From fluff to measurable value: how to calculate ROI for customer experience

Manuela Burki, IMS Marketing Director

You can’t manage what you can’t measure. The elusive path to great customer experience, though paved with good intentions, is also littered with post-mortems on projects that did not prove their value. This is because companies do not consider incorporating ROI for customer experience into their strategy from the very beginning. While marketers are getting better at optimizing conversions throughout the touchpoints of their customers’ journeys, many still struggle with understanding the lifetime value of their customers, how their customer service affects retention, and why they consistently fall short of delivering a positive end-to-end customer journey.

This article is essential reading if your company is:

  • Struggling to link value creation with initiatives to improve customer experience
  • Unable to get sufficient management buy-in to drive organizational change
  • Skimming the surface of customer experience without improving end-to-end journeys
  • Chasing client retention rates but unable to prove increase in lifetime value of a customer

Understanding how your customers behave is a crucial first step in achieving a customer-centric organisation

Great customer experience starts with an understanding of who your customers are and how they behave. Data analytics and customer segmentation are vital starting points, but a degree of human intervention is essential to take a step back and look at what your brand is saying to your customers as a whole. Step into your customers’ shoes and navigate their paths to purchase by exploring the different channels through which audiences can reach you.

By confronting the same obstacles as your customers, your marketers will be in a better position to recognize their needs across the entire buyer lifecycle.

A little less confutation, a little more action please: Customer experience for today’s hypercompetitive market

However, customer-centric business models are not driven by marketing teams alone. True customer experience permeates every level of the business, across the entire organisation. In order to get sufficient buy-in and resource allocation to achieve change, it’s essential that companies understand how, and why, customer experience affects their competitiveness.

Managing your customer touchpoints is increasingly complex across an omni-channel strategy

A customer touchpoint is every interaction between your brand and user whether that’s before, during, or after a sale, whatever the channel. Understanding and mapping out all these touchpoints is key to building a customer journey that faithfully reflects how your audiences interact with you.

The more touchpoints you have, the more challenging it is for your brand to offer a consistent experience at every interaction. Few companies excel at putting customers at the heart of every interaction, despite studies that show that an overwhelming number of brands understand that competitive advantage revolves around customer experience (source: Gartner).

A siloed approach to customer service is the biggest barrier to great customer experience

Most brands that are fluent in digital marketing have already had success with optimizing conversion rates at every touch point. Marketers may even have enjoyed positive feedback in the form of polls or NPS surveys assessing how the company has performed in delivering a certain service. Yet these same brands struggle to increase the lifetime value of their customers and underwhelm at providing overall customer experience.

The fatal error companies make is focusing on individual touchpoints. In doing so, brands are failing to look at the big picture. It is how users engage after interacting with your brand at these various touchpoints that informs their overall experience.

Brands must move beyond a siloed approach and start a cross-functional, multi-channel review of the experience they offer to customers. A more holistic approach will allow brands to achieve a more consistent service across touchpoints and understand where parts of the journey may be negatively impacting their performance, even if these touchpoints perform well individually.

A little more bite and a little less bark: how to calculate ROI for customer experience

Not many companies would challenge the fact that customer-centric activities improve organisational performance. Businesses that succeed in putting customers first enjoy higher retention rates, lower customer acquisition costs, and higher employee satisfaction. Expectations often fall short, however, when it comes to the perceived benefits of customer experience strategies. Without reliable measurements on initiatives to improve customer experience, managers may pull the plug on resources or write-off projects as a failure, costing their companies dearly in long-term competitiveness. The solution is to ensure that marketing strategies effectively consider how to calculate ROI for customer experience.

It falls on marketing teams to convincingly build a case for their campaigns by making a clear link between customer experience and value. To do so, metrics must be put in place to analyze the different types of customer behaviour and the types of engagement that create value for the business. For a more accurate analysis, customers should be segmented into cohorts and assigned traits according to the value they generate.

Brands must then put in place review mechanisms that collect data about customer satisfaction. Collection processes should allow for meaningful comparisons to be able to identify trends over a period of time. Using this customer data, you can then analyze your customers according to whether they are satisfied, neutral, or dissatisfied. You can link this information to historical performance of your customers in order to be able to predict the potential loss in revenue when customers downgrade to ‘dissatisfied’ status, or potential gains to be won by moving a percentage of your customers up to ‘satisfied’ status.

Without being able to demonstrate the ROI for customer experience, brands will not secure the buy-in required to make a difference in how they are perceived by their customers. Building a solid link between value creation and customer satisfaction will facilitate future investment and ultimately improve brand competitiveness.

Are you looking to drive value by bettering customer experience?

  1. Read our article on how to use Net Promoter Score to successfully measure customer satisfaction
  2. Get in touch with us at info@imanagesystems.com for a free consultation on how strategic digital marketing can get your brand heard above the noise
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