If your business deals with customers on a daily basis, you’ll know as much as anyone about the importance of customer experience. Ensuring your customers have the best possible experience whenever they interact with your business — from using your products to communicating with your staff — is the best way to produce customer retention.
Positive customer experience is non-negotiable, if you want to have a customer-facing business. 59% of consumers said they would walk away from a company after several bad experiences. This is not something that you can afford to ignore.
At the same time, positive customer experiences mean your clients will be far more likely to continue to do business with your company. We all know reading a positive business review makes us want to use the company’s services, so it’s no surprise having a first-hand positive experience has the same effect.
However, just instinctively knowing the importance of customer experience isn’t good enough for a modern and growing business. Like any part of your business, quantifying this will enable you to analyze your practices better and use resources more efficiently. It will also mean you can justify expenditure on customer experience.
Quantifying something as intuitive as customer