The ROI of Your Customer Experience Investment

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It doesn’t take a lot of effort to convince people in the CX world about the benefits of investing in a well thought out, seamless cross-channel customer experience. Improved share of wallet from repeat purchases, the multiplier effect that comes from people telling others about their positive experience, and reduced customer churn are all direct and measurable benefits.

What is more difficult, however, is directly measuring the ROI in dollars for these investments. With recent independent third-party research by the Temkin Group and Forrester, however, it is possible to work out the ROI for industries as varied as airlines, banks, cable service providers, consumer electronics, credit card providers, health plans, hotels, insurance providers, investment firms, ISPs, retailers and wireless carriers.

Each of these industries has both CX leaders and laggards, and as you would expect, the customers of these leaders and laggards behave in different ways: customers of leaders spend with competitors less often, tell more people about their experience and make more repeat purchases. By looking at the numerical differences in these values, and combining it with industry behavior rates for customers making recommendations, we can actually calculate what the dollar benefit is for closing the gap between being a CX leader and laggard.

As an example, let’s take a bank that has 20 million customers and earns on average $650 per customer per year. Among their more loyal customers, however, they earn $850 per customer per year.

For the banking industry, customers of CX leaders have a likelihood to switch to a competitor of 38%, while customers of laggards have a 44% chance – a gap of 6 points. Closing that gap by just 25% will result in 300,000 customers reconsidering their decision to switch. If only half of those actually remain loyal (and given the average revenue per customer of $650) it results in a revenue benefit of $97.5M, or $4.88 per customer:

(20,000,000 customers) x (6%) x (25%) x (50%) x ($650 per customer per year) = $97,500,000

This change alone would represent an increase of 0.75% of total revenue for this bank.

Doing similar calculations for the effect of improved word of mouth and increased revenue per customer from repeat purchases shows improvements of $1.44 per customer per year and $3.60 per customer per year, respectively.

To see how this works for your industry and customer base specifically, take a look at the Customer Experience ROI Calculator we’ve developed and placed (without an e-mail capture wall) on our site using this data.

If you have suggestions for how we can improve this calculator to fit your size of business, let us know. And for the technically-minded that want to check our math, we’ve released the source for this online as well.

Ryan Brideau
Ryan Brideau is a Vice-President of UserEvents, Inc., a company dedicated to unlocking the business value in big data. UserEvents' first product, CxEngage, allows enterprises to consistently deliver great customer experiences by letting them monitor and act on their customers' journeys in real-time.

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