Too many customer experience projects stall because leaders are unable to demonstrate the value these projects create. Connecting specific customer insights to specific tangible benefits for the business is critical to overcoming this challenge.
Initially, executives can get very excited over the promised benefits of becoming a customer centric organisation: greater customer loyalty, higher retention and engagement, lower cost to serve as well as improved customer and employee satisfaction. But they are often unable to articulate how improving experiences for customers will create value for the business.
After the customer experience transformation project commences the initial enthusiasm behind it will quickly dissipate if it takes too long to produce noticeable results. Lisa Khatri, head of customer, brand & design experience APJ, for Qualtrics, advises, “The success of any transformation requires active support from senior executives. As organisations become more mature, experience management impacts more departments and touches more processes across the business. If the senior leaders don’t collectively view these changes as critical – if they don’t communicate why change is necessary, model desired behaviours, or hold the organisation accountable for results – these transformation efforts will ultimately fail.”.
The transformation project will inevitably raise questions about business policies and procedures, cross departmental priorities, and where to invest in innovation. Joel Maynes and Alex Rawson in an article published by McKinsey, observe, “Without a quantified link to value and a sound business case, such transformation efforts often can’t show early gains, build momentum among functional executives, nor earn a seat at the strategy table. They stall before they ever really get going”.
David Blakers managing director APAC, InMoment, adds, “We know for a fact that proving ROI from CX is one of the greatest challenges facing our CX leaders. The key challenges revolve around the fact that multiple variables impact business performance and often CX initiatives are not designed with ROI tracking in mind. Forrester predicts that one in four CX professionals will lose their job in 2021 due to an inability to link CX improvements and activities to company financial benefits.”
The customer experience transformation project being planned must align with the business strategy and goals of the organisation. Khatri advises, “Any customer experience transformation, to be successful, must align with corporate strategy. This helps secure company-wide buy-in through a deeper understanding of why the changes are being implemented. It also links the program to the company’s overall growth and success, helping you profile the potential impact it can have”.
Companies investing in the customer experience must clearly identify how improving the customer experience will generate value. To build this link, you need to understand the customer behaviour that creates value for your business and then follow customer satisfaction over time to quantify the economic outcomes of different experiences[i].
Linking customer insights to business goals
Core to every customer experience transformation project or customer centric strategy is understanding who your customers are, their behaviours and their preferences. Customer insights allows the business to gain a deeper understanding of how customers think and feel about the brand as well as its products and services. By knowing this, you’re able to improve the customer experience. Blakers comments, “customer insights are an understanding of customer behaviours or preferences that can be used to help solve business challenges. Customer insights are sourced by analysing a combination of direct, indirect and inferred customer feedback combined with relevant operational data on your customers”.
The first step to linking specific insights to particular business outcomes is by defining your objectives. Khatri says, “It sounds obvious, but identifying the desired outcomes helps sets the metrics to track, the targets to aim for, and the timeline to follow. Organisations must establish a baseline when embarking on any customer experience transformation. Doing so allows you to know your starting point and to identify how the changes made are impacting outcomes across different groups within your customer base.”
By establishing the objectives of your transformation project and aligning them with your corporate strategy you can start identifying what insights are necessary to help you make the right decisions and solve the particular problems being faced by the business. For example, if increasing market share is a top corporate goal then your customer experience objective is likely to be improving customer retention. Therefore, you will want to gain Insights around why customers are leaving and what changes or initiatives are necessary to retain them.
Also, when designing a new CX initiative or transformation it’s important to link it to a financial or operational outcome. Blakers advises, “When developing a product, process, or people-related CX improvement initiative, link this to a key financial or operational outcome and use direct marketing principles (e.g. test and control groups) to help isolate, then validate the impact the initiative has had. Putting these measures in place early enough will provide you the time needed to gather sufficient data to demonstrate the ROI impact.
In order to prove business value, according to Blakers it’s essential to draw a line back to economic pillars. He highlights the following that could be affected by your experience initiative:
- Customer Acquisition. Understand the market environment and changing consumer preferences to design better products.
- Customer Retention. Address organisational or procedural issues that negatively impact customer experience and cause churn.
- Cross-sell and Upsell. Identify opportunities to expand loyalty and share of wallet within existing customer base.
- Minimise Costs. Find areas for achieving greater efficiency, eliminating avoidable service costs.
“Customer insights have the capability to add endless value to a business—they point to opportunities to reduce costs, attract new customers and retain existing ones. Customer insights are used to help prioritise investment decisions, resource allocation and staff training activities. Having access to, then taking action on, a continuous feed of customer insights enables brands to help improve the effectiveness of every customer interaction, reduce friction in their customer journey and ultimately deliver more wow moments for customers”.
Khatri Concurs, “The best customer experience programs are focused on understanding the preferences, behaviours, and attitudes for individual customers, with insights enabling organisations to make tailored changes that have a big impact. Looking at previous interactions and the experience delivered throughout, organisations can collect insights to understand churn, retention, satisfaction, and engagement.
Understanding the link between CX metrics (NPS, CES, CSAT) and desired business outcomes
Most CX projects use metrics like NPS (Net Promoter Score), CES (Customer Effort Score) or CSAT (Customer Satisfaction) to track the attitude and perceptions customers have of the organisation. NPS, CSAT and CES all have important roles to play in delivering ROI and real benefits to the organisation from its CX program. Problems emerge, however, when the focus is primarily on improving those scores rather than using them as part of a management system to drive action.
Blakers says, “The CX metric of choice is far less important than establishing an insights-to-action capability that sees the organisation align around a culture of improving customer experience—not just measuring it. It doesn’t matter so much which CX metrics a companies uses as it is to understand the relationship between a key customer metric and the business outcomes executives want to drive.”
You need to understand what business and customer outcomes matter in your industry as well as what value specific customer behaviours contribute to achieving those outcomes. For example, if you’re in the telecommunications industry it may be that more satisfied customers are less likely to churn, less likely to call and complains and will subscribe to more services.
“To win the minds of your executive leadership team, it’s really important for each CX initiative to be linked back to the most relevant operational and finance success measures. Often these operational performance metrics will already be used by the business so linking your CX initiative to those measures becomes more impactful. Focus where you can on cost saving assumptions first, as these models are typically easier to defend than revenue-based models (e.g. reducing churn, increasing share of wallet, increasing average tenure or LTV)”.
“They generally require less calculations, less assumptions, and less time to prove an impact. For example, failure demand—where you identify the issues that drive avoidable contacts into the organisation—can be much quicker to identify and act upon”.
The ability to generate accurate and timely customer insights can deliver tremendous value to the business. Demonstrating some early wins and how the CX strategy is adding value will encourage ongoing commitment from senior executives and ensure customer centricity has a place at the strategy table.
[i] https://www.mckinsey.com/business-functions/marketing-and-sales/our-insights/linking-the-customer-experience-to-value