Most organizations recognize that customer experience has become the main competitive differentiator. To that end, more companies are introducing customer experience management (CEM) programs in an attempt to gain a competitive advantage. But many aren’t getting the results they hoped for. This is where the necessity of measuring a CEM program’s financial returns comes in.
Why Measuring the Financial Returns of Your CEM Program Is a Necessity
Some might dislike the idea of quantifying the results of a customer experience management program and get frustrated when others demand to see the financial returns. After all, isn’t making customers happy the primary goal? It could be argued that budget justification is eating into valuable time that could be spent on satisfying customers. Though a noble sentiment, the main reason behind achieving a delightful customer experience, in the end, is to: gain a competitive advantage, drive more sales, reduce costs, and improve the bottom line. In other words, if your CEM program isn’t generating long-term financial returns then it’s time to find one that is.
The fact is that if you’re actively monitoring the financial effectiveness of your CEM program, you’re going to analyze other key metrics as well. And reviewing those metrics will tell you whether you’re on the right path, and offer the opportunity to fix it if you’re not.
How to Measure a CEM Program’s Financial Returns?
The actual process of measuring a CEM program’s financial return isn’t all that difficult. Typically, it might require several steps, but not all organizations need to complete all of them.
But in some instances, even with a system in place that is actively monitoring all CEM metrics, it can take as long as five years to achieve a positive result. Meaning, it can take up to five years for your program’s returns to exceed the cost of the investment.
That sounds pretty disheartening at first, but remember that the goal of your customer experience management program is to build customer loyalty by providing delightful experiences. There are no quick fixes here, so your goal must be long-term. That’s because the rewards of customer loyalty can only be seen over a span of a few years, rather than a few short months.
With patience comes prosperity, resulting in a sustainable business model that won’t crumble under the first hint of a shift in the market.
Breaking down the ROI Journey
Calculating the returns associated with your customer experience (CX) program can be tedious; there are multiple data sets – transactional, behavioral, experiential, and more – that decide the outcome of customer experience initiatives. How do you accurately measure ROI then? Most importantly, is there a simplified approach so that businesses can get started immediately?
A proven approach is to breakdown the ROI journey into a series of smaller steps. Doing so makes it easier to map different data sets to CX returns, and factor in every department’s contribution – sales, marketing, product and so on – towards making CX profitable.
Here’s a breakdown of the ROI journey:
And finally, the Financial ROI of CEM can be measured with this simple formula:
Return on CX Investment = (Gain from CX Investment – Cost of CX Investment)/(Cost of CX Investment)
And how do you find out the ‘Gain from CX investment’ and ‘Cost of CX Investment’? Our eBook on the ROI of CEM has all the answers you’ll need.