7 Global CX Experts Reveal How to Prove the Business Value of Customer Experience

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For the past three years (starting with this article) I’ve been banging the drum about a worrisome problem. Namely, less than one in four CX initiatives can demonstrate business impact in the form of tangible benefits.

My argument in a nutshell: During a downturn, CX programs that can’t justify their existence will get cut. Well, my CX friends, thanks to COVID-19 that day has arrived.

But, it’s not too late to get your act together and explain why your company needs a CX initiative. (Or, you can work on your résumé instead.)

To help, I’ve asked highly respected global CX industry experts to answer three key questions:

  • What have you found to be a successful approach to CX justification?
  • Do CX benefits tend to come from improving customer satisfaction and increasing revenue, or from improving operations and decreasing cost?
  • What skills should CX professionals develop to be more effective at building and selling a CX business case?

You will find their answers below (lightly edited for clarity), plus links to other resources to dig deeper. Please take advantage of their decades of combined expertise to keep your CX program funded during and after the current crisis.


Lior Arussy

Founder of Strativity, CX transformation leader, and author of eight books including Next Is Now (2018)

LiorArussy.com


What have you found to be a successful approach to CX justification?

Nothing beats financial results. I know that some CX experts will jump to object. But it is a moment of truth for the industry. CEOs care about revenues and profits. Show them the money and they will show you the investment. It is as simple as that.

The best ROI driven by CX strategies should be demonstrated in the 5 Ps of the economics of customer experience:

  • Preference – strong preference for the brand
  • Premium price – the ability to command a higher price
  • Portion of Budget – the wallet share your brand command
  • Promotion to others – not just intentions to promote, actual advocacy
  • Permanence of relationship – the longevity, while profitable, of the relationship with the customers

While cost reductions associated with CX digital efforts are nice financial drivers, they tend to be appreciated for a short period.

It’s time for CX to deliver financial results. I would start by improving customer retention. An area often neglected and can and should be influenced by exceptional customer experience delivery.

The case for CX will start with capturing a portion of the business from existing customers that you aren’t capturing today because the experience is not great.

Do CX benefits tend to come from improving customer satisfaction and increasing revenue, or from improving operations and decreasing cost?

While cost reduction efforts are appreciated, they usually considered to be a short-term impact in nature. They are often forgotten fast.

The CX benefits ought to come from improving financial results. (Customer sat is a nice indicator, but must be fully correlated to customer financial behaviors.) During our work with a consumer products manufacturer who works through channels, we identified that their current customer experience is affecting their ability to capture a larger portion of the customer budget. When we demonstrated that they on average leave $2000 per customer on the table and capture on average only $199 per customer, they realized it is time to redesign the experience.

What skills should CX professionals develop to be more effective at building and selling a CX business case?

Business is about selling. No matter how amazing your work is, if you can’t sell it, you will not generate the funds, the resources, the collaboration, and the willingness to change you need for your organization. Yes, we need to start selling. Do not assume that CX will sell itself just because it is common sense. It is not.

True CX is about change, selling on a bright new future, and helping people see why they want to accelerate change.

Learn More: Chapter 1 of Next Is Now: 5 Steps for Embracing Change—Building a Business that Thrives into the Future (PDF)


Dave Fish, Ph.D.

CEO and Founder of CuriosityCX, a Consumer Research and Customer Experience Consultancy

CuriosityCX


What have you found to be a successful approach to CX justification?

Anywhere you can make an unambiguous direct connection between CX and business outcomes. The more local and relevant the better. For example, telling an operator that if their NPS goes from 60 to 80 they should have long-term benefits is not as good a demonstrating that benefit with a single operator.

Some of the most impactful approaches are

  • Rejecter studies – x% rejected your treatment… convert percentages into actual lost sales volume which gets retailers attention quickly.
  • Stacked ranked with franchisees – displaying this stuff is social shaming. Salespeople hate to be last (or even second) on anything. Showing them how far they are from perfect is sometimes a great incentive.
  • Conversion – this is where CRM and EFM are powerful.

If I can show an operator or business owner that by doing things a certain way it can directly impact the bottom line through better treatment, UX, or CX then that is a sure way to sell CX. For example, having employees take orders while in drive-through lines 1) gets people through faster, making for happier customers and 2) increases throughput through the drive-through increasing revenue. There are little tweaks like this everywhere which can improve the customer experience and by doing so make more money.

