Demonstrating the Return on Investment (ROI) of customer experience is only important if you want your company’s leadership to continue investing in your customer experience program. And since a high-quality customer experience (CX) is likely the most effective strategy for any business to promote customer engagement, spending, and loyalty, leadership buy-in is critical.
Earlier, when we interviewed 102 CX experts and asked them what are their biggest CX challenges, more than 50% of the leaders said that brands tend to lose steam midway and abandon a focus on CX when they don’t get a quick return on CX investments.
In the same report, Michele Steele, creative experience advisor at Reaction, said:
“It’s hard to measure the squishy stuff, and story tell the impact you’re having to the c-suite and board because it’s about loyalty and how people feel. It’s not also easy to hear the real story of how their business is performing from the customers’ eyes and adjust company priorities accordingly”
Marketing leaders can show the outcomes of their campaigns in terms of the number of leads, and sales leaders can present the result of their efforts by the number of conversions, but how can CX leaders show the success of their initiatives?
Related: 102 CX Experts Reveal Their Challenges and Actions, from Clootrack (email required)
Showing The ROI of Customer Experience Is Difficult But Not Impossible
Many CX leaders are in a dilemma when measuring the outcomes of their CX investments since they do not have a clear solution on how to measure the ROI of each initiative they have implemented.
This is due to multiple reasons, including:
- Not having a clear understanding of the metrics required to measure the returns.
- Difficulty showing the direct correlation between the initiatives they have taken and their results in terms of revenue.
- Inability to show the immediate impacts of their CX initiatives on customer satisfaction, loyalty, and advocacy.
- Not having complete access to data relating to their customer journeys across all channels and touchpoints.
- Unavailability of relevant resources, including budget, technology, and personnel, to measure the impacts.
Finding real-life examples of companies that have successfully translated improvements in customer experience due to their CX programs has been difficult, although not impossible.
When done well, investing in customer experience yields a significant return on investment. The goal is to use statistics to demonstrate the ROI of CX and tell a compelling story.
Related: Customer Experience Metrics: The Top 5 Ranked
20 Global CX Experts Reveal How They Proved the ROI of Customer Experience Programs
Posed with a business challenge of gathering evidence that it is possible to show the ROI of the CX investments, we interviewed several global CX leaders from leading global brands to learn about their challenges in measuring the ROI of their CX initiatives.
We wanted to understand how they could quantify these initiatives’ impact on their businesses.
We compiled our findings into a report, “Clootrack’s Global CX ROI Study 2023,” featuring 20 real-life examples of successful CX initiatives linked to tangible business outcomes.
- A retail company was able to increase sales by 30%
- A fintech company was able to improve its NPS by 15 points
- A software company was able to decrease churn by 66%
These real-life examples demonstrate the significant impact that CX initiatives can have on a company’s financial performance. By investing in the customer experience and tracking the results, companies can achieve impressive returns and secure the funding they need to continue investing in CX.
How to Prove the ROI of Customer Experience to Leadership
There are numerous approaches to justify CX investments for each CX program.
One method is to link the CX program’s results or improvements and evaluate the return on investment. Another approach is to link CX activities to their beneficial impact on the end customer. Soft ROI is just as crucial as hard ROI.
Related: Why Customer Experience Matters
While assigning a specific number to CX may be challenging, there are a few ways you can employ it. Here’s how to get started:
Present the CX Program to the appropriate stakeholders
Only the appropriate stakeholders can make decisions about CX programs. Determine what is giving your C-suite headaches. What issues are they coping with? What is it about a CX that worries them? Finally, what solutions do they hope to attain with customer experience programs?
Before deciding to invest in your CX program, you’ll need stakeholder approval. To do this, you must understand their fears and apprehensions regarding the CX program. Demonstrate that your CX program may alleviate their anxieties and headaches.
Create your own CX ROI model
Since there are numerous methods for measuring the ROI of CX programs, it is critical to develop an ROI model tailored to your organization to demonstrate that ROI is concrete and your efforts to improve customer experience can be monitored.
We saw that many CX executives used operational measures such as revenues, renewal rate, churn rate, customer lifetime value, basket size, and so on to develop their own model to analyze ROI.
Verify that the appropriate VoC is captured
According to Blake Morgan, CX Futurist, in a Forbes article, “To demonstrate the ROI of customer experience, changemakers must connect money and data to important components of the customer journey.”
Many firms lack access to consumer feedback, which is critical for determining the ROI of customer experience (CX). In some of the preceding situations, we observed that those in charge of CX initiatives conducted the necessary analysis with sufficient VoC data on customer perception, such as NPS, customer contentment, or propensity to renew.
You can’t improve something if you can’t measure it
Organizations are often not yet calculating ROI, although they intend to do so in the future. Companies implementing CX programs saw increased customer happiness, lower turnover, and improved website experience.
Nevertheless, you won’t know the exact impact of your CX program unless you measure it. As a result, it is critical to measure the outcomes of your CX campaign.
Concentrate on Long-Term Customer Experience Results
CX professionals have been unable to calculate ROI in several scenarios mentioned above. Because it is a new project, additional time is required.
Leaders are frequently under pressure to produce short-term financial results. Yet, it is critical to consider the long-term benefit of increased CX investments, which will eventually boost business value through customer loyalty and advocacy. Link CX investments to greater long-term value rather than just monetary gain.
The Right Technology is Crucial
In a sophisticated environment, brands must consider multiple interaction channels to get solid insights. The most effective solution is using an analytics tool or developing your tool that gathers customer data from various touch points like sales, social media, survey scores, etc., and produces actionable insights. With those insights, brands can find customers’ issues, find the right solution, and place them at the right point in the customer journey.
Keep in mind it is a journey of continuous improvement
CX projects cannot be a one-time initiative. CX initiatives have been established in some circumstances but have yet to provide demonstrable outcomes. They are, however, airing it continually and not stopping it in the middle. Initially, the results will be felt as soft ROI, but as the program evolves, there will undoubtedly be hard ROI.
Increasing CX Investment by demonstrating returns
Linking CX measurements to top-line revenue success can be effective, for example, by measuring whether NPS advocates really promote you and the impact of this. Nevertheless, it is not always clear how CX performance corresponds to financial results. Executive leaders must direct their CX teams to use data to demonstrate the ROI business case for CX to win and maintain support and resources.
Despite proof that investing in CX improves customer experience and addresses business concerns, CX leaders continue to struggle to quantify the financial benefits using standard ROI metrics.
CX leaders must think in terms of convincing and truly get to the heart of what the C-Suite needs to hear.
- Consider how we may best give company value.
- What will the return on our investment be if we do this?
- What measures will show that we made the proper decisions?
Ultimately, companies must understand that customer experience is an investment – not an expense. By investing in customer experience programs, a company can differentiate itself and build long-term customer loyalty and engagement. With the right metrics, companies can demonstrate the ROI of customer experience programs and make a case for investing in them.
To read the complete report on how the CX leaders proved the ROI of their CX investments, you can download the report here: Clootrack’s Global CX ROI Study 2023. Image courtesy of Clootrack. Uma Bhat is the VP, Content Strategy & Analysis, at Clootrack. The owner of this site works with Clootrack on the CX: See Why video series.