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The  customer experience (CX) landscape is continuously moving, driven by rapid technological advancement, changing customer expectations, and the desire most businesses to differentiate in an increasingly competitive economy. Businesses are investing extensively in CX initiatives to fulfil customer needs, but many CX leaders are struggling to demonstrate the return on investment (ROI) and value of these investments.

Consumers in business world have more choices than ever before, and CX expenditures are critical to providing pleasant customer experiences and motivating customer loyalty. Companies can separate themselves from the competition and boost customer happiness and loyalty by providing a simplified, smooth, and personalised customer experience throughout.

CX leaders in a business, on the other hand, face tremendous obstacles in demonstrating the ROI of CX expenditures. Many businesses lack the quantitative data and resources needed to assess the impact of CX initiatives, and it can be difficult to track and quantify the both positive and negative impact of of CX investments on customer satisfaction and loyalty. Furthermore, demonstrating the impact of CX initiatives on business outcomes like as revenue, customer retention, and cost savings can be difficult.

This blog will explore CX leaders' struggles in demonstrating and calculating ROI and share strategies for overcoming these challenges. 

3 Challenges CX leaders Face While Proving ROI of CX Investments

Many CX leaders struggle to demonstrate the ROI of CX investments. Despite the growing recognition of the importance of CX in business success, it can be challenging to show how CX investments lead to tangible financial outcomes. 

3 challenges leaders face while Demonstrating ROI of CX

Here are some common struggles that CX leaders face when trying to demonstrate ROI of CX:

1. Lack of clear metrics for measuring CX ROI

One of the most significant challenges for CX leaders is determining the right metrics to measure the ROI of CX investments. While there are many potential metrics to consider, deciding which ones are most relevant and meaningful for a particular business can be challenging. 

Additionally, some CX metrics, such as customer loyalty or brand perception, can take time to quantify.

For example, Bell Flavors & Fragrances provided fragrance solutions globally to major companies in various consumer product categories. However, the company was experiencing a decline in customer engagement due to limited multi-channel experiences. 

Bell Flavors & Fragrances enhanced the CX by providing seamless and connected experiences across devices to address this issue.

To gauge the ROI of this initiative, the company evaluated the open rates and time spent by customers on various devices. This assessment was based on specific metrics such as potential customers' click-through and view times as they interacted with the platform.

2. Difficulty in attributing CX improvements to specific investments

Another challenge for CX leaders is identifying which particular investments are driving CX improvements. Often, CX improvements result from a combination of investments and initiatives, making it challenging to determine which ones are most impactful. 

External factors such as changes in the market or the competitive landscape can also impact CX, further complicating the attribution challenge.

For example, Pierce Manufacturing was one of North America's top producers of customized fire trucks. To tackle the issue of low sign-ups, conversion rates, and average basket size for their mobile loyalty program, the manufacturing company established an exclusive loyalty program that offers existing customers and new customers with unique access, coupons, and discounts.

To measure the success of their initiatives, the team analyzed monthly and yearly data based on the project's duration. They also attributed CX improvements to specific investments, mainly concentrating on conversion rates, sales, and website traffic.

3. Inability to connect CX improvements to financial outcomes

Another challenge for CX leaders is linking CX improvements to specific financial consequences, such as increased revenue or decreased costs. While there is growing recognition that CX investments can lead to financial benefits, connecting CX improvements and financial outcomes cannot be easy. 

This can make it challenging to build a business case for investing in CX, particularly for executives primarily focused on better understanding the financial metrics alone.

For example, Sunbasket delivers fresh, seasonal ingredients and easy recipes to your door, making it a healthy meal delivery company. However, the company received negative feedback from customers due to the complicated meal cancellation process. 

As a solution, Sunbasket created a self-service cancellation process for customers that included targeted "save" opportunities. Customers can either self-administer the cancellation or choose to speak with an agent.

To evaluate the ROI for CX, Sunbasket identified outcome metrics that are expected to be affected. Suppose the outcome metrics do not involve financial metrics such as cost or revenue. In that case, the company will determine the correlation between the CX outcome and either cost reduction or revenue increase.

The primary metrics to gauge ROI were decreased customer service expenses and operational costs associated with managing the overall volume of inquiries, a lower average spend and quantity of discounted boxes issued during unsuccessful "save" scenarios, and increased resubscription rates.

7 Strategies for overcoming struggles and demonstrating ROI of CX

Measuring the ROI of CX investments can be challenging, but there are a few strategies that CX leaders can use to overcome these struggles and explain the financial impact of CX. Here are some key strategies:

Demonstrate ROI of CX with These 7 Strategies

1. Pitch the CX Program to the right stakeholders 

Identify the key stakeholders who can influence the success of CX initiatives and pitch the program to them, highlighting the potential benefits and ROI.

A US-based biotech corporation shifted significantly in its business model, moving from a heavily product-focused approach to a patient-centric and customized healthcare service model. 

