Annette Franz, CCXP, is founder and CEO of CX Journey Inc., a customer experience consultancy; she's a coach, keynote speaker, and author.
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I spend a lot of time talking to leaders about the value of a customer-centric culture. Sadly, their reactions are often disheartening because it seems so obvious what the value is; instead, what I see and hear are leaders who:
• Don’t see or appreciate the connection between the employee experience and the customer experience (CX).
• Focus on growth and acquisition, not on retention, which creates that never-ending vicious cycle (leaky bucket) because both employees and customers are constantly leaving.
• Believe the purpose of business is to maximize shareholder value. While that may be an outcome, it is not the means or the purpose.
• Focus on metrics. If you’re only measuring for the sake of the metric—and not for improving—then you’re doing it wrong.
• Need to see the return on investment (ROI) of putting the customer at the center of all they do.
But here’s the indisputable truth: You are, as Peter Drucker says, in business to create and nurture customers. Without customers—and especially without employees to create your products and to serve your customers—you have no business. You are in business for the customer, because of the customer.
And yet, there are those executives who tout “competing priorities” as obstacles that keep them from going all in on culture transformation efforts. But wait! What competes with customers for your resources and efforts? What could compete with the foundation or the purpose of your business? What business initiative could you be considering that doesn’t ultimately impact the customer?
These are the types of things that leave executives wanting to see the ROI of putting the customer at the center of all you do. Specifically, they want to know the ROI of a great customer experience.
Defining The ROI Of Customer Experience
When executives ask what it means for the business if they commit resources to improving the customer experience, it’s important to note that it’s not all tangible but ultimately does lead to better business outcomes. Yes, it’s important to link the work to business outcomes, but know that the ROI isn’t just about revenue and growth but also about nonfinancial benefits—all of which eventually translate into financial benefits and outcomes for the business. This is one of the reasons that it often takes 18 months or more to prove out the return on these improvements.
Some of the obvious financial benefits of investing in improvements that ensure you meet customer expectations and solve problems for them include increased repeat business, reduced churn, reduced acquisition costs (because customers become an extension of your sales team) and increased upsell and cross-sell opportunities.
Nonfinancial benefits include increased word of mouth, positive brand perception, operational efficiencies (streamlined processes, reduced support costs), improved productivity and stronger employee morale, which down the road can translate into financial benefits.
A great customer experience can positively impact a company's bottom line by fostering customer loyalty, generating positive word of mouth, reducing costs and providing valuable insights for continuous improvement and innovation. The competitive advantage gained from doing the work that others in your industry are not doing is a huge benefit, as well, and can lead to the types of outcomes your business desires.
Mistakes When Measuring ROI Of Customer Experience
When trying to show the ROI of customer experience, leaders make mistakes that hinder the assessment. Some of those mistakes include:
Only Focusing On Short-Term Metrics
Concentrating only on immediate, short-term metrics (e.g., quarterly revenue) without considering the long-term impact of customer experience on customer lifetime value and loyalty leads to underestimating the true value of positive customer experiences over time.
Neglecting Customer Feedback
Ignoring or undervaluing customer feedback results in a lack of understanding of customer perceptions and expectations; this, in turn, leads to missed opportunities for improvement and a failure to address issues that impact satisfaction and loyalty, thus impacting ROI over time.
Overemphasizing Vanity Metrics
It happens too often that brands rely too heavily on superficial metrics (e.g., social media likes, website traffic) that may not directly correlate with actual business outcomes. These vanity metrics can provide a misleading picture of customer experience success and may not align with true ROI.
Not Considering The End-To-End Customer Journey
Solely focusing on individual or isolated touchpoints rather than considering the entire customer journey leads to an incomplete understanding of the journey and results in overlooking critical moments that significantly impact customer satisfaction and loyalty and, hence, ROI.
Failure To Attribute Outcomes To Customer Experience Initiatives
Some companies struggle to accurately attribute specific outcomes and demonstrate a direct link between their customer experience initiatives and measurable business results, making it challenging to justify investments.
Ignoring The Employee Experience
Too many companies disregard or discount the impact of the employee experience on the customer experience. Unhappy or disengaged employees negatively influence customer interactions and satisfaction, affecting overall customer experience and, consequently, ROI.
To mitigate these mistakes, leaders must adopt a holistic and long-term approach to measuring customer experience ROI, incorporating a combination of quantitative and qualitative metrics, customer feedback, employee engagement assessments and a comprehensive understanding of the entire customer journey.
Measuring return on investment, though it seems as simple as benefit divided by cost, is more detailed than that. Understanding the benefits, understanding the costs and understanding all that impacts both components is critical to getting a true assessment of ROI.
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