Do CX benefits tend to come from improving customer satisfaction and increasing revenue, or from improving operations and decreasing cost?

I see CX benefits coming via cost avoidance in improving tactical things about the customer experience most often. Creating an easier ordering system. Providing better transparency in the supply chain. Simplifying UX. These are small increments.

The really big ‘whales’ are harder to achieve but where the big money is. Uber reinvented the Taxi, by throwing the old model out. Cirque du Soleil reinvented the “Circus”. Airbnb reinvented hospitality, and so on. These were not incremental changes but fundamentally different approaches.

So cost-saving or avoidance is easier but lower return. Categories and reinvention of the entire process is where the big money is, but it’s harder to do and so less frequently achieved. It’s like playing the outside of the roulette table (lower risk, lower return cost avoidance/savings) or inside the table (higher risk/higher return margin/revenue generation).

What skills should CX professionals develop to be more effective at building and selling a CX business case?

Business planning and modeling. You got to have a business case and be willing to build on facts. The second is clarity of good narrative storytelling. It’s the one-two punch… facts (business case) and stories (e.g., joe the plumber).

Learn More:


Ian Golding

Global Customer Experience Specialist and Certified Customer Experience Professional (CCXP)

Customer Experience Consultancy


What have you found to be a successful approach to CX justification?

There is no one answer to this question as it all depends on the specific scenario. Industry trends could be the only justification needed – any legacy retailer or bank should know that disruption caused by new fintech operators is justification enough to justify understanding how to differentiate on the entire customer experience to survive in the future.

The most effective approach to justification though is likely to be making as strong a correlation as possible between improving the customer experience and the financial performance of the business. This correlation should result in a more cost-effective business and a business that is better at both winning and keeping customers.

Do CX benefits tend to come from improving customer satisfaction and increasing revenue, or from improving operations and decreasing cost?

Without question, the answer to this is both!! Three forms of financial return can be achieved with an intentional focus on customer experience:

  • Revenue Generation
  • Cost Reduction
  • Cost Avoidance

Too many businesses tend to only focus on Revenue Generation – wanting to see an effect on this as quickly as possible. The problem is that this financial return is a long term one – it comes from establishing an intentional approach to managing and improving the experience that ultimately results in improved customer advocacy, loyalty and as a result, sustainable growth.

The short-term benefits will be delivered through cost reduction and cost avoidance. Eliminating the things that go wrong in the customer journey (the randomness) and by preventing things from going wrong, organisations around the world should be saving billions!!!

What skills should CX professionals develop to be more effective at building and selling a CX business case?

CX Professionals need to have a strong understanding of the basic, fundamental principle of “cause and effect” – connecting operational process performance with customer perception. This understanding comes from a foundation in process improvement methodology.

It is also critical for CX Professionals to build strong relationships with the finance community in their organisation. Influencing CFOs of the benefits of being sustainably customer-centric will open many doors!!!

Learn More: CX Professional Masterclass (online)


Michael Hinshaw

McorpCX founder and President, best-selling author and top-ranked global customer experience thought leader

McorpCX


What have you found to be a successful approach to CX justification?

Customer experience is an investment. Treat it that way. It’s the rare executive team that would green-light CX without a defensible ROI and business justification – nor should they. CX pros need to be able to rationalize their value and that of their programs.

For example, one quick ‘all up’ way is to look at your entire customer base with two pieces of customer-level information in hand: their “CX score” (CSAT, NPS, CXi, etc.) and the “value” of each customer (things like gross revenue, profit, lifetime value, etc.). Then calculate average CX scores for each of the top 20 percent (most value) and bottom 20 percent (least value) of your customers.

The math from here is simple: Calculate the differences between the top and bottom 20%, and divide the difference in average value by the difference in average CX score to find out the value of better CX.

  • Bottom 20%: Average CSAT of 46 and value of $120
  • Top 20%: Average CSAT of 72 and value of $260.
  • Difference: 26 Points on CSAT, and $140 in value (140 / 26 = 5.38)

Conclusion: Each 1 point increase in CSAT drives an increased $5.38 in value—or a 4.5% revenue boost—per customer.

Do CX benefits tend to come from improving customer satisfaction and increasing revenue, or from improving operations and decreasing cost?

