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How to Make the Case for CX Investment
Good customer experience drives revenue, but your argument will need to show nuance
For the rest of the March 2017 issue of CRM magazine please click here

If you are like other customer experience (CX) pros, at some point in your career you’ll encounter the “money question.” Your CEO will ask, ”What’s an improvement in our customers’ experience worth in dollars and cents?” You might not have a good enough answer; 50 percent of the CX leaders Forrester Research surveyed have not yet modeled how CX quality influences customer behavior.

We know great customer experience drives revenue, but making that case requires a more sophisticated understanding. Forrester recently used its Customer Experience Index (CX Index) and modeled the revenue impact of improving CX, asking these three questions: (1) What is a customer’s loyalty (retention, enrichment, and advocacy) worth in revenue dollars; (2) is there a relationship between CX quality and loyalty-based revenue; and (3) how does the relationship between CX and revenue potential differ by industry? We found nuanced insights into the relationship between CX and revenue. Here were three key discoveries:

• Advocacy loyalty is a small share of the overall revenue impact. Not every recommendation will result in net new customers. For one thing, if the recipient of a recommendation is already a customer, the recommendation is moot. Therefore, the higher a company’s market share, the lower the chance that a recommendation will reach someone who isn’t a customer already and result in a net new relationship. Additionally, the recipient must need the recommended services.

For example, Amazon offers easy access to a broad range of products—more than 250 million in all. Etsy offers about 40 million products, many of them “vintage goods and craft supplies.” That makes the likelihood that a customer can find something she wants on Amazon higher than on Etsy.

• CX and revenue potential don’t always move in lockstep. In some industries, such as banks, the revenue upside gets progressively bigger with higher CX scores. In others, like wireless service providers, the opposite is true.

• Results and implications differ by industry. Take wireless service providers, for example: Because revenue potential tapers off at high levels of CX, wireless service providers should focus on making the worst experiences better instead of refining already good experiences. This would be meaningful for most large wireless service providers; about a third of each company’s customers say they have very poor experiences.

So what does this mean for CX leaders who are trying to make the case for customer experience investment? Here are five ways to sharpen your argument:

Size the opportunity for your firm. Understanding the relationship between CX and revenue for your industry is a start, but we found that results for individual brands often differ from the industry at large. It also matters how many customers your company has. Multiply that number by the per-customer multiplier from your analysis to arrive at the total revenue associated with improving CX Index scores.

Give executives a timeline for when to expect revenue gains. First, identify the drivers of your firm’s CX performance. Then work with stakeholders to pinpoint which projects that are already under way or will kick off soon address those drivers. For each project, estimate how much that project will improve CX performance, and when. This will help you create a timeline for when you expect to realize the revenue potential.

Include nonrevenue benefits of improving CX in your case. You’ll make a more compelling case if you include corporate success metrics—other than revenue—that tie into CX improvements. That’s especially important in industries in which improving CX has a low impact on revenue. For example, in the credit card industry, better CX can help save costs because customers who, say, successfully use self-service don’t call the company looking for help. Good CX can reduce pressure from the public and regulators because happier customers are less likely to complain to the Consumer Financial Protection Bureau.

Monitor competitive CX moves to create urgency. Forrester has seen the CX Index scores of various firms rise significantly. Even if your firm performs O.K. compared to the rest of the industry, you risk going out of business when your competitors significantly improve their CX.

Stay alert for signs of impending disruption. Think about what happened to Blockbuster when Netflix came to town. Disruption is more common than you’d like to think. Consider how to better serve your disappointed customers, as they’ll be the first to leave.


Maxie Schmidt-Subramanian is a senior analyst at Forrester Research who serves CX professionals. Follow her on Twitter @maxieschmidt.

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