Customer experience (CX) is gaining significant traction as companies looked for ways to improve their customer engagement and boost profits.
However, many CX professionals are having a hard time showing the connection between better CX and revenue growth in order to justify future investments.
“If you are like other CX pros, at some point in your CX career you’ll encounter the ‘money question’, writes Maxie Schmidt-Subramanian, Forrester senior analyst serving customer experience professionals, in her blog. “Your CEO will ask you, ‘What’s an improvement in our customers’ experience worth in dollars and cents?’ And it’s likely that you won’t have a (good enough) answer.
“I say that because I know that 50% of CX pros we surveyed have not modelled how CX quality influences customer behaviour. We know great CX drives revenue. But to make the case, you need a more nuanced and sophisticated understanding.”
Forrester used data from its CX Index to model how changes in customer experience affect revenue potential for 13 industries. The models take into account industry specific dynamics like barriers to switching and recommendation effectiveness.
Drilling down into a dollars and cents value, Forrester examined what a customer’s loyalty was worth. For each customer, Forrester calculated the revenue associated with that customer’s retention loyalty, enrichment loyalty, and advocacy loyalty.
Statistical analysis was also used to determine the relationship between CX quality and loyalty-based revenue across the 13 industries.
Forrester research in its “Drive Revenue With Great Customer Experience, 2017” report shows that for every industry analysed, positive revenue potential is seen from improving CX.
However, while the revenue opportunity moves in lockstep with better CX for many industries, some industries see disproportionately bigger or smaller revenue increases as CX improves.
Some of the highlights from the report show:
* Mass-market auto manufacturers have the highest revenue potential. According to the report, the high per-unit revenue from the sale of each vehicle makes winning new customers very attractive. It was also shown that while the revenue from servicing a vehicle is far lower on a per-transaction basis, it is still significant because it occurs frequently.
* Wireless service providers gain most by improving poor experiences. Findings show that wireless service providers have the third-highest CX-driven revenue potential among the industries analysed. Even though the per-customer revenue potential of CX is moderate, the big players in this space can have millions of customers. The analysis shows revenue potential tapering off at high levels of CX and Forrester suggests that wireless service providers should improve the worst experiences instead of refining good experiences.
* Airlines gain more by avoiding defection than from delighting already happy customers. In an industry filled with disgruntled customers, Forrester says improving CX for the unhappiest travelers can help airlines stop customers from abandoning them for their competitors.
* Credit card providers shouldn’t bet on CX for large revenue gains. As credit card providers improve CX, they might see financial benefits like lower service costs, but the revenue impact from improving CX is low. Forrester says this is because there is no evidence that customers spend more on a credit card just because their experience with the credit card brand is good. Moreover, not many customers opt to get a second credit card from the same brand. However, it’s important for providers to understand that advocacy revenue (referrals by happy customers) potential is 10 times greater than for other industries, accounting for 31% of the industry’s total CX-driven revenue potential.
Forrester recommends that CX professionals use the model to inform their CX business case insights into how CX could drive revenue potential. It will also help to make the case for CX by showing how much revenue their companies may be leaving on the table.