In the era of the customer, companies are adopting digital initiatives and making changes to established business models, processes, and systems to become customer-centric organizations. But when it comes to quantifying and communicating the ROI of a great customer experience to other stakeholders, CX leaders are scrambling to provide answers, finds a new report from West Monroe Partners called Quantifying the ROI of Customer Experience.
The CX conundrum
The importance of quantifying and justifying any investment is not new—marketers have long faced similar pressures. And like marketers, quantifying the ROI of CX improvements is complicated by the breadth of engagement across multiple channels over the customer life cycle. Since businesses are coordinating functions from sales and marketing to customer care, identifying the critical touch points is difficult.
And while customer experience leaders are tracking many metrics and KPIs, such as churn reduction and customer lifetime value, most rate their ability to communicate impact to the C-suite as only a 5 out of 10, with 10 being highly capable.
To further complicate the matter, CX leaders have a short time frame to show progress. From a poll of 75 customer experience professionals, 52 percent of respondents indicated that they have less than a year to connect their investments to top-line financial benefits. Only 24 percent have the luxury of a one- to two-year window.
The short time frame suggests CEOs are prioritizing quick wins, says Paul Hagen, a senior principal with West Monroe Partners and co-author of the report. “In a world of quarterly earnings reports, it’s not surprising that leaders are pushing for fast results,” he says. However, prioritizing fast results makes it difficult for companies to successfully implement more ambitious initiatives, such as those that require cross-functional collaboration.
“Customer experience takes time,” Hagen adds. “In order to really be able to differentiate, you've got to keep at it for a while. But if you haven't brought your leadership along or your leadership doesn't quite understand what the trajectory of customer experiences is, you’re limited to quick wins.”
Linking CX to ROI
What can CX leaders do to better communicate the value of a great customer experience to other stakeholders? The first step is to observe the stakeholders and understand their needs, Hagen explains. Just as it’s important to understand customer expectations, the same approach applies to executives. “What makes them tick, what terminology resonates with them, and how can customer experience efforts help them achieve their objectives?” he says.
CX leaders should be prepared to tailor financial benefit explanations according to the specific stakeholder. Managing expectations is also critical—CX leaders should segment or “tee-up” their customer experience efforts by overall maturity, especially for leaders who are looking for fast results.
The survey found that most respondents did not work closely with the CFO on their CX efforts. This is a missed opportunity, the report points out, because if CFOs see the connection between customer experience and business value, they can be an advocate for such measures.
What’s more, CFOs can provide guidance on the metrics and criteria that are used to make investment decisions. They can also suggest specific terminology to help frame the business case for customer experience investments.
Collaborate to fill data gaps
Data is obviously essential to proving ROI but the two biggest obstacles to demonstrating CX value was access to data, followed by data quality, according to respondents. The key to overcoming this obstacle is collaboration and communication, advises Hagen. “If you don't have sufficient data or a repository, you need to work with other people in the organization on consolidating your data,” he says.
Collaboration ideas include working with the data management team to prioritize data sources, partnering with finance to create a task force on data, and reaching out to marketing or sales to piggyback on data quality initiatives that are already in the works.
As important as it is to deliver exceptional CX, failing to communicate the bottom-line benefits of those efforts to key stakeholders jeopardizes future improvements. CX leaders must tighten their game and that includes being data-driven storytellers who know their audience.