How Much is Good CX Worth?

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It’s hard to find an executive who does not believe in providing a good customer experience (CX). Most will also agree that good CX is financially an advantage. They may cite the value gained in repeat business, reduced cost of sales, and less service touch-points. Motivated employees may be cited as an additional benefit. In fact, CX can be the key differentiator for fast growing Indian companies today. According to Gartner, 50% of marketing investment is now being spent on improving customer experience.

Why then do so many organisations fail to invest in a good customer experience? Is it because they think it is difficult to implement or is meant only for large enterprises? Those are the myths and technology led CX is not only easy to implement but even cost beneficial and helps to clearly establish an edge for the start ups as well as for mid market players.

Another issue that probably interferes in CX being a priority for organizations could be though we all intuitively understand that customer experience is good, we lack the tools to link CX to financial impact. More so as rather than individual elements a good CX should be a holistic, integrated customer journey, and that is difficult to measure.

Can we be sure that CX can help the financials of mid-level enterprises? To answer this question, let’s refer to research conducted by Medallia and published in Harvard Business Review. They took the revenue from two organisations – one a transaction-oriented business and the other a subscription-based one. While transactional businesses focus on return frequency and spend per visit, subscription-oriented industries depend on retention, cross-sell, and upsell.

After controlling for other factors that drive repeat purchases in the transaction-based business the research found that customers who had the best past experiences spend 140% more compared to those who had the worst past experience. That’s a tremendous upside for investing in the customer experience!

What about subscription businesses? Would they benefit too? A subscriber that has the poorest experience has only a 43% chance of being a subscriber a year later. On the other hand, a subscriber who gives one of the top two experience scores would have a 74% chance of remaining for at least another year.

A survey conducted by Oracle among 1300 senior executives across 18 countries also highlights the importance of customer experience. Executives estimated that their potential revenue loss for not offering a positive, consistent, and brand-relevant customer experience is 20% of their annual revenue. Clearly whichever way we look at it – cost-savings, revenue gain, margin improvement or loss avoidance, there is a huge upside to an improved customer experience.

What can be measured gets done, so it is imperative to find ways to increase the measurability of customer experience improvements and to tie it back to business goals.

Find money for what matters

Customer benefits are not made equal. Use research to find out what matters most to your
customers. Then consistently invest in this feature/service/benefit. For example, an airline would have to create a hypothesis around benefits such as seat pitch, food choices, on-time record, frequent flyer program and explore which ones carried the most weight with customers.

Verify the linkage

Use historical data to verify that the right attribute has been chosen. In situations where the brand has performed well on the chosen metric – as per customer feedback – we need to revisit the data to see if it has led to a better business outcome.

Map the most valuable customer journey(s)

Once the most important customer journeys have been identified we need to look for ways in which we can deliver a flawless experience. Is it possible to eliminate current pain points in the journey? Is it possible to deliver it in a way that makes it a unique differentiator? One way to find out which bits of the experience journey are current pain points is to review which parts of the process generate the most number of customer-service calls. Bringing that number down is not just good for customer experience but also reduces cost to serve.

Good CX can further a business’s marketing growth. By creating a reputation around good CX, the business’s attempts at marketing will get a wider, more positive reception. CX is typically a multi-departmental transformation program. It is easy to get bogged down in operational difficulties and shelve the program. The way around this is to break up the project into quick wins. Create a roadmap that balances long term goals with short term success. Chances are that with this metrics-oriented approach you will find the pot at the end of the rainbow.

Summary

Good CX is a financial advantage. Not only is it easy to implement, but it’s also cost beneficial and established an edge for start-ups and mid-market players. Customers with good past experiences are more likely to make more purchases as well as subscribe to the business. Using research and historical data to will help find ways to increase measurability of customer experience improvements and tie it back to business goals. Once the most important customer journeys have been identified, look for ways to deliver a flawless experience.

Key Takeaways

1. CX can be the key differentiator for fast growing Indian companies today.
2. Good CX should be a holistic, integrated customer journey.
3. It is imperative to find ways to increase the measurability of customer experience improvements and to tie it back to business goals.
4. Use research to find out what matters most to your customers. Then consistently invest in this feature/service/benefit.
5. Create a roadmap that balances long term goals with short term successes.

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