What is the business value of customer experience? In honor of CXPA’s CX Day (October 1), Bruce Temkin, managing partner at Temkin Group, asked me to participate in a blog carnival about the topic, so I’ll attempt to answer the question here.
It’s not an easy question to answer. For example, it’s difficult to determine the value of a specific customer service phone call. We can measure the cost of every call coming into a contact center right down to the minute, much like we can measure the cost of every pitch a major league baseball pitcher throws during a regular season. However, we can’t measure the value of every pitch. One pitch could give up a season-ending home run, while another pitch could make the final out to win the World Series. Certainly, the game-winning pitch is more valuable to the fans and the winning franchise than the game-losing pitch. To make matters even more complicated, if you were to ask 20 fans to place a value on that game-winning pitch, you might get 20 different answers. Value, like beauty, is in the eye of the beholder.
Similar to each pitch, some customer service calls have low value to the customer and the organization, while others have high value to both. Also, we don’t know what the customer does once he gets off the phone. If the customer experience is an exceptional one, does he share it with family members, friends, and peers? If so, how many? Will any of these people take action after hearing his positive experience? What kind of action will they take?
Some consultants go so far as to suggest that companies shouldn’t even consider return on investment (ROI) metrics as a reason to make a customer experience technology investment. They posit that it’s too big of an undertaking—there’s too much to consider, too many intangibles. There are the obvious intangibles—customer satisfaction and loyalty, employee morale and productivity, and brand recognition and reputation—but what about knowledge? A technology deployment could enable employees to make smarter business decisions about customers, but how do you determine the value of knowledge to an organization? It’s nearly impossible, especially when you consider that knowledge can be shared with multiple employees over an extended period of time.
Nonetheless, most businesses cannot start a customer experience initiative without the necessary approvals from senior management. To get these approvals, decision makers must first attempt to answer the following question: What’s the cost of doing nothing? More specifically, how much will doing nothing negatively affect sales and the bottom line as well as the aforementioned intangible considerations? Organizations should try to assess how all of these elements will be positively and negatively affected over one, three, and five years, if nothing is done.
If management determines that a technology investment is necessary, the decision often becomes an exercise in risk assessment. They often ask this question: What do we stand to lose if we invest in the flawless implementation of a particular technology? The short answer is the total dollar value of the investment, which often includes the technology, deployment, customization, integration, additional staffing, and training costs.
Often, the companies we profile in the Real ROI section of CRM magazine focus on the overall cost of the customer experience technology deployment and the time it will take to recover their investments. The more impressive examples illustrate how much their returns exceed their investments. Some areas that can benefit from a customer experience initiative include, but are not limited to, the following:
- sales numbers (e.g., changes in average deal sizes, increased revenue, number of customer wins and conversion rates, and shopping cart abandonment rates);
- marketing metrics (e.g., open rates, click-through rates, lead qualification, and loyalty);
- customer service numbers (e.g., average handle times and first call resolution rates); and
- overall business goals (e.g., customer satisfaction rates, cost savings, customer churn rates).
By focusing on the cost-recovery milestone, business managers can simplify their justification for a customer experience technology purchase, which frees them from the burden of thinking about the totality of ROI. For most companies, this is enough.
This post is part of the Customer Experience Professionals Association’s Blog Carnival ”Celebrating Customer Experience.” It is part of a broader celebration of Customer Experience Day. Check out posts from other bloggers here.