The blithe answer is “yes.” Provable CX benefits can be found almost anywhere, in almost every organization. Where is value created? Where is it destroyed? For whom, and how?

We’ve found that the numbers will tell you where to focus, and how to prioritize. For example, we commonly see the most valuable customer segments getting the same undifferentiated experience as all customers.

What if you improve a painful service experience, and boost their retention and lifetime value by 10 or 20 percent?

In this same scenario, lower-value customers can be shifted to self-serve and digital channels—often improving their experience while simultaneously reducing the cost to serve them. A provable win-win.

What skills should CX professionals develop to be more effective at building and selling a CX business case?

  • Think like an executive: The most successful CX pros we work with understand what keeps their executives up at night, and align CX efforts to executive goals and desired business outcomes.
  • Learn how to actively measure experiences, and link them to business outcomes: CX is tangible and measurable, so back up whatever you do (and whatever you want to do) with metrics and data.
  • Become a storyteller. Stories of customer experience successes linked to measurable business results are ‘CX gold’ in any organization.

Learn More:


Howard Lax

Principal Director, Customer Experience Consulting at Confirmit

Confirmit


What have you found to be a successful approach to CX justification?

The only compelling justification is making the economic case based on your company’s actual numbers. There are countless examples of business cases using industry data or case studies, but your CEO/CFO is unlikely to be convinced by third party examples.

You do not need elaborate ROI models. Rather, simply link relevant business outcomes – be they renewal rates, customer lifetime value (if you can estimate it), share of wallet, annual spend, frequency of shop, occupancy rates . . . whatever metrics you use to measure customer value and the customer behaviors that create value for your firm – to the CX/customer loyalty metrics you use.

For example, the visual below is a simple but compelling case for the value of CX for a retail client without any complex economic modeling. It quantifies the extent to which customers with the best experiences spend more per shop and shop more often at a given store than customers with poor experiences.

Do CX benefits tend to come from improving customer satisfaction and increasing revenue, or from improving operations and decreasing cost?

While many people focus on the cost-saving argument, the boost in customer behaviors that create value for the firm (AKA drive revenues) is far more compelling. The reality is that while there are some examples of cost savings from improved CX, there are far more examples where better CX leads to increased costs. The majority of firms “reward” their best customers with discounts, loyalty/shopper programs, freebies, points, specials, custom offers, better service and an array of other goodies that increase costs.

In general, better CX requires investment, not savings . . . but this investment has a payoff, as illustrated above. Think of your favorite restaurant: when you are there, the chef probably come by to chat, perhaps you order something special that isn’t even on the menu, the manager sends over a complimentary aperitif and perhaps a dessert tasting . . . all of which increase costs; but that is precisely the point: investing in delivering great experiences to keep customers loyal (AKA keep customers coming back and spending more).

What skills should CX professionals develop to be more effective at building and selling a CX business case?

This is not about specific skills, per se. One doesn’t need to brush up on their accounting or financial skills. Rather, this is about critical thinking and analysis, on the one hand, and having a solid grasp on your company’s CX data and business model, on the other.

Per the response to #1 above, the first step is understanding the outcomes or customer behaviors that leadership wants to promote at the customer level. Identify the key metrics from your firm’s CRM or other operational data, as well as in your feedback surveys, that measure or are indicators of those outcomes. Link the surveys/other feedback sources to those outcome/behavior measures. Then turn the results into an analysis illustrating how differences in CX result in/correlate with the desired outcomes.

Being able to relate to and work with the owners of the company’s internal data, as well as strong presentation and storytelling skills certainly helps as well. Absent that, the skill to hire a consultant/supplier who can help execute the process will help.

Learn More:


Harley Manning

Research director in the customer experience practice at Forrester and the co-author of Outside In: The Power of Putting Customers at the Center of Your Business.

Forrester


What have you found to be a successful approach to CX justification?

I always start with what executives care about: increasing revenue, decreasing costs, and reducing risk. “Let’s make our customer happier” gets smiles but not funding.

When making the business case for CX to execs it’s important to begin by explaining how CX accomplishes these goals: Customers who have better experiences stay with brands longer (increasing lifetime value, which feeds a retained revenue business case) and spend more with the brands (fueling a revenue per customer business case). We have lots of data to prove that these things are true, everything from large-scale models based on consumer surveys to specific business cases where companies tied CX improvement to retention and cross-sell.

