Four Ways to Speak the CFO’s Language
If your company is not measuring these attributes in relation to your customer experience program, you’re missing an opportunity to make the revenue connection and speak the CFO’s language.
While every company is different, improvements in customer experience will almost always drive financial value principally in four distinct, customer-focused ways: sales, attrition rates, cost to sere, and new customer referrals. If your company is not measuring these attributes in relation to your customer experience program, you're missing an opportunity to make the revenue connection and speak the CFO's language.
These examples are of common metrics that have been tracked by companies for years. What's new here is that rarely are they tracked in tandem with customer experience metrics. Combining these metrics with customer experience scores may reveal potential correlations in segments, individual customers, or the entire customer base. And with enough data, the case can be made for a causal relationship.
This is the type of conversation the CFO and other financial executives want to have. Being able to put customer experience efforts into a familiar context will allow financial executives to understand the impact of customer initiatives relative to the business in both the short and long term.
Clearly, estimating the benefits of these metrics requires a certain type and amount of data, as well as the know-how to integrate data into a comprehensive cause-and-effect story. That's where the value of Customer Experience Value Analysis shines.
Sales: The most obvious benefit from high customer experience scores is increased customer purchase activity. This could be manifested in greater repeat sales of the same product or increased sales penetration into other product lines. The customer buys more frequently or buys a broader array of products than he has in the past. We've seen this occur in retail cases where greater sales are the result of more store and online visits and in larger and more diverse shopping baskets. Moreover, high customer experience scores are likely also correlated with larger purchases.
Attrition Rates: High customer experience scores can reduce customer churn, and thereby retain potentially jeopardized customer value. The typical retention metric examines how many customers that had purchased during one period purchased again in a subsequent period. A magazine subscriber that renews his subscription fits this definition, just as a car buyer who disposes of a vehicle and then purchases another from the same manufacturer is a retained customer. However, retention may also be measured as sustained activity with certain products. For example, retaining a bank customer could mean that not only has the customer kept a particular account open, but that he has maintained the balance in that account, or that he continues usage of a product like, for instance, a revolving line of credit, that actually drives its value.
Cost to Serve: Customer value can be increased as the result of high customer experience scores, if these scores are correlated with a lower incidence of customer channel contacts or the deflection of some customer contacts to lower cost channels. For example, a better customer on-boarding process may eliminate a large volume of contacts that result from new customer purchases. This happens frequently with technology products like in-vehicle telematics or cable TV installations. Through better education and access to self-serve capabilities the customer can have a better experience, thereby reducing the need for customers to contact the brand and the cost associated with those contacts.
Similarly, value can increase if customer experience improvements increase first contact resolution, hence reducing repeat contacts. Many companies have seen their contact center costs explode due to low first contact resolution performance. Additionally, we've seen in our own analysis that the need for a customer to contact a brand repeatedly in a short time span (e.g., less than a week), particularly over the same issue, has a large negative effect on customer experience quality scores.
New Customer Referrals: High customer experience scores can boost customer value through customer acquisition. It has been shown that customer recommendations (as, say, embodied in NPS) have a significant influence on the acquisition of new customers. Even just the positive mention of a brand on social media is known to have this kind of effect, albeit to a lesser degree. So the extent to which positive customer experiences lead to more recommendations means a brand is likely to see greater customer acquisition.