One of the great dilemmas of building a successful company is knowing that your customer experience strategy is important, but not having the numbers to prove it. Return on investment is a financial calculation, and while creating better customer experience is proven to be correlated with an increase in loyal customers, it is difficult to prove direct causation in this regard.
There are three types of return on investment relating to customer experience and the tools that we use to manage, measure and enhance it. These three types are:
- Indirect ROI
- Instant cost savings
- Action-based ROI
Measure – analyze – take action. Listen to your customers and change your service. This is a simple tactic but it is still considered indirect because results will not be seen immediately. In a normal situation, it is fairly hard to calculate indirect ROI, but the value is evident. We have seen businesses go under because of poor feedback and customer experience management. Failing to listen or even understand your customers is a much bigger deal than just not being able to collect and analyze feedback. The trick is not just collecting feedback or customer experience data. The trick is to understand which parts of your business are the biggest drivers of your customer experience. Understanding the root cause and “why” of your issues. This can be done by collecting feedback continuously and organizing it into an easy-to-understand format.
To get the most out of feedback data, we need open-ended feedback to complement numbers. AI-enhanced text analytics allows you to automatically determine the sentiment of your open-ended feedback so that you can spend less time reading and more time making decisions. From our customers, we have seen a 30% growth in revenue from companies who put customer feedback in use by fixing the problems right when they arise. In another case, a web store was able to increase their average checkout basket size by 10% in a matter of months and in turn, grow their bottom line by 7%.
Companies that invest in CX programs usually see fast results in their financials as well as in their overall customer satisfaction. On average, for every one-point rise in your NPS (Net promoter score), your revenue will increase by 0.14%. So a seven-point increase in your NPS will result in 1% more revenue on average. This is due to the nature of customers “promoting” or “detracting” your business. If you can grow the number of promoters, you can be sure to have more positive referrals. According to Sage, it is clear that promoters are more than 17 times more likely to give a good review of the company to another person. Visit our NPS info page to calculate your company’s NPS.
Instant cost savings
Now we’re talking! Why do something later when you can do something immediately. The biggest and most obvious cost-saving you will see is in the tools you use. Technology has taken huge leaps forward during the past couple of years, especially in the CX industry. When you are able to manage everything in one place with a dedicated piece of software, you save hours of labor per week. We have seen average time savings of around 30% and cost savings of around 50% in analytics related costs when investing in customer experience management software.
When all of your CX data is in one place, you will also reduce the strain on your customer support team by Solving issues when they arise. Reduced customer churn and reduced employee churn is a good recipe for success.
Action based ROI
Now, this is my favorite part. Most CX professionals concentrate on analytics but neglect actions. This is about taking advantage of your CX data immediately. Customers that give you feedback are the most valuable customers you have because they care about your business and their own experience (they are 30% more valuable to be exact). So why not fix their problem AND offer them more? If you automate messages based on their feelings and offer them discounts, we can see amazing results. One of our eCommerce customers was able to convert 5% of their complaining customers by offering them a discount. Pretty good right?
Another straightforward implication is to collect feedback before the customer has bought from you, analyze it and, based on that feedback, optimize your sales funnel to reduce friction and reach the sale. A website was able to convert 7% of their users when they were first asked to give feedback. They set automated messages that would send discounts to them. The tone of the message is important here. If the customer is unhappy, the message would read something like:
“We’re sorry to hear that you had a negative experience today. To make it up to you, and to thank you for giving feedback, here’s a 10% discount to use on your next purchase”
The same discount with a different tone would be sent to loyal, happy customers:
“Thanks for your feedback! We want to reward our most loyal customers, like you. So here’s a 10% discount to use on your next purchase”
Lastly, taking advantage of reviews is not new to the eCommerce industry but is often neglected by other businesses. This is a huge amount of lost potential because the reviews have exactly the same kind of effect on sales in other businesses as well. So when someone gives you feedback, why not ask a review and share that on social media? Of course, it is a good idea to give them a small incentive to do that but often the most engaged customers are happy to do so. Our research has shown that up to 5% of all people who give feedback are willing to publish a review!
There are a lot of potential avenues for turning customer experience into profit and most of them are underutilized by most companies. We are talking about a potential increase of 10%-20% on a yearly basis – which is nothing to scoff at! So take these tips, add them to your toolboxes and make good use of them.
Jaakko is an award-winning CX professional and entrepreneur at Feedbackly, founder and community professional at the biggest entrepreneurial digital community in Finland – Yrittäjä.io. He is a notorious keynote speaker from entrepreneurial stories to day to day human communications and customer experiences.