Thank you to everyone that participated in the survey after Lorraine’s blog post from March 16,...
What is the ROI of Customer Experience
“Stellar customer experiences are good for business.” - Captain Obvious
But businesses like numbers. And convincing leadership that investments in customer experience (CX) improvements will inevitably raise the question, What is the return on investment (ROI)?
Of course, this isn’t an easy question to answer. It requires accurate data and analysis, and if your business doesn’t have a track record of CX investments yet, you don’t have a baseline to compare it to or some industry benchmarks to get a sense of what you can expect. How can you get past the perception that CX is nothing more than window dressing and lacks any real quantifiable impact on revenue?
Research into the ROI of customer experience
Here is one place to start: the XM Institute at Qualtrics recently released its Global Study: ROI of Customer Experience, 2022. After surveying 24,000 consumers across 24 countries, here are some high-level findings:
- Consumer satisfaction impacts key loyalty behaviors. People who are satisfied with their experience are more likely to trust, recommend, and buy from a company again.
- Consumer likelihood to recommend is most impacted by consumer satisfaction. Customers who have had a 5-star experience are 3.6 times more likely to recommend it, 3.3 times more likely to trust it, and 2.6 times more likely to buy more than customers who have had a 1-2 star experience.
- The impact of satisfaction on loyalty metrics varies by country. Looking at the gamut, German consumers’ likelihood to recommend a business increases by 6.3x after a 5-star experience, whereas Chinese consumers’ likelihood to trust, recommend, and purchase more increases just 1.7x.
- Banks struggle the most with loyalty after satisfying experiences. Banking customers who have 3 to 5-star experiences are the least likely to recommend and buy more from banks. Only 64% of banking customers would buy more after a 5-star experience, compared to 86% of online retail customers.
Circling back to another Captain Obvious-type observation, the study confirms that CX correlates to:
- Purchasing more
- Recommending a business
We know this, but by how much? The study does put generalized multipliers on each of these, segmented by both country* and specific industries, including: airlines, banks, higher education; credit card providers; department stores; fast food; government agencies; health insurance; hospitals/medical clinics; Internet service providers; mobile phone providers; online retailers; parcel deliveries; property insurance; public utilities; streaming entertainment; and supermarkets.
Of course, Qualtrics’ XM Institute isn’t the only organization conducting useful research on customer experience ROI. Forrester published a report, The Business Impact of Investing in Experience, which finds that experience-driven businesses grew revenue 1.7 times faster than other companies in 2020 and grew customer lifetime value by 2.3 times. A Watermark Consulting 2021 report found that businesses defined as customer experience leaders saw their stock perform 108 points higher than the S&P Index 500.
Generalizations and benchmarks are helpful for back-of-the-napkin work. But true numbers for your business and true transformation require hard work.
How to calculate CX ROI
Qualtrics, the industry leader in customer experience solutions, laid out how to build a business case for CX. They propose four stages to build your own CX ROI calculator:
- Define your CX objectives. Are you going to track net promoter score (NPS), customer satisfaction score (CSAT), or something else?
- Establish a CX baseline. This will enable you to know how people with different views of your brand act.
- Calculate the CX value. Use information from step 1 and 2 to determine the business value of improved CX.
- Subtract CX operating costs. The formula is simple - Expected Revenue - Operating Costs = ROI. Calculating it is a little harder.
Read their full article with all of the detailed steps and the associated research here.
What are your next steps?
At Farlinium, we can help you. Our unique ROI-driven approach helps us provide an end-to-end solution for understanding customer feedback and driving business value. We utilize Qualtrics’ industry-leading suite of services to listen to the Voice of the Customer across a wide range of sources, analyze that data to find actionable insights, and help you leverage those insights to increase revenue, reduce cost, and improve customer satisfaction.
*The survey included customers from: Australia, Belgium, Brazil, Canada, China, France, Germany, Hong Kong, India, Indonesia, Italy, Japan, Malaysia, Mexico, the Netherlands, New Zealand, the Philippines, Singapore, South Korea, Spain, Thailand, the United Kingdom, the United States, and Vietnam.