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Exploring the Elusive ROI of Customer Experience Management 

Lynn Hunsaker | Jan 30, 2015 164 views 2 Comments

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Customer Experience ROI ChallengesMany of us subscribe to customer experience management (CXM) as promising substantial business results by (a) encouraging customers to say great things about your company (growing the funnel of prospective buyers) and by (b) encouraging customers to buy more (expanding share of budget, buying from more product lines, and buying premium offerings).

The Focus on Revenue Growth
Notice that the promises as stated here are about increasing revenue. This is a stumbling block for CXM return on investment (ROI), making it tough to show higher revenue relative to investment for the following reasons:

  1. Investment versus Return: It takes a certain amount of corporate machinery to continually entice positive word-of-mouth, cross-selling, up-selling, and so forth.
    • Investments that entice CXM ROI include CRM, loyalty programs, references, engagement programs, content/digital marketing, alliances, advertising, campaigns, deals, and closing the loop on negative voice-of-the-customer one-by-one.
    • How are we planning scalability and sustainability of returns relative to the required investment?
  2. Reactive versus Proactive: In many firms our CXM strategy is primarily around service, making up for snafus caused by other parts of the company, with ongoing investments needed in shipment expediting, issue escalation, returns, and customer service focused on remedial actions.
  3. Analysis Paralysis: Voice of the customer, journey mapping, and customer touch-point analysis may be making a dent in how we understand our customers’ realities, but unless they’re launched with intent to transform the way we deliver customer experiences, it’s still just an investment, not a return.
  4. Who’s Benefiting? These promises as stated in the opening paragraph aren’t so much about customers’ well-being as they are about the company’s well-being. In the age of transparency, some investments we make to entice positive word-of-mouth and purchases may actually erode customers’ trust of us, which doesn’t bode well for tomorrow’s ROI.
  5. Immediacy: An over-focus on near-term revenue may be blinding us from seeing the whole equation and keeping us from managing CXM ROI more wisely.

The Focus on Profit Growth
Let’s consider redefining the promise we’re seeking from CXM in a way that maximizes profit growth, such as:

  • Enabling customers to fall in love with our company
    • in place of “encouraging customers to say great things”
  • Making it irresistible for customers to buy from our company
    • in place of “encouraging customers to buy more”

The nuances are powerful and entail quite a different CXM strategy. For companies that have succeeded in getting customers to fall in love with them and making themselves irresistible to buy from, CXM ROI is obvious and compelling. Just think of a company you love: are they profitable? Most likely, yes.

Being Lovable: Being easy to do business with causes positive word-of-mouth to occur naturally and in customer-initiated ways that your marketing department may not otherwise be able to imagine or influence, minimizing the necessary investment in enticements.

Being Irresistible: Wisely aligning your company with what customers care about causes customers to fall in love with doing business with you. Re-purchases, share of budget and share of market occur naturally and sustainably.

People & Process Investments for Profit Growth
Alignment of your whole company with customer needs goes beyond enticements, analyses and service. It relies heavily on people and processes: centering both employees and our business proactively on customers’ well-being.

CXM investments in people and processes should include company-wide customer-centric hiring, development, recognition, compensation, employee engagement, accountability, and use of six sigma/lean and related tools (root cause analysis, organizational learning, change management, systems thinking, streamlining, etc.).

It’s about getting it right the first time and every time — being easy to do business with, and offering hassle-free products, services, communications and interactions.

Sustainable CXM ROI requires a well-oiled machine in the people and process categories of CXM investment. When this machine is guided by CXM analyses, it can stay on the right track and be agile enough to tap into greater opportunities. And when this is the case, the need for enticement and service investment is reduced by preventing issues, which naturally differentiates our customer experiences and grows customer enthusiasm. Another bonus: employee engagement, productivity and creativity tend to increase when there are fewer issues to deal with and when customers are enthusiastic about the company.

Quick wins for near-term ROI increases are typical when setting out to manage customer experience formally. But it’s a losing battle to put all your eggs into the basket of analyses, enticements and service. Shore-up long-term wins by rebalancing your CXM strategy with people and process investments that enable ongoing irresistible love between your company and both employees and customers alike.

First published on InsideCXM.com


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2 Responses to Exploring the Elusive ROI of Customer Experience Management

  1. Christine Crandell January 31, 2015 at 7:42 am (38 comments) #

    Sage advice as always from you 🙂 i support the call for rebalancing the focus of CX (or insert your favorite phrase) to the whole relationship not just on acquisition. The challenge is our economic model that focused on quarterly returns and meeting/exceeding guidance to the street. Very large company can undertake a progressive rebalancing if they plan for it. For small, medium sized and newly IPOed that is hard as there often isn’t enough cash, bandwidth and appetite for that kind of change.

    I keep wondering how do we change how we talk about CX/CEM/whatever to inspire smaller companies to embark on the transformation?

  2. Lynn Hunsaker February 1, 2015 at 1:07 pm (108 comments) #

    Thanks for you comment, Christine. Interestingly, it’s the companies that started out when they were still small with a focus on customers’ ease-of-doing-business who we now see all the time on “best customer experience” lists. Since this is a way of life, in addition to a fundamental business philosophy, a company is always better off to adopt it earlier rather than later. (Zappos, Amazon, USAA, Nordstrom, etc.)

    Precious bandwidth and cash get eaten up unfortunately by weak/broken processes that irritate customers and employees, causing turnover for both and a never-ending hamster-wheel of extra marketing and service costs to entice retention. An ease-of-doing-business mentality frees up resources to create greater value. It’s a great strategy for standing out from the crowd of industry peers stuck in business-as-usual.

    The way to talk about it is to straighten out the apparent chicken-and-egg confusion around the company’s purpose. We’ve come to take it for granted that all the investments listed in #1-3 in the article are just what it takes to do business. However, I’d like to suggest that:

    **Being on-target with customers’ needs (better than competitors do) is the way we earn salaries, budgets, and return to investors.** Anything we do in business that’s remedial or primarily self-serving rather than customer-needs-serving is wasting resources and growth opportunities.

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