{"id":962327,"date":"2020-05-01T13:33:16","date_gmt":"2020-05-01T20:33:16","guid":{"rendered":"http:\/\/customerthink.com\/?p=962327"},"modified":"2020-05-03T10:08:41","modified_gmt":"2020-05-03T17:08:41","slug":"cx-roi-how-to-justify-improving-the-customer-service-experience","status":"publish","type":"post","link":"https:\/\/customerthink.com\/cx-roi-how-to-justify-improving-the-customer-service-experience\/","title":{"rendered":"CX ROI: How to Justify Improving the Customer Service Experience"},"content":{"rendered":"

To gain funding to improve the service experience, CX pros must support the KPIs of the customer service department. Improving customer satisfaction is not enough.<\/em><\/p>\r\n

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At first blush, it should be a no-brainer to justify a Customer Experience (CX) program to improve the service experience.<\/p>\r\n

Customer Service (CS) is often the first thing people associate with CX. CustomerThink’s research<\/a> found that 73% of CX initiatives focused mainly on customer service\/support at the beginning, while other stages of the customer journey (buying, usage) garnered more attention later on.<\/p>\r\n

Conceptually, it’s simple. Make service “better” to raise customer satisfaction scores. Then wait for the revenue gains to roll in as promised by CX advocates. Eventually, your stock price will take off, too!<\/p>\r\n

But that’s not how it’s working out for at least three of four CX programs, according to CustomerThink research and other industry studies. After the excitement wears off, business executives will only continue to fund programs that produce benefits for the company. CX is no exception.<\/p>\r\n

The purpose of this article to reveal some of the underlying issues preventing CX from being embraced by CS leaders. And, to present approaches that can help connect the dots from CX dreams to the desired funding for service experience improvements.<\/p>\r\n

Bank of America Turnaround Hinges on Improved CX<\/h2>\r\n

I’ll start with a brief story about a bank that historically has struggled with customer satisfaction. Based on ACSI reporting, Bank of America has been a perennial bottom-dweller in the rankings dating back some 25 years.<\/p>\r\n

Even if we narrow the focus to the past 10 years, you can see (chart) that its ratings were noticeably below other large US banks from 2011 to 2015. But after that, ratings improved substantially and now BofA is competitive with its main rivals.<\/p>\r\n

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Source: ACSI<\/a><\/figcaption><\/figure>\r\n\r\n

What happened? According to BofA’s Holly O’Neill<\/a>, Chief Client Care Executive:<\/p>\r\n

\r\n“Between 2013 and 2015, Bank of America pivoted from a product and fee-driven approach to a more relationship-driven approach that focused on the expertise of our people and our innovative technology. We like to call this our high-tech and high-touch approach.”\r\n<\/blockquote>\r\n\r\n

This “pivot” was accomplished with a massive technology investment to improve digital experiences, which saved money because human-based interactions are more expensive. They could have stopped right there and pocketed the savings, but thankfully they didn’t.<\/p>\r\n

BofA invested the digital savings in upgrading “expert advice” for customers having more complex requirements. In 2016 they launched an Academy to provide training to frontline associates. Then the bank implemented a new client survey “Voices” program which makes it easier for customers to provide input and for frontline teams to take action.<\/p>\r\n

In early 2019, J.D. Power rated<\/a> BofA ranked highest in customer satisfaction with retail banking advice. A year later the same study found BofA and Citi in a virtual tie for the top score. Great progress.<\/p>\r\n

Increasing Customer Satisfaction and Loyalty is the Heart of CX Management (CXM)<\/h2>\r\n

The beating heart of the CX movement is a powerful idea. Improve customer satisfaction and loyalty, and over time you’ll see higher revenue growth (compared to those who don’t) because ‘happier’ customers tend to remain customers, buy more, and refer others.<\/p>\r\n

You see this reflected in virtually all CXM definitions. For example, Gartner<\/a> says:<\/p>\r\n

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“Customer experience management (CEM) is the practice of designing and reacting to customer interactions to meet or exceed their expectations, leading to greater customer satisfaction, loyalty and advocacy.<\/p>\r\n<\/blockquote>\r\n

The CXPA breaks it down<\/a> this way:<\/p>\r\n\r\n

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“CX Management is the set of practices that an organization employs to meet (or exceed) customers’ expectations.”<\/p>\r\n<\/blockquote>\r\n\r\n

Now, just to be clear, customer experiences are customer perceptions<\/em> of their interactions with your company (buying, usage, service, … anything). This is key; just making a change and calling it “improved CX” doesn’t count unless your customers agree. Typically, customer perceptions are captured via surveys, which enable the calculation of customer satisfaction and loyalty metrics.<\/p>\r\n

Customer satisfaction<\/em> is a measure of how well customer expectations were met. Did the experience meet, exceed, or fall short of what the customer expected? Loyalty refers to both continuing as a customer (retention) and having a positive feeling about a brand, which may lead to referral behavior.<\/p>\r\n

Satisfaction and loyalty tend to rise and fall together, but not always. It’s possible to have highly satisfied customers who don’t buy again due to change in circumstances. Or, customers may be unhappy but appear to be loyal because they have limited choices or are trapped in a long-term contract.<\/p>\r\n

The Business Case for CX Improvement is Revenue Growth. That’s a Problem.<\/h2>\r\n

OK, so that’s how CXM is defined, but what’s the goal? The short answer is growth<\/strong>.<\/p>\r\n

