Two major threats to superior customer experience

  1. ROI becomes IOYInadequacy of connection between customer experience investment and financial benefits.

 

It is very hard to provide direct, causal, linear connections between investment into customer experience management and growth of revenue, reduction in operating cost or improvement of profit margins. To be fair, there is plenty of evidence that uses correlations to illustrate the impact of customer experience improvements on:

However, none of the evidence demonstrates an indisputable cause and effect relationship that could be attributed by non-believers to other variables like successful marketing campaign or state of economy. The certainty of money outflow to fund customer experience improvements is hard to overcome by uncertainty of outcome and time horizon.

 

  1. The practice of estimating operational ROI without evaluation of impact on customer experience.

 

Utilization of this methodology is too common and often constitutes the triumph of efficiency over effectiveness. While it simplifies estimation and measurement of isolated results for a specific business unit, it completely ignores the effects of the proposed investment on the overall goal of any business:

“The purpose of business is to create and keep a customer” Peter F. Drucker

Applications of this methodology are responsible for:

  • cutting costs of customer support labor at the expense of an increase in customer churn rate. While it could be profit margin positive for the next few quarters, this investment threatens the long term viability of the entire business.
  • cutting costs of market research at the expense of increasing the product return rate and poor market adoption.
  • paying minimum wage plus commission on the retail floor to the detriment of customer experience and destruction of loyalty.

Customer experience management is a holistic discipline which means that a variety of factors, internal and external, can influence the perception of your customers at any given period of time. Top level customer experience metrics cannot deliver definitive proof that cx investment into specific improvement generates factual return within a specific period of time. Detailed analysis that identifies and measures components or attributes that influence the top level customer experience metric, can enable direct association with specific operational KPIs. The correlations between a department KPI and the associated CX attribute trends should be monitored monthly or quarterly for possible diversions that serve as alerts. Most importantly, no operational investment ROI should be estimated without thorough examination of its potential impact on customer experience.

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12 Responses to Two major threats to superior customer experience

  1. Richard Helm says:

    Let us put it in simple terms. Declining customer base…lower sales and less profit. No customers..no sales, no profit and close the doors.

  2. Matthew Teresi says:

    Customer experience is key in fostering long term repeat customers. If you offer just adequate experience the customer can get that anywhere. Which means they will likely shop elsewhere. Exceptional experience means not only will they have a good reason to repeat, they will also likely refer others to you.

  3. R. Dale Miller says:

    The millenniums are 100K in debt, they prefer not to own anything and will be the downfall of retail as we used o know it. The middle class cannot prop up the economy any longer and the Feds are killing large and small business with their think tank policies that find their way into law, namely healthcare and other domestic spending,..Leave it to Beaver went of the air in 1963 and so did American prosperity.

  4. Ioannis Bimpiris says:

    The only threat in my humble opinion is the mindset created by this unquenchable thirst to spend billions on market research. If you want to achieve excellence in customer service, ask your customer. We are all forgetting what customer satisfaction is all about. Well, its about the customer. Talking to customers, actually listening to their wants and needs will go a lot further than any amount of market research will achieve. Inspire your teams to be proactive at all levels and you just might be supersized at the results. People create customer service excellence not market research.

  5. Sunil Seth says:

    Not a big fan of decision making by financial modeling due to use of “hurdle rate” concept, assumptions on valuation of intangibles which are suspect to manipulation and also not enough financial modeling historical data, benchmarks/standardized practices to evaluate experience. Given that scenario, I would suspect Decision comes first and Financial Justification comes later.

    But this is a flaw in experience modeling process and conceptually I would agree with you on the need to look at financial viability as well as achieving consistency over Wow!

    Of course I could be outdated in my analysis of situation as things keep changing very fast in this space so don’t kill me yet 🙂

  6. Sunil Seth says:

    Digital Strategy, Analytics & Customer Centricity Expert
    Bean counting approach is an exercise in self assurance but not necessarily one that proves success. Customer’s wow experience should be company’s core business and NOT something extra that needs business case justification.

    The real question bothering people is that can they get away with providing just an average experience… They just have to achieve this quarter’s numbers so why bother for WOW!

  7. Terry Grapentine says:

    Do customers really want “superior customer service?” Probably depends on the product and situation.

  8. Lynn Hunsaker says:

    I appreciate your closing statement, Greg: no operational investment ROI should be estimated without thorough examination of its potential impact on customer experience. That should be applied liberally, to things expected to increase revenue, reduce cost, retain employees, and on and on. It’s a matter of making company-alignment-to-customers an over-arching context for running the business. And that’s the crux of the issue for CX/$ analyses: to what extent did the CX effort align to customers’ well-being relative to the investment. This thinking cuts through superficial and micro fixes, two big stumbling blocks widespread in current practice.

  9. GregoryY says:

    Thank you Lynn. I truly believe that CX investments should be profitable because otherwise they are not sustainable. Boilerplate ROI methods currently in use, are designed from inside-out perspective and focused on departmental budgets. They are antiquated and should be reviewed with customer focus in mind to be effective.

  10. GregoryY says:

    By “superior” I mean consistent and frictionless customer experience. I have never met a customer who does not want that.

  11. GregoryY says:

    Two wrongs don’t make it right. Management has fiduciary obligations to investors, employees and the customers to keep the company solvent. Investment into “wowing” customers without modeling financial impact is not going to help anybody. I say it has to be done and done right. By the way I think most customers would trade “wow” for CONSISTENT delivery of frictionless experience that meets their expectations any day of the week.

  12. GregoryY says:

    Not sure how talking to customers does not qualify as market research. Although listening to what customers have to say is by far better method of customer research than talking to them or surveying them.

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