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Finding the ROI of Customer Experience

Measuring the ROI of Customer Experience

Many business leaders believe there’s a correlation between providing customers with great experiences and positive changes in business performance. After all, when customer experience metrics such as customer satisfaction and Net Promoter Score (NPS) tick up, increases in profits, revenues, and other business results usually follow.

A study by Forrester Research and Watermark Consulting helps bear this out. The two companies tracked the six-year stock performance of  companies on Forrester’s Customer Experience Index. Even during the recession years of 2007-2012, customer experience leaders averaged
double-digit gains in stock performance, beating customer experience laggards by an impressive margin. Despite these findings, many organizational leaders struggle to connect the dots between customer experience and business outcomes.

Indeed, nearly half (47.3 percent) of the nearly 100 customer experience professionals* surveyed in the 2014 1to1 Media/Temkin Group study, Measuring the ROI of Customer Experience, say that their organizations are either “ineffective” or “very ineffective” at measuring the business impact of customer experience. There are several factors contributing to this disconnect. Part of the problem is that many organizations (43.7 percent) have trouble building models that connect customer experience metrics such as customer satisfaction and NPS with changes in business results (revenue, profits, share of wallet). Other challenges include gaining consensus on the right customer experience metrics to use (15.5 percent), presenting the information in a way that resonates with senior management (11.3 percent) and the ability to collect customer and business data from across the enterprise (9.9 percent).

“One of the problems is that the people who focus on customer experience don’t talk in the language used by senior management,” says Bruce Temkin, customer experience transformist and managing partner at Temkin Group. “Customer experience leaders might point out that the company improved customer satisfaction by 23 percent or NPS by 15 points. That’s great, but if I’m a senior executive, I care about market share or growing sales quarter over quarter. Those are the things you need to communicate to them regarding the ROI of customer experience.”

In addition to talking the talk, customer experience leaders can also benefit by taking a more systematic approach to calculating the ROI of customer experience. This often requires organizational leaders to take a step back and examine how they currently measure customer experience, whether any changes to these measurements are needed, and whether this is being calculated with the most appropriate business metrics.

* 89 people completed the online survey in July 2014.