The company implemented a cx strategy to achieve this transformation that enhanced and guided the Patient Experience Officer (PXO) and integrated with all the initiatives within the transformation portfolio.

As a result, the company generated a "soft ROI" by promoting cooperation and coordination between different teams, which helped to minimize redundant activities and optimize research, workshops, insights, and project teams. 

This led to significant time savings and cost reductions for customers acquired the company.

2. Build your own Customer Experience ROI model 

Develop a customized CX ROI model that aligns with your organization's goals and has key metrics well, including customer lifetime value, customer effort score, cost savings, and total revenue for significant growth.

For example, Tata CLiQ is an e-commerce platform offering categories such as Fashion, Footwear, Accessories, and Beauty. However, the company faced challenges in engaging with customers through personalization. 

They adopted data analytics and technology to create customer micro-segments to target audience based on shared characteristics to overcome this.

To evaluate the effectiveness of their CX improvement projects, they build their own cutomer experience ROI model by defining a set of metrics known as Success Measures. These metrics were grouped into focus groups: Efficiency, Effectiveness, and Experience.

After implementing the CX improvement projects, Tata CLiQ analyzed the pre and post-implementation data to measure the impact of their initiatives across these three categories. 

The results showed a significant ROI improvement due to their efficiency, effectiveness, and superior customer experience efforts.

3. Ensure the Right VoC is Captured 

Capture the right Voice of Customer (VoC) data to make companies gain valuable information and insights into customer needs, preferences, and pain points. Use this data to inform initiatives that can deliver measurable customer experience ROI.

For example, a well-known US-based company specializing in financial management software for healthcare providers faced customer service complaints that led to a significant loss of accounts. To tackle this issue, a leading CX Consultant was brought in to conduct rapid VOC research.

This involved qualitative interviews to understand customer values and a subsequent quant study to see customer relationships, collect feedback and validate the results. Using this data, the consultant helped the company to re-prioritize its marketing campaign and product roadmap and re-design its service experience.

The consultant's efforts yielded positive results as the company identified pain points along the customer journey and followed up with customers to address their concerns before losing their accounts. 

As a result, the company improved its own customer experience program and service and reduced churn rate and customer attrition, thanks to the insights gained from the Voice of the Customer research.

4. Right Technology is Inevitable 

Adopt technology solutions and services that can help capture, analyze, and act on customer data in real-time. This can include tools and services such as customer feedback platforms, data analytics software, and CRM systems.

For instance, an Indian Fintech company with deep integrations with multiple partner banks provided various financial products, such as prepaid cards, credit cards, savings accounts, debit cards, virtual accounts, and virtual corporate wallets. 

Their primary CX challenge was consolidating customer feedback from from various tools to understand customer needs better. To achieve this, they implemented a system that unified customer touchpoints and used a CRM tool to analyze the collected data.

On the other hand, Aditya Birla Sun Life Insurance Company faced quantifying customer engagement levels throughout the product life cycle without resorting to surveys. The company offers a range of products and services across different stages of customer lifetime. 

In response, the company developed an AI-based rule engine that tracked customer lifetime milestones and incorporated various parameters such as consumer behavior, vintage, and distributor level to create a Relationship Quotient (RQ). 

This quotient is a quantified number associated with each customer at both the per customer base and contract levels.

5.  Quantify the Results

Companies are not yet measuring it, but they have plans for calculating customer experience ROI in the future. After rolling out the customer experience programs, companies have seen higher customer satisfaction, lesser churn, or improvement in overall experience on their website. 

However, unless you measure it, you can't tell the exact impact of your CX program. Therefore, it's important to quantify the results of your customer experience program.  

6. Focus on Long-Term Customer Experience Outcomes

Leaders are often pressured to deliver short-term financial results. But it is important to focus on the long-term impact of greater customer experience investments that eventually will increase the business value through customer loyalty and advocacy. 

Connect customer experience investments to increased long-term value rather than just a quick financial value.  

7. Ensure Continuous Improvements

Customer experience programs cannot be a one-time initiative. We have seen that CX programs are implemented in some cases and have yet to show quantifiable value or results. However, they are running it continuously without dropping it mid-way. 

Initially, the results can be felt in terms of soft ROI, and as the program matures, there will definitely be hard ROI. 

The Bottomline

Measuring the ROI of customer experience investments can be challenging for CX leaders due to the intangible nature of CX improvements. The struggles include the need for clearer metrics for measuring CX ROI, difficulty attributing CX improvements to specific investments, and the inability to connect CX improvements to financial outcomes. 

However, customer experience leaders can overcome these struggles by pitching the CX program to the right stakeholders and building their own CX ROI model that aligns with their organization's goals and other metrics like customer lifetime value.

These marketing strategies or marketing campaigns can help customer experience leaders demonstrate the financial impact of CX and secure support from other business leaders to invest in improvements in poor customer experience, leading to business success.

Read More: 6-Step Guide to Jump-Start Your ROI Using Customer Journey Analytics