Last updated on October 1, 2022
Customer Experience (CX) concerns the overall relationship customers have with your brand, in contrast to customer service, which is more incident-driven. You’re striving to affect how customers perceive and interact with you over their entire journey with your company.
To your customer, you represent one brand among many. Your job is to stand out in order to earn increasing numbers of loyal customers.
And CX is most definitely about the long game. Rather than offering relatively short-term discounts and deals, or reactively firefighting problems, the emphasis is on proactively improving the end-to-end experience customers have with your brand.
Look at it this way. Instead of staking your value on a forgettable take-out snack, you’re taking the time to perfect a five-course Michelin star experience. So how do you prioritize your customer experience needs and initiatives?
More than two-thirds of marketers say their companies compete mainly on the basis of CX (Gartner), and customers are willing to pay more for a great experience. That means CX teams have loads of money to spend, right?
Probably not. While there is an unlimited number of initiatives that you could choose to implement, CX still has a limited budget. Somehow you have to choose what to spend your valuable time and money on. But how?
Any initiatives you want to prioritize should further one of these four goals:
Improve customer loyalty – Most companies measure this using Net Promoter Score (likelihood to recommend).
Control customer churn – Minimize the number of customers defecting from your business.
Earn customer advocacy – Increase the number of customers who are willing to become brand advocates.
Boost revenue – Note that by focusing on the first three, you will ultimately boost revenue.
You should spread your initiatives between these goals. You also have to balance the needs of your business with the needs of your customers in order to prioritize customer experience initiatives effectively, and make peace with the fact that you only have limited time and resources.
HBR demonstrates why too many companies are wasting resources trying to “delight” their customers when they should be aiming to reduce customer effort. You need to remove obstacles and smooth interactions, then measure your initiatives using the Customer Effort Score (CES).
We’ve considered the goals of CX. Now it’s time to look at the factors that affect how much each initiative is worth to the business. Any action you take is going to have costs and benefits.
Here are the business needs:
Cost to fix – how expensive is it going to be to make this change?
Time to fix – how long is it going to take to achieve your goal?
Effort to fix – how much effort will you need to invest?
Resources required to fix – what resources do you need to draw upon, and will it take away from other projects?
Impact to the business – what are the potential benefits to your business if you take this action, and do they outweigh the costs? Consider which initiatives will have the biggest impact and ROI.
The way to calculate the ROI of CX is by building a positive business case and quantifying the improvements you are going to make in monetary terms. You must understand how the changes you make influence customer behavior, and how this impacts your financial metrics.
Follow these steps:
Measure the customer experience using something like NPS.
Understand how improving this metric changes a critical customer behavior metric, like customer churn, repurchase rates, or Customer Lifetime Value (CLV).
Work out how changing this behavioral metric influences the financials, such as increasing revenue.
And of course, any CX initiative must bring some significant benefit to your customers. Consider:
The impact on the customer – what are the potential benefits to your customer if you take this action? Which interaction does it improve? How does your initiative make it easier to be your customer?
Customer segment – how important is the affected customer to your business? What value do they bring to the business that enables you to justify investing in improving their experience?
You should also classify the interaction you are aiming to improve on how they vary in importance to customers. Here are the categories:
Must-haves – interactions that are important to get right, but exceeding expectations here has no potential to improve customer satisfaction.
Selectors – what compels a customer to choose your company over another, where exceeding expectations has the potential to increase customer satisfaction.
Delighters – experiences that surprise customers with a high level of service, but only if overall service is already satisfactory.
It’s important to look at the combination of factors involved, and weigh the potential experience benefits to customers against the business’s need to turn a profit. Also, remember that what you need to do varies by industry: if it’s easy for customers to switch providers, then CX is more likely to positively impact revenue than in industries where it’s harder for customers to switch. In the latter case, simply providing adequate service is sufficient.
One way to ameliorate a limited budget is to prioritize your customer experience initiatives based on customer segmentation. You only focus your most valuable customers. There are a couple of ways you can do this.
For the Apostle Model, identify those customers who are the most loyal and the most satisfied. These are the ones you want to hang on to, since they bring the most value to the company.
For the Loyalty-Profitability Model, identify those customers who are the most loyal and the most profitable. Those with a loyal attitude are 120% more profitable than other long-term customers who are loyal in behavior only.
As we mentioned earlier, it’s critical to strike the right balance of satisfying your customers but not over satisfying. KPMG has published research on CX Journey Economics, which instructs companies to control their CX spend while still striving to meet customer expectations.
Failing to meet customers expectations has twice the negative impact as delighting customers has a positive impact. They recommend investing wisely, so that exceeding customer expectations does not negatively impact profits.
The best thing you can do for your customer is to keep the channels of communication flowing back-and-forth. What are the improvements your customers are asking for again and again? What are their biggest pain points?
Open up multiple methods of feedback and take action on what you learn: close the feedback loop with your customers and measure success. When you make a CX change, record how this impacted customer behavior using a metric like NPS. Consider learning from insightful analytics with machine-learning-based text analytics. Seek clarification on the initiatives that helped your customers, as well as the ones that didn’t work out so well.
CX is so much more than just delighting customers. Everyone wants to invest in CX improvements, but it’s often difficult to justify the spend. Consider which initiatives have the most potential to impact customer effort for your priority customers. Place all your energies into striking a balance between improving customer satisfaction and controlling costs.
Make your case to company executives by highlighting benefits to both company and customers. Focus only on those customers who have the potential to provide more value to your business, and state clearly why those customers are worth it.
New CX initiatives have to be justified by a business case just like any other, but the value they provide is often murky. Calculate the potential ROI of your initiatives to make them more appealing to decision-makers.
Artificial Intelligence (AI) is used everywhere in customer experience management, especially in customer feedback analysis. Learn how you can benefit Natural Language Processing and why you should use a combination of machine learning and human intelligence.Read more
What is real-time customer feedback? Find out why you should collect and analyze customer feedback as it comes in real time.Read more
The customer is a mysterious creature. Just ask any business owner. And to achieve sustainable, long-term success, you need to understand what your customers want and need. One example is that, for a company to grow, it needs to convert one-off customers into regular patrons. And the only way to keep them coming back for […]Read more