I then pivot to cost-cutting. That’s easy to explain: Customers with problems contact your company, running up service costs. Track down and eliminate the problems that are making them unhappy and they will not call you to complain. That makes them happier and saves you a ton of money.

Then I provide some examples like the $4 million a year Fidelity saved by fixing an IVR login problem, the $500 million per year that Cisco saved by redesigning a customer-facing portal to enable better self-service (which is what their customers wanted instead of hand-holding), and the whopping $1.7 billion annually that Sprint saved thought a multi-year program of tracking down and eliminating problems. I wrote about all three of those in my book Outside In, and they’re still some of the best examples I have (though we collect new ones on an ongoing basis).

Risk reduction is also pretty simple. Unhappy customers call you, but really unhappy customers call regulators. A single contact by a regulatory body can ruin a lot of days for a lot of senior managers. For example, we’re seeing AI used to analyze contact center data and CRM data and predict which customers are about to blow a gasket. Proactive outreach to them before they go kinetic is well worth it. The first time I saw this used was in the health insurance industry – worth every penny.

Do CX benefits tend to come from improving customer satisfaction and increasing revenue, or from improving operations and decreasing cost?

Both. The most high-leverage plays we’ve seen recently increased CSAT, increased revenue, and decreased costs. All of it stemmed from operational improvements.

In a recent report, we interviewed CX leaders at companies that had statistically significant increases in their Customer Experience Index (CX Index TM) scores. We found that they all focused on business process improvements and operational improvements (like technical fixes). Often these improvements, which improved customer satisfaction, also decreased costs.

For example, Vanguard uncovered a back-end problem that caused some digital transfers from other institutions to fail and get “kicked to paper” (the recipient got a letter in the US Mail and had to call Vanguard to complete the transfer process). Vanguard fixed the problem, which made customers happy and eliminated their need to call Vanguard (a call that the customer didn’t want to make in the first place). Business result: More assets under management for Vanguard at a lower cost so acquire the assets.

Highmark BCBS found that about half of customers who tried to pay online had their transactions fail due to a systems issue. They fixed the issue and now have a 93% completion rate for online payments. Business result: Reduced time-to-revenue and lower costs (no need to move to more expensive channels like phone).

We saw similar operational improvements that made big improvements to CX at TD Bank, TD Ameritrade, Best Buy and even the TSA.

What skills should CX professionals develop to be more effective at building and selling a CX business case?

First and foremost, learn and fully internalize the relationship between CX and business results like increased revenue and reduced cost. Get comfortable explaining those relationships. When you can easily explain them to a person without a CX background you’ll know that you fully understand the material. I’ve blogged about this a lot, as have others. It’s not that hard for anyone with a basic understanding of business to master this.

Second, learn how to build an ROI model. Most people in business had to learn how to do that at least once, even if it was only in school. If they didn’t, there are online resources that can teach them. Or find someone in your finance department to befriend. All you need is a willingness to learn. I’ve gotten to be quite good at building these models and I am a writer by trade. I believe I’ve taken exactly one accounting course in my life. It is not high-level math.

Learn More:


Nancy Porte

VP, Global Customer Experience at Verint and Certified Customer Experience Professional (CCXP)

Verint


What have you found to be a successful approach to CX justification?

Two words to keep in mind: relevance and timeliness. Leaders who are approving business plans – and funding for those business plans – are very focused on organizational goals. When justifying the new project, function or team, it’s critical to dovetail the success into those organizational goals. Your plan should re-state the goals and illustrate how your plan will help achieve.

Additionally, the justification should include short-, mid- and long-term goals. While it is tempting to focus on the long-term benefits of major projects and culture change, it is important to include short-term (3 to 6 month) benefits, too.

My first justification for a CX program was turned down. When I went back to ask “why?” I found that I had not done my homework. One leader said that he didn’t want to invest in something that solved a problem he didn’t have. I had shown how great customer experience leads to higher customer retention rates. But the company was already experiencing very high retention and was focusing, instead, on how to gain new customers. Clearly, my argument was a good one – but not for that company!

Another leader said that it was too philosophical, stating the benefits of a company with a CX program over one without. But he couldn’t tell what exactly it would do for our company.

Both leaders were honest and their responses informed my next steps. First, I scheduled time with each member of the executive team, explaining the goals and structure of a customer experience program and answering any questions they would have about this new function. In my next proposal, I was very specific about short term goals as well as long term goals. I didn’t receive the full requested amount of funding but it was enough to have a successful first year!

