Q&A on CX Measurement and ROI

Photo credit: iStockphoto/BlackSalmon

I recently cohosted the webinar How To Prove The ROI Of CX with Ben Brown, a senior consultant from Forrester’s Total Economic Impact™ (TEI) team. Ben creates ROI models for a living, so he was the perfect partner in crime for this webinar.

Participants asked us questions about customer experience (CX) measurement, business cases, and ROI. We wanted to share some of the answers with you. We’ve broken them up by theme, so feel free to skip around to what’s most relevant to you.

Using NPS in an agile environment

Q: In an environment of ongoing change and improvement, is NPS (Net Promotor Score) more of a tool to help us learn from changes/experiments or an absolute measure that we can use to judge against competitor benchmarks?*

A: I know of companies that have used NPS to evaluate new product ideas. But NPS is a pretty high-level metric, and there is some “noise” because it doesn’t measure CX quality directly. (Instead, it measures loyalty.) That’s why metrics more specific than NPS often lend themselves better to experimentation and A/B tests.

CX metrics for B2B and B2B2C

Q: What are the ideal leading indicators of B2B CX performance? How do you measure success at a B2B2C company, where customers don’t buy directly through you but through intermediaries and you have limited information about customer adoption?

A: It’s hard to answer this question, generally. In a B2B setting, drivers like product quality, quality of customer support, proactiveness of communication, and the value delivered to a customer matter. Depending on the business model, operational metrics can also be leading indicators of customer satisfaction (CSAT)/NPS. For example, Shell found that shipping on time and in full was a leading indicator for CSAT.

It’s also tough for B2B2C. Sometimes the intermediaries provide the information, especially if you offer to work to help them make the case for CX. If they don’t provide information, another option is to do an ad hoc study with end customers. I know it’s not always possible because you don’t always have their contact information. In the end, you might end up making two CX business cases — one for the direct and one for the indirect relationship.

Going beyond surveys

Q: Are there analytics to measure customer behaviors and experiences so we don’t have to rely just on what people self-report?

A: There are, on a transactional level. There’s technology that can tell us with a decent probability whether a call or website visit was a frustrating experience, for example. But at the “relationship level” — a customer’s overall experience across many transactions and journeys — it’s hard to find data to do that.

Understanding the timing of CX ROI

Q: What’s the typical amount of time that elapses between when a firm releases something new and when they can measure its ROI? It is it weeks, months?

A: It really depends on the specific investment being made and the specific product/industry. Some companies might be able to achieve near-instant results with weekly cash flows (maybe a B2C software company or retailer), whereas others may take months or likely years (annual B2B or B2C subscriptions, for example). Most Total Economic Impact models are done on an annual basis given that specific weekly and monthly cash flows can be hard to predict and may be subject to seasonal variation.

Demonstrating the Total Value of Investing in CX

Q: A lot of calculations capture just one piece of CX’s total value. How can you collectively state the case for significant investment in CX?

A: We hear this question all the time, and it’s always a challenge, especially when you make the case for CX or design. People just love statements like “Improving CX by X points yields a revenue lift of Y.” And at Forrester, we have done research to show what the business growth impact of improving Customer Experience Index (CX Index™) scores by one point is. In fact, we have built models for 15 industries.

If you want to do that for your situation, you can start by looking at a specific customer segment and find customers that score highly on your CX metric of choice and some that score low. Then, for each group, compare key customer behaviors that matter to your business success (like spend, cost to serve, etc.). Do happy customers spend more, cost less, etc. than unhappy ones? If so, that’s your CX lever. You can then try to extrapolate to the rest of the customer base.

However, we recommend to start making the case for improvements to a specific journey or touchpoint. It’s easier to do. And then you can add those results up.

Also keep in mind that sometimes it can be enough to prove that you’ll break even. So find out what kind of revenue lift or retention increase or call volume decline you’d need to make your CX investment worth it and then decide whether it’s realistic that that lift will occur. Once you have that and can prove that there is positive ROI, use your visuals, anecdotes, testimonials, etc. to tell that story.

Correlation versus causation

Q: Most of the analyses I’ve seen that tie customer experience to business metrics rely on correlation (not causation). Usually it’s something along the lines of customers that give a higher CSAT/NPS score have spent $X more on average than customers who give lower scores. Can you share successful examples of analyses that actually establish a causal link?

A: Yes. Mostly those are examples where a company was able to do a (more or less controlled) A/B test — for example, because they improve CX for some but not other customers or in some but not all locations, etc.

Keep in mind, though, that we often hear “correlation is not causation,” and it’s correct. But when you get that question, you should ask yourself (or others) whether there are other factors that are more likely than CX to have affected the change you have observed. Sometimes you will find that there isn’t much else that explains the change. In that case, even a correlation is useful. If there are other drivers, of course that’s a different story.

Turning customers into advocates and picking the right metrics for high-renewal segments

Q: What can you do to turn customers into advocates?

A: It depends on who your customers are and what the “drivers” of good experiences for your customers are. Forrester uses a framework that shows great experiences have to have: 1) effectiveness; 2) ease; and 3) positive emotions. You can use that framework to identify what the kinds of things are that you can do to improve one, two, or all three.

Q: What’s the best metric to measure if renewal rates are already high (99%) but customer spend isn’t growing much?

A: In this case, enrichment-related metrics would be a good way to go. But it’s also worthwhile checking how much money is at risk, even with such a high renewal rate.

The original article by Maxie Schmidt, principal analyst at Forrester, is here. * Net Promoter and NPS are registered service marks, and Net Promoter Score is a service mark, of Bain & Company, Inc., Satmetrix Systems, Inc., and Fred Reichheld. The views and opinions expressed in this article are those of the author and do not necessarily reflect those of CDOTrends. Photo credit: iStockphoto/BlackSalmon