CX Leaders Struggle to Show the ROI
While top executives find it highly important (9 on a 10-point scale) for customer experience (CX) leaders to demonstrate the financial impact of their investments, most CX leaders rate their ability to communicate the impact of their work as just average (5 on a 10-point scale), according to research from West Monroe.
The reason for this struggle? According to the West Monroe’s “Quantifying the ROI of the Customer Experience” report, a lack of time and resources are the main culprits. The majority (52 percent) of respondents reported having less than a year to demonstrate the financial benefit of investments. One-quarter reported having only three to six months to prove ROI, and a little more than one-fifth (21 percent) had six to 12 months.
Additional barriers to proving the ROI of CX include the following:
- lack of access to data and the quality of data (49 percent);
- lack of skilled analysts to extract insights from data (27 percent); and
- lack of access to executives (7 percent).
Executives have to be open to making the necessary changes, says Paul Hagan, senior principal in West Monroe’s customer experience practice. “It does require inspired leadership. Loyalty is slow to earn, fast to burn. Every company will make mistakes.”
With that in mind, companies that focus too much on quarterly earnings might not be able to focus on the changes that will bring long-term improved CX, according to Hagan.
He pointed to Amazon, which had poor financial results for a long time, as an example of what a company can do if it focuses on the long term rather than the next earnings report.
Hagan recommends the following five steps to convince company stakeholders to improve the customer experience:
- Get to know the stakeholders and their goals. Listen to stakeholders to learn what they see as important. Additionally, learn who is likely to support financial investments in CX, who is likely against further investment, and who is in between. In all cases, CX leaders must be able to explain the financial benefits of any CX changes and at all stages of any such effort. Early efforts will be focused more on ROI; later efforts can use analytics to build a business case, according to Hagan.
- Work closely with the chief financial officer. The ability to demonstrate the financial benefits of any CX project will be essential in getting corporate buy-in. The CFO can aid tremendously in this effort by suggesting preferred language and framing for any business case presentations, Hagan says. “Becoming familiar with the CFO’s perspective is crucial,” he adds. “With this context, the CX leader should seek to connect customer engagement activities with ongoing efforts that can help the company achieve its strategic goals.”
- Partner with data teams to improve data quality/access. CX can leverage ongoing data quality initiatives. CX professionals and data management can work together to prioritize data. Data analysts should do more than just collect data; they need to use the information to develop insights that can have meaningful impact for the company, according to Hagan. “Improving data quality requires a sustained commitment” that could take as long as 18 months or more, he cautions. “It won’t be perfect right away.”
- Make strategic investments that matter. Hagan recommends creating a balanced scorecard, then determining which investments will have the biggest impact on improving CX. From there, companies will need to manage activities that can improve scorecard performance most quickly, make sure these activities get the necessary resources, and empower team members, he says.
- Tell stories that appeal to emotions. While it’s important to have the financial numbers to make the case for CX investment, spreadsheets alone won’t do the trick, Hagan says. “Let customers tell the story,” he urges. “Specific insights from actual customers can take executives beyond metrics.”
By following these five strategies, CX leaders can create the necessary foundation to demonstrate how they aid their companies’ financial performance, enabling them to be integral contributors to future strategic planning, according to Hagan.