Customer experience economics – monetising the value of CXM


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Here’s a question, how do you monetise the value of CXM?

Customer Experience Management (CXM) is the practice of designing and reacting to customer interactions in order to meet or exceed customer expectations and to increase customer satisfaction, loyalty and advocacy.

Recent research has confirmed what we have known as consumers and business people for a long time, that customers are prepared to pay more for a superior customer experience and that businesses who invest in the overall customer experience achieve higher levels of cross-sell and client retention. Not surprisingly that realisation is feeding the business case of many organisations as they build the justification for a further investment in their Customer Relationship Management processes and technology.

But do the economics of Customer Experience and the business benefits it promises truly stack up for your organisation?

Beyond the statistic from Forbes that 86% of customers are willing to pay more for a better customer experience, and the statistic from Peppers & Rogers that highly engaged customers deliver a 23% increase in profitability & revenue, is there a broader base of evidence to support the argument?

When evaluating research and statistics, I like to relate my own experience to the findings – to apply my own sense check to the numbers. My conclusion is that I can certainly point to numerous occasions where I have paid a premium, solely due to the customer experience I was receiving, or I perceived I would receive. Don’t get me wrong I’m as price conscious as the next person, and I expect quality and value for money from any purchase. But I am also time-poor and I want to engage deeply with only a few suppliers and brands that I trust, within those interactions I have high expectations and want to be treated with respect and as an individual. As a result, my choice of suppliers in a business and personal context is strongly influenced by their ability to deliver consistently. I know that the ability of those brands to delight me is more likely to be determined by process excellence, outside-in thinking, personalisation and their culture, as opposed to their ability to under-cut the competition or cram in more ‘features’ I don’t actually need.

The measurable benefits of Customer Experience Management efforts are multi-faceted, covering customer satisfaction, loyalty, retention and advocacy. In fact, here at Touchstone we have identified 40 benefits that we consider as part of the development of a client’s business case for a CRM investment. Our experience has been however that only a small number of these benefits accrue to an organisation, that’s because every organisation is unique and customer behaviours and motivation differ greatly as you move between B2C and B2B scenarios.

I can certainly subscribe to the concept that when the overall Customer Experience level is high, that consumers are less sensitive to price increases and actually more tolerant and patient when things do occasionally go wrong. I can also attest to the concept that as a consumer I am more likely to adopt a new product from a brand I trust, as opposed to risk money and time with an unfamiliar supplier – so supporting the oldest adage in CRM, that it is 6-7 times more expensive to sell to a new customer than an existing one. So in practice metrics associated with that benefit find their way into most business cases for a CRM investment.

What about the promised increases in average order value and purchase frequency that most research purports? Okay possible where over time the supplier is winning more of a share of my proverbial wallet at the expense of another supplier. Less likely however if you translate those promised benefits to a personal context. As the owner of only one property, am I likely to buy additional house insurance beyond my annual policy because of a positive customer experience during my on-boarding? Am I likely to consume more electricity because the supplier delighted me by tying together all my multi-channel interactions? In both cases the answer is no – because my spend and need as a consumer is finite, and the maximum ROI for the service delivery has been reached. In short, provide me with any further customer experience improvement and the only thing that increases is cost within the supplier’s business.

What about the concept of advocacy and referral often touted as a financial benefit of a strong CXM model. Am I likely to tell my friends, family and workmates of the great new restaurant, hotel, gadget that I have discovered? Sure I am, we all like the positive glow associated with passing on a great find and letting people share the experience. Am I likely to refer on details to my network of the business supplier who has bowled me over with an overwhelming customer experience? Much less likely as I may well want to retain the competitive advantage that the new supplier brings me and keep their capacity focussed on my own business.

Our experience at Touchstone is that through discussion, analysis and pragmatism, a strong business case associated with the monetary benefits of improving the customer experience can be quickly built – the economics of which can actually be determined by a handful of benefits that are highly personalised to the business and to the desires & behaviours of its customers.

For advice on preparing a business case for an investing in the customer experience, refer to the Touchstone best practice guide:

Dean Carroll
Dean Carroll is a 15 year customer experience strategy & technology veteran, he leads the CRM Consulting Practice for Touchstone in London. Dean has worked for technology leaders such Microsoft and Vodafone, has built award winning consulting businesses and oversees transformational CRM projects that create sustained value.


  1. Well, if CX improves, the benefits improve, and customers are willing to pay for added benefits. Value is what you pay vs the benefits (including the CX you get).
    Therefore you can monetise not only CX, but any other benefit including a brand improvement (better advertising and positioning), product improvement etc.

  2. Hi Dean

    The commercial/ financial arguments in favour of CXM need to stack up, otherwise why would a company ever bother doing it, right?

    Running in parallel / in tandem with the Customer Lifecycle (surely the biggest Customer Journey of them all!) is the Customer Lifetime Value calculation, which is built up of a number of factors, some of which you have discussed in the post. It consists of response rate, conversion rate, purchase frequency, purchase value, average profit per purchase, referral rate and retention rate.

    We would argue that you cannot utilise these measures in isolation to make the financial case for CXM, as they may not stand up on their own on a case by case basis – as you suggested, depending on the circumstances, some opportunities to expand value are finite. However when calculated together as part of CLV, they make an awesome case in favour of CXM.

    Not only are all of these things measurable by the business, enabling it to calculate the CLV and hence the profitability of customer relationships; they are influenced by the customer’s interactions with of the business’ 7Ps, which are the things that we can change to have an impact on the customer’s experience. We must however ensure that we can prove the link between the things we change across the 7Ps and their impact upon the factors from which the CLV is built.

    Et voilà! The financial case for CXM is made and, utilising CLV, it can continue to be traced.


    Ian Williams


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