you want to start now you can find a link to the survey and report by Bruce we mentioned in this talk on our site. The report includes things to consider before you start and clear steps for calculating the value of customer experience.
Some advice from the report is:
- Enlist your CFO. Even if you have the brightest business analysts in the world on your team, if you do not involve the CFO’s team, the finance leader will always question your financial models and assumptions.
- Use existing metrics. Try to make your case based on the business metrics that your company already uses – it will make it easier for people to understand and will help you earn their buy-in.
- Be conservative. Resist the temptation to use the high end of estimates for potential benefits. While the results may seem more compelling, they will also be harder to defend.
- Create a simple story. People tend to remember very simple storylines, so make sure that you organize your results in a way that is easy for people to understand.
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