Customer experience (CX) is intangible in nature and is considered a ‘softer’ part of the business. Therefore, it becomes difficult for businesses to invest in an underrated yet powerful asset. This is why CX enthusiasts recommend evaluating metrics to add value to your CX program.
These metrics help professionals to tie customer-focused efforts to their monetary value. But, why is it important to calculate ROI for CX and how it can boost ROI generation? Let’s understand!
Why Consider Calculating ROI for Customer Experience?
Customer-centric brands with exceptional customer experience tend to bring 5.7X[i] revenue than their counterparts who are less focused on CX. This alone proves that customer experience plays a vital role in customer acquisition and retention.
However, it is not enough that only CX professionals understand its benefits. They need to be able to communicate the benefits to the higher-ups. This is why calculating ROI for CX is important. Not only does it prove the importance of CX but also helps figuring out the areas of improvement.
What Metrics are Considered to Calculate Customer Experience ROI?
Companies that invest in CX reported an 84%[ii] uplift in their revenue. Some of the metrics that these companies use to bind CX with ROI are –
- Customer Lifetime Value (CLV): CLV is the amount of money a single customer would spend from start to end. To calculate it, multiply customer value by average customer lifespan.
- Customer Support Spend: Support costs are basically direct interaction between company and customers that includes customer service programs, quality assurance, etc. It can directly be compared to your customer satisfaction metric.
- Churn Rate: Churn rate represents the number of customers that will abandon your services and products. To calculate it, divide the number of customers you lost in the last quarter by the number of customers you acquired in the last quarter.
- Average Transaction Size: Average transaction size enables you to evaluate the buying pattern of your customers or if they prefer certain products. Take the total revenue generated in a given time and divide it by the total number of sales generated during the same time period. The resulting percentage is your average transaction size.
Binding these metrics with customer experience will enable you to derive the value of CX. You can source each customer’s profile that offers contextual information, enabling you to have solid evidence of how they are benefitting from your CX program.
How Can You Improve Customer Experience ROI?
Despite the intangible nature of customer experience, it has a deep-rooted impact on the overall profitability of a company. Therefore, improving your CX can significantly boost your ROI. To put that in motion, you need actionable strategies to boost ROI through your customer experience program.
Here is how a strategic customer experience program can help you boost ROI –
1. Find and Reduce Upsetting Metrics
By upsetting metrics we mean the metrics that you would rather keep at minimal, like churn rate. Reduce customer churn rate by finding why your customers don’t continue with your brand and make required improvements. For instance, if your customers are experiencing delays while interacting with your brand, they might abandon your website. In that case, you can incorporate an AI-based chatbot to eliminate the delay in interaction and resolve your customer queries. Moreover, retaining existing customers is more cost-efficient than acquiring new ones. That being said, a lasting customer experience will keep your customers coming back to you, resulting in customer longevity.
2. Cut Down Overhead Expenses
An efficient CX program keeps the benefits coming. Apart from reduced churn rate and improvement in customer retention, it helps you to cut down various overhead costs. Here are a few ways in which it helps:
- An error-free and intuitive website interface enables customers to self-serve themselves, which cuts down support expenses.
- Satisfied customers tend to refer your products and services to their friends and family. It cuts down the customer acquisition costs.
- Reviews, brand mentions, etc. by satisfied customers is free marketing.
This way an efficient customer experience doesn’t only bring ROI to the table but also results in lesser expenditure.
3. Analyze and Tweak Customer Journey Maps
There is no such thing as a one-size-fits-all customer experience approach. You need to walk in your customer’s shoes to understand how they perceive your brand. To do that, start building a customer journey map that enables you to visualize their experience from start to finish. Further, it presents the opportunity to pinpoint gaps and fix them. As a result, the customer would reward your efforts with brand advocacy, hence more customers and better ROI.
Understanding the importance of a CX program and how it can boost your ROI is just the beginning. Every business has its own proposition and you need to optimize your CX program over time, accordingly. Like any project, getting started is the hardest. Use these tips to get started and you will eventually grasp the CX metrics and continue working on their improvement.
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