A satisfactory customer experience (CX) means higher customer loyalty, higher spending, greater word of mouth, lower costs and less churn. In spite of these advantages, however, budget approvers often have apprehensions about CX investments and many CX professionals struggle to quantify the impact of customer experience on business KPIs like revenue, churn and lifetime value. Having the ability to quantify CX ROI is not only needed to get approvals for further investment, but also to optimize CX efforts. But is it possible to quantify CX ROI at all? The answer is yes, but only if we can link customer behaviors with measurable operational variables and correctly identify areas of improvement.
1. Define business metrics
Start by defining important CX business metrics which impact your organization’s revenue. When selecting your metrics, make sure that they are measurable and quantitative. If you are having difficulties identifying metrics, here are a few staples you can start off with:
2. Identify customer groups and link business metrics with customer groups
One of the easiest and measurable way to group customers is to use customer survey responses. You can use NPS data to define key customer segments;
After grouping your customers based on some quantitative scores, link each group with metrics you had selected in Step 1. Ask questions such as “What is the average annual spend of detractors? How much does it cost to serve to promoters? Do detractors churn more than passives?”
To make this work easier, you can prepare a table to help you visualize the data like the following:
3. Determine main issues & improvement areas for each customer group, and make an action plan to fix the issues and improve customer satisfaction
To enhance customer experience, it’s crucial to address both pain points and opportunities for improving the experience of satisfied customers. To identify key issues, use Voice of Customer surveys to pinpoint problems that have most impact on customer segments which appear to have higher frequency and intensity. . For instance, are there frequent complaints about call transfers or hidden costs? How many detractors report long wait times? Is there a noticeable gap in call resolution satisfaction rates between detractors and promoters?
You can start by reviewing aggregated Net Promoter Score (NPS) results to identify major issues, even without detailed analysis of specific channels and data capture timestamps. However, if you have the right tools to analyze customer journeys, you can delve even deeper. Evaluate performance across different channels and touchpoints, such as preferred channels for product returns or if customers prefer chat, call centers, mobile apps, or online portals. Does your organization perform consistently across all channels? For example, if customers rate the call center lower but the self-service platform higher, this analysis can help pinpoint areas for improvement and optimize your customer experience efforts.
Following your analyses, you need to ask yourself the following question:
“What are the actions I should take for each group at which moment and on which channels to fix their issues and increase their satisfaction?”
4. Make investments and implement your changes
Answering the question above will give you an action plan and reveal investment areas. Try to identify and start with quick wins. This will help you prove your approach and get approvals for future projects. While prioritizing your projects, make sure to keep the company’s goal and vision in mind.
5. Wait for customers to notice your improvements and measure the satisfaction again
After implementing your changes, give your customers enough time to notice your improvements and repeat the same surveys to track improvements. If for example the number of promoters is higher, cost-to-serve is less, or the retention rate is increased following the changes, it means you are on the right path. By calculating your cost savings and considering your investment, you can also analyse your ROI.
An important note to remember at this stage is that CX investments often have longer payback periods and require patience and commitment. Your customers and organization will doubtlessly see benefits from a well-structured improvement plan. If you need support identifying your organizations improvement areas and assistance in building your roadmap for a better customer experience, you can contact us now.
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