Just about every business leader today knows the importance of delivering a great customer experience. Yet there’s a yawning gap between knowing this and having the ability to deliver on it. Why is that?
Customer Experience Isn't Getting Any Better
Across the board, while the importance of CX to winning in the market continues to increase—with Forrester reporting that CX leaders enjoyed a 17 percent compound average growth rate from 2010 to 2015, compared with 3 percent for “CX laggards”—the reality is that CX delivery isn’t getting any better.
Now we’re seeing the impact of this performance gap on the market. Organizations are competing on price again, simply because they haven’t figured out how to operationalize the competitive advantage of delivering a great customer experience.
In the retail market, price wars have broken out among companies like Walmart, Target and Costco. And the financial services sector is experiencing price-based competition as well, with JPMorgan now offering free trades, heating up the battle for new investors and millennial customers, according to the Wall Street Journal.
Build a Business Case for CX
How can companies do better? How can they bridge the chasm between market expectations, aspirations and reality?
It’s crucial to start by building a stronger business case around CX, one that will convince the CEO, the board of directors and, particularly, the hard-nosed, profitobsessed chief financial officer. You need to build a case based on ROI and quantifiable metrics. It’s not enough to say, “We will boost revenue if we improve the customer experience.” You have to get specific. Only with a convincing business case can you get the funding required to deliver an effective customer experience.
To understand this, consider why CX efforts fall short. The main reason is that companies tend to approach CX as tinkerers rather than conquerors. They tweak instead of committing to full-blown transformation. They may add a survey tool that provides voice-of-the-customer insights. But do they operationalize their findings? Many companies have initiatives, but very few tackle CX in ways that are tied lockstep with their business strategies. Very few truly put the customer at the center of everything.
Why do companies tinker when they should conquer? Because executives are reluctant to invest unless they see a clear and compelling ROI.
Quantifying Returns on CX Investments
Many companies find it difficult to measure returns on their CX investments because it’s not immediately clear how to tie qualitative improvements in the customer experience to financial outcomes. Yet we have found that it is possible to achieve this in a disciplined way by following four key steps:
- Establish a CX value framework: To establish your CX value framework, identify the key components of enterprise value—such as customer trust, profit margin and cost to serve— then pinpoint the drivers behind each. Once you have defined the drivers, develop a portfolio of activities the organization can pursue to improve them.
- Integrate the framework with planning and portfolio development: The CX value framework needs to be integrated with continuous strategic planning and portfolio development, to ensure that investments are aligned with CX value improvement from the top down. Once a portfolio is established, this will ensure that value is not eroded during project delivery and harvesting.
- Establish an iterative transformation program: By iterating, you can incrementally quantify the value you’re delivering. The goal should be to demonstrate that the theoretical value laid out in the business case is yielding the predicted profits. This will help you obtain the ongoing funding needed to build superior CX.
- Define key performance indicators (KPI) that enable you to measure improvements: Metrics should include measures of customer and employee satisfaction and effort, which you can quantify through surveys. They should also include efficiency statistics, such as time per task and time spent on value versus time spent on task work, to be gauged through employee discussions and by evaluating benchmark process improvements. The resulting data can be correlated to cost savings and revenue growth, producing defendable ROI figures demonstrating the value of CX to the board and the members of the C-suite.
Read the full article in CMSWire.