Five Steps to a Robust Customer Experience Business Case

August 13, 2015
Contributor: Heather Pemberton Levy

Our five step plan helps marketers get disciplined about building the business case for investments to improve customer experience.

It seems simple. Deliver a great customer experience and happy customers hand over their money. Provide a mediocre customer experience and disgruntled customers walk out the door…with their money. But, still, quantifying the true business impact of investments to improve customer experience is one of the hardest tasks a CMO can undertake. Why? Because customer experience is broad and amorphous. Relying on vague arguments that it’s simply the right thing to do isn’t enough to attract and sustain investments. You need a business case.

The strongest business cases focus on the twin factors of profitable growth: revenue and cost, according to Jake Sorofman, research vice president for Gartner for Marketing Leaders. In a recent survey, 73% of consumers said they would expand their purchases with a vendor by 10% or more if the customer experience was superior. Where to start? Here’s a blueprint for building a compelling customer experience business case.

1. Focus on high priority customers

One size does not fit all when it comes to customers. Some segments make money and some lose money. Start by identifying your customer segments and personas with the highest expected lifetime value and lowest cost of acquisition and service. Invest in these segments disproportionately and build your plan around customer experience investments that attract and retain customers with the characteristics of these high-value segments. Once high value customers have been identified, it’s time to focus on key moments of engagement.

2. Focus on high priority moments

Find out what is working and what is not in the high value customer journey and decision process. Where are customers providing positive and negative feedback? Where are the pinch points and bottlenecks? Where are these customers abandoning the buying process? Where are they raising their hands for help?  In other words, focus on the moments that matter most — the interactions that disproportionately impact satisfaction, loyalty and advocacy.

3. Benchmark performance against competitors

While great customer experience is an admirable pursuit in its own right, the focus should be on  identifying the highest value moments for your highest value customers — relative to the competitive alternatives available to the specific customer segment. The next step is to use either internal data or externally sourced benchmark data (NPS, CSAT, CES, etc.), set baseline metrics and measure performance relative to your competitors.

4. Find new and existing revenue sources

At least half of customers will pay a modest premium for a better customer experience and retention rates are approximately double for customers who report a positive experience than for those who report a poor experience.  The most successful customer experience leaders start by investigating how they can positively influence customer lifetime value (CLTV) and average order value (AOV) in the areas of new customer acquisition (pre-sales experience), customer retention (define leading indicators of customer churn) and growth of existing customer relationships (turn loyalists into advocates). But revenue isn’t the only focus because we’re interested in profitable growth so cost levers quickly come into play.

5. Find areas for cost reduction

Finally, since it costs less to serve happy customers (fewer returns, fewer support needs, etc.) and less to retain current customers than acquire news ones, look to both the cost of customer acquisition and the cost of service in making the business case for customer experience. Reducing inbound customer service issues can directly reduce the cost of serving existing customers. Next is to balance new customer acquisition against retention and growth efforts to create a plan that drives the most profitable revenue for your company.

Armed with these five ingredients, marketing and customer experience leaders can build a solid business case that clearly shows how investments in customer experience enable profitable business growth.

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