Do CX benefits tend to come from improving customer satisfaction and increasing revenue, or from improving operations and decreasing cost?

CX benefits come from both increasing revenue and decreasing cost. It is a common fallacy that customer experience only improves customer satisfaction and, therefore, increases revenue. However, when improvements are made, it’s not unusual to improve operational efficiency at the same time.

Also, with the advanced analytics that comes with a CX program, one can improve operational efficiency by demonstrating where there are overinvestments in areas that, simply, customers don’t value. So many times internal ideas spawn new programs and those ideas are never validated with customers. If these programs can be identified and eliminated or downsized, the organization has resources to devote to more customer valued services.

I’ve also found that it’s easier to “find and fix” when a program is first created, which often improves operations and decreases costs. So, these can be the first short-term successes of a new program. Improving customer satisfaction and increasing revenue are mid- and long-term efforts since they are typically larger projects with more investment and longer timelines.

When we started our program, we focused on those “find and fix” moments. We saw short-term victories in customer service (improving a communication procedure that created frustration with customers waiting to have an issue resolved) and professional services (training project managers on a consistent method of completing projects.)

These projects, while increasing customer satisfaction, also improved operational efficiencies and decreased costs. For example, when we improved a communication procedure in Customer Service — reaching out proactively to inform customers about progress on their cases — less time was spent on incoming calls from customers requesting updates.

While we still execute these “find and fix” areas, we are working on larger projects now that improve customer satisfaction by improving employee engagement, implementing customer data systems, etc.

What skills should CX professionals develop to be more effective at building and selling a CX business case?

CX professionals should collaborate and communicate across the organization to gain support for the business case. While we often focus on skills associated with persona development, customer journey map building, project management, etc., the ability to collaborate across the entire organization and communicate the importance of the customer experience function is vital to the ongoing support and success of the program!

Learn More:


Jim Tincher

Nationally recognized customer experience expert, journey mapper, author, keynote speaker, and entrepreneur

Heart of the Customer


What have you found to be a successful approach to CX justification?

Hands down, the most successful approach to justifying CX comes down to three things: ROI, ROI, and ROI. Unfortunately for most programs, mechanisms for tying CX initiatives to ROI aren’t built into the capability because they’re typically launched by a sponsoring executive with a vision, who recognizes the importance of CX based on broad cross-industry research, not a direct justification.

But when that executive moves on, their replacement sponsor cuts the program because they come up empty-handed when they try to find out what impact CX has on business outcomes. We’ve seen this scenario play out in multiple programs.

Do CX benefits tend to come from improving customer satisfaction and increasing revenue, or from improving operations and decreasing cost?

We’ve seen it work both ways, and it’s rarely black and white. Ultimately, it’s going to depend on each organization’s unique needs, goals, and structure. (If there were one-size-fits-all solutions in CX, we’d all have much easier jobs!)

For example, Heart of the Customer mapped a journey for a manufacturer and found that customers who were happier with the way complaints were handled were more likely to purchase higher-margin products. So, reducing friction in the complaint process led to higher revenue – as well as cost reductions from decreased call volume.

Meanwhile, a financial products client discovered that a large number of complaint calls were related to customer confusion. So, they recreated the journey to build in a comprehensive communications approach that addressed customer challenges. This resulted in cost reductions due to a lower call volume – but also an increase in digital engagement that led to higher revenue.

What skills should CX professionals develop to be more effective at building and selling a CX business case?

The most important skill is learning to show, not tell. CX pros have to develop the ability to connect their work to business KPIs. If you increase satisfaction by 10%, what does that mean to the business? Are your happier customers ordering more products? Are more confident customers contacting the call center less often? It’s imperative to learn to show how your survey scores impact the hard numbers that are meaningful to executives.

That means it’s also important to develop the fortitude to track down operational data – because that’s what you’re going to need to build a compelling case that links your work to KPIs. But that data is typically siloed and difficult to access. If you can develop the skills – and make the interpersonal connections needed – to gather and analyze this data, you’ll be able to prove that improving customer experience makes it easier for leadership to achieve their business goals. That’s the ticket to winning over the C-suite.

Learn More: CX for Skeptics: Showing the ROI of CX (white paper)

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