A Return on Investment (ROI) calculation is a foregone conclusion for any person working in business today. But one area that doesn’t get linked to an ROI often enough, is the investments that are associated with Customer Experience. All those people who work in Customer Service and Experience know how difficult it is to equate ROI to improvements in this area. Therefore when I was approached by the Economist Intelligence Unit to offer my thoughts on their new research of 832 companies in Europe, North America and Asia, it piqued my interest.
In my post, “10 Must-Dos for Chief Customer Officers,” I talk about what the champions of customer experience in any organization need in order to get the job done well. The good news is according to the research 83% of companies believed that customer service is either very or moderately important to their financial performance. A third of companies have defined a link between ROI and Customer Experience and 41% are working on defining the link. Which category does your company fall into?
Based on a report, ‘Service 2020: Return on Service’ published by The Economist Intelligence Unit this week, I have 3 learning’s I would like to share with you:
#1: Cut through the Clutter to Get a Clear Picture.
As the report outlines there is no “industry standard” for how to measure how your customer experience performance is connected to the bottom line. The bad news is that there are about 1000 different ways you can link this. The key issue is people need to believe the results. The good news is that the data likely already exists in your organization you just need to find it and define the formula that works for you.
The Economist Intelligence Unit report outlines the growth of Net Promoter Score® (NPS®), which is a score that indicates how likely your customers are to recommend you to family and friends. While this is a good starting point and relatively simple to measure, NPS® doesn’t adequately measure the emotional and subconscious part of the experience, which play an important role in every customer’s experience.
#2: Choose a focus for your experience improvement investment
More than one of the experts that were interviewed for the Economist Intelligence Unit agreed that an organization must be able to make a direct connection to a performance metric in order to show a return on investment effectively. But in order to choose the right performance metric, you must also choose a focus for your investment dollars and connect the two. Many times organizations just give the Customer what they want. In research we undertake for clients we point out the big difference between what a customer says they want and what drives value ($) the two can be very different; we define this as the Emotional Signature. To get ROI you need to focus on value.
The report outlines Customer trust was the metric most of the companies in the report chose as their focus, followed closely by repeat purchase intent. So if that is what you want to measure, invest your dollars on the areas that directly affect customer trust and/or repeat business behaviors.
Now that you have identified a goal and a strategy, you have focused your efforts on an area where you can measure your success. But instead of a feeling or a couple of great letters from happy customers to present as evidence that it is “working”, you have hard numbers that can be tracked and reported to management, a far more effective way to be heard and prioritized in today’s corporate culture.
#3: Take it to the Top
In my post, “10 Ways to Check Your CEO’s Real Commitment to Improving Your Customer Experience,” I list ten questions to help you determine where your organization is as far as making customer experience a priority. One point I make in particular that will be helpful is to look at their actions that support their words. Start with this to figure out ways that you can begin the process of winning over the most senior levels of your organization.
Too many times, the senior levels of management lack a true commitment to the process (read: expense) of improving customer service. Unfortunately, this is because too often there are not any hard numbers associated with these expenses. By choosing a focus of investment and measurement, however, you can win them over and make their promise to improve and support efforts for customer experience improvement (warts and all) more than just words.
Most companies know that customer experience is important. So of course when you ask them if they are focused on it, you will likely get an affirmative answer. But if you dig a little deeper, you often find that while they have the right words, they rarely have any action to back them up. Why? It’s simple: they don’t know how to make the connection between an investment in customer experience and an increase in profits. Having said this there are areas they do support where proving the ROI is difficult for example leadership training. It can be difficult to find figures that prove ROI on Leadership training but companies instinctively know that it’s a good idea – which it obviously is – and will spend money on it. With customer service, they don’t really believe it’s important.”
There are a bunch of reasons why this happens. It can be that there are too many metrics running at any given time. It could also be that no one really knows where to look for a connection between the expense and the profit. Another reason is that often the senior management team doesn’t really believe that it matters. But whatever the reason has been in the past, the future of business requires a new approach to link profits to the expenses associated with customer experience.
The Economist Intelligence Unit’s webinar, “Return on Service” is covering the reasons behind these strategies in more detail. I encourage you to read the report or watch the webinar to help you in your efforts this year. Linking your customer experience to the bottom line will help you avoid the same mistake that most of your competitors will make this year.
What does your organization do to equate ROI to Customer Experience?
|Colin Shaw is founder & CEO of Beyond Philosophy, one of the world’s first organizations devoted to customer experience. Colin has been recognized by LinkedIn as one of the top 150 Business Influencers in the world. He is an international author of four best-selling books on Customer Experience. Colin’s company, Beyond Philosophy provide consulting, specialised research & training from our Global Headquarters in Tampa, Florida, USA.
Follow Colin Shaw on Twitter: @ColinShaw_CX