The ROI of a successful customer experience strategy
In this day and age, where marketers have declared customer experience (CX) king and customers are in control, it’s fair to say that we’re living in an experience economy. But living in an experience economy and winning in an experience economy are two different things.
As with any investments you make, answering questions about the return on investment (ROI) of your CX initiatives is part of every marketers job. You can’t avoid it and that’s a good thing. You always need to measure the key performance indicators (KPIs) that connect the dots back to your brand and the customers you’re trying to reach.
But why are we struggling?
It’s well known that brands with a superior CX bring in more revenue than competitors that are lagging behind. The challenge lies in defining success and making it measurable. It’s difficult to put a value on the relationships you build with your customers. Even more so, because some of your initiatives will be focused on the long-term and don’t show immediate results.
But you have to make investments in your customers, your relationships and the technology that helps you scale those relationships.
On top of that, when you’re in the midst of your transformation process and faced with simplifying your IT architecture, developing a solid strategy and attracting digital talent, it’s no surprise that building a solid measurement framework gets lost in the mix. More often than not, we get caught up in the busy work.
From CX to business value
A good CX strategy should always be perfectly aligned with your business strategy. Both need the same focus. The degree of CX success is then determined by the amount of contribution towards these business objectives while taking the costs into account.
Degree of CX success (ROI) = [ Benefit - Cost ] / [ Cost ]
A well-executed CX strategy captivates customers through for example personalized content. People will be more likely to leave their contact details, creating leads for your sales team to go after. Overall growth is one result, next to a reduction in the costs of customer acquisition. Lowering your operational cost could be another motivator, which for instance can be done by offering a more user-friendly app, so the calls to your customer service center are reduced. CX saves money and makes money. Do we need to say more?
On the flip side, improving CX will lead to increased spending on technology, tools, professional services, training and operations. First, determine what costs are one-off and which are recurring. When facing costs that are difficult to pinpoint, use estimated ranges. This makes your CX investment as tangible as can be.
When building your ROI model it’s key to remember…
- Always start with making a business case before any CX investment. Make this case as tangible as can be, even if it means working with ranges and estimates. Also include a timeline, so you can forecast when costs take place.
- It’s important to understand the balance between achieving business objectives and exceeding customer expectations. What is the return you want as a business and what’s the return for your customers? How can you create value for both sides?
- Try to work with an experienced partner that supports you in shaping your business case and CX strategy, and is exceptional at producing content and platforms at a quality level that will elevate your brand.
- Establishing a CX strategy also includes collecting valuable data that shows the success of your strategy and areas for improvement.
Measuring the return of CX investments can be challenging and overwhelming to say the least. But as part of our job as marketers it’s unavoidable, ROI is important. Don’t let the perfect be the enemy of the good though. Your ROI model will never be perfect, the goal is to create a model that is based on reasonable assumptions. In the end, you will track success metrics, so you can adjust your assumptions over time.