The most commonly accepted CX “formula” is:<\/p>\r\n

Improve CX > Increase Satisfaction and Loyalty > Grow Revenue<\/b><\/p>\r\n

And you won’t have to look hard to find numerous industry studies supporting this relationship.<\/p>\r\n

Forrester claims<\/a> that increasing a brand’s CX Index™ (a measure of CX quality including effectiveness, ease, and emotion) by just one point can equal up to $1 million in incremental revenue. Furthermore, the analyst firm finds<\/a> that “CX leaders outperformed CX laggards on both stock price growth and total returns.”<\/p>\r\n

Most everyone agrees: Great experiences lead to higher levels of customer loyalty which, over time, increases revenue growth.<\/p>\r\n

Why is this a problem?<\/strong><\/p>\r\n

Unfortunately, business executives are generally more receptive to a mix of growth and cost\/efficiency improvements. And in customer service, the balance is often tipped towards cost\/efficiency, according to many experts I’ve interviewed.<\/p>\r\n

Bill Price of Driva Solutions<\/a> says that while executives may claim they place equal weight on customer satisfaction and efficiency, those closer to the front lines give efficiency far more attention – about 80% of the priority. Price says it’s hard to link customer satisfaction to tangible benefits, while efficiency is easy to measure and show business results.<\/p>\r\n

Customer service trainer Steve DiGioia<\/a> is a crusader for service as a differentiator and loyalty strategy. But he laments that the hotel industry has become focused on efficiency, with management upping the workload to the point there is little time for personal service. While surveys can help identify problems, he thinks CX people would be wise to get out of their offices and spend time with employees and customers. Insight gained from that experience would help identify areas to focus attention.<\/p>\r\n

Now, to be fair, this is still an improvement over many years ago, when cost was the<\/em> overriding priority in customer service. That resulted in a rush to offshoring and other cost cutting that, for some brands at least, resulted in reduced levels of customer loyalty which eventually negated some of the cost savings. You might say: penny wise but pound foolish<\/strong>.<\/p>\r\n

So, CX pros, if you’re pushing growth as the sole reason to invest in CX, you’ll have a tough time getting CS stakeholders on board if they are being asked to do more with less.<\/p>\r\n

Misalignment of Key Performance Indicators<\/h2>\r\n

Key Performance Indicators (KPIs) reflect the business priorities of an organization, be it the corporation or a functional department like customer service. Here’s a formal definition<\/a> from KPI.org (emphasis mine):<\/p>\r\n\r\n

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Key Performance Indicators (KPIs) are the critical (key) indicators of progress toward an intended result. KPIs provides a focus for strategic and operational improvement, create an analytical basis for decision making and help focus attention on what matters most<\/strong>.<\/p>\r\n<\/blockquote>\r\n\r\n

I would take it a step further and say that the metrics used to judge management performance – driving bonuses, promotions, etc. – reveal the true strategy<\/strong> of the organization. KPIs should include a few truly critical<\/em> indicators that have a direct connection to the success of the business strategy and are actively used by management.<\/p>\r\n

CX proponents believe CSAT, NPS or some other measure of experience quality is the key to success. But I wonder how many take the time to understand the current KPIs of stakeholders. As mentioned, customer service metrics are tilted towards efficiency. That’s a misalignment that make the CX business case challenging, unless you can get stakeholders to embrace a new KPI.<\/p>\r\n

Bill Price, who has decades of experience in large\/complex contact centers, says he still finds ASA (Average Speed of Answer) and AHT (Average Handle Time) given too much weight compared to the quality of the customer experience. Surveys have low response rates, and internal “quality management” efforts are often more concerned about complying with internal procedures like “Did you apologize three times?” than service quality as the perceived by the customer.<\/p>\r\n

Jeremy Watkin, Product Marketing Manager at 8×8<\/a>, found first hand in his BPO industry experience the challenges of quality management. Like Price, he says top management likes efficiency measures. Customer satisfaction is often secondary, until a situation blows up and a complaint is made to senior management. Then hours are spent researching what happened and developing a fix. Simply put, bad customer satisfaction stimulates action to prevent client defection, but it’s not something that service organizations pursue proactively.<\/p>\r\n

These findings were echoed in numerous other interviews. To be clear, I’m not saying that customer satisfaction is unimportant to service managers. Just that it has a much lower priority than you might think if you take executive proclamations at face value.<\/p>\r\n

How Does Customer Service Justify Investments?<\/h2>\r\n

Yes, most executives say they want to “compete based on CX” – but as Harley Manning<\/a>, Research Director in the CX practice at Forrester puts<\/a> it so well:<\/p>\r\n

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“Let’s make our customer happier” gets smiles but not funding.<\/p>\r\n<\/blockquote>\r\n\r\n

So, what does<\/em> get funding in service organizations? In short, the answer is: Investments that move the needle on KPIs<\/strong>.<\/p>\r\n

CX pros, take a tip from the technology vendors selling into service organizations. Most use “improve customer experience” as a marketing message, and that’s true to a point. But when I asked vendors to explain how their solutions were justified at their clients, the CX rationale (improving customer satisfaction\/loyalty) faded to the background, and cost\/efficiency benefits were usually featured.<\/p>\r\n

For example, visit the ROI calculator<\/a> of TeamSupport, which the home pages says provides a “B2B-focused customer support solution that actually helps you build satisfaction and loyalty.” I filled out the forms indicating I was a mid-sized B2B support organization, and quickly found my “personalized ROI” was cost\/efficiency benefits:<\/p>\r\n