Dear Customer Experience Manager,
Have you recently tried to convince your boss that your company should invest more in Customer Experience? Assumingly, you did not come to that conversation empty-handed.
You probably had some data points from the NPS or satisfaction research, trying to prove that good customer experience equals more money for the company. Plus you may have told some good – or terrifying – customer stories. And yet, somehow, the answer was No.
We at Futurelab have seen many good CX initiatives shelved because CX was “not a priority right now”. Pick any reason: weak market, digital transformation, too busy, and now COVID. At times it seems that CX projects are overly scrutinised, while other initiatives can get a waiver with only a fraction of diligence. In our recent survey of CX professionals, we tried to get a grasp of their struggles. We found out that proving that customer efforts can deliver a substantial ROI is one of the biggest challenges for a CX manager.
It is understandable: the investment takes place on a short- or mid-term basis, in one or two departments; but the effects of good experience are long-term, and dissipated throughout the company. So, in order to make an ROI calculation, you would have to ask for lots of various data in many departments, and then construct a robust econometric model. Right?
Wrong. If your boss is not supporting you yet, these attempts are exactly what will fail you.
Starting too big and too broad is the bane of any ROI calculation. The data may not exist or be expensive to obtain. The department heads you are asking for data may not be willing to help, because, again, it is not a priority. And finally, a robust model may take years to develop and still show nothing, because your reality is very complex (or your data is flawed).
So what’s the point of the exercise, you will ask. The point is that, if your CEO is not responsive to the customer experience message, they will find the reason to reject.
Therefore your task – as a person who is responsible for listening to your customers – is to listen to your internal customer first. Ask your CEO or the person who is responsible for your budget these two questions:
- What is our strategy? What are we trying to achieve as a company / brand?
- What are our KPIs? How are we going to measure that we succeed?
Your business case, or the way you prove the value of CX to the organisation, must ultimately build on the answers to these questions. Even if you do not have this information first hand, you can still use any of the existing strategy tools like the Ansoff Matrix or Strategic Opportunity Matrix to plot your approximate position and realise what the whole company is doing.
Now let’s look at two examples of answering these questions and creating a business case for CX:
Let’s assume that your company is growing fast; and that the CEO’s strategy is to increase the revenue. The task of the marketing department is to concentrate their effort on recruiting as many new customers as possible. That means that the CEO will not likely respond to your message that customer experience creates loyalty; because at this stage of company development, customer loyalty has low importance.
Your job here would be to demonstrate that great customer experience can amplify marketing efforts by delivering new customers via word-of-mouth. The CX budget you have is better invested in a small survey which will bring you two pieces of data:
- The importance of peer-to-peer recommendation for your new customers. Would your customers follow a recommendation, and if yes, to which extent can it impact them?
- The percentage of your customer base, which actually recommends your company / brand. They may say that they would recommend, but do they really do it? And if yes, what ways and channels do they use?
After you acquire proof that great CX means more NEW customers – and at a lower cost – you can concentrate your efforts on those experiences that do create customer advocacy. And, in the meantime, you have also proven to your CEO that you understand their objectives.
Case: Our customer, a global bank providing personal financial services, wanted to cut down the number of their retail locations because retail-visiting customers were expensive to serve. However, we found out that customers who visited retail locations had strong social connections, and therefore were three times more likely to bring in a new client than those who managed their assets entirely online. The bank has then adjusted the retail policy to meet the needs of those customers who wanted the agents’ attention.
Now imagine that your company exists in a saturated market, and is struggling to gain market share (or is even losing it). The struggle for every customer becomes real, new customers are scarce, and so are budgets. Your CEO may concentrate on maximising profit. And at this moment the message of customer loyalty will be heard a lot better.
Your business case should, therefore, prove that good CX helps your company to retain existing customers and make them cheaper to serve and even buy more. Here are two different pieces of data you need:
- Overall Customer Lifetime Value for happy and unhappy customers (a simple NPS calculation should do)
- The percentage of customers who churn because of poor CX
To prove your point here, pair up with your customer service and / or contact centre colleagues to get the churn numbers, as well as their internal metrics like cost-to-serve or total handling time to demonstrate that poor CX costs the company money. Your CX strategy, in this case, will also be concentrated on customer retention and long-term relationship building.
Case: Our client, a global mobile operator, needed to convince their executive suite of the value of the CX initiatives. Their approach has proven that happy customers cost €9 less per year to serve and had a churn reduction leading to 8 months longer stay. Plus, happier customers brought in 2.3 new customers on average. These three simple numbers convinced the CEO to supported the CX initiatives all the way.
These two questions – What are the company / brand goals, and What are the related KPIs – can help you not only with the C-level business case. You may need to create multiple simple business cases that address various internal stakeholders.
An owner of a retail franchise location won’t be bothered with C-level proof points but instead needs proof that good customer experience can help them get more footfall and sell more in their shop.
A B2B manager won’t be responsive to the churn story because their customers have long-term contracts but will react to the Share of Wallet incentive.
A few more tips for the road:
- Do not start with a complex ROI calculation. A few simple, but well-made points will land better than a model that’s difficult to get and even more difficult to explain to your busy colleagues
- Do not go asking random clueless colleagues for their time to get you the data. Find the ones who already get it and pair up with them.
- Do not underestimate the power of a good testimonial – but don’t rely on them entirely. Anecdotal proof can help you hammer the message down but may be entirely rejected if it’s all you have.
And remember: ROI models don’t have to be perfect. They have to be useful.
Authors: Marina Natanova and Stefan Kolle
Marina Natanova is Head of Research at Futurelab. She ensures methodologies and processes are developed to drive long term success.
Futurelab is the European Customer Experience consultancy. Since 2004, we help our clients understand the needs of their customers, develop better customer experience, and draw profit from customers’ loyalty and word of mouth. Our clients are companies like ING, Vodafone, Toyota, Lexus, and Heineken. Why work with us? Because we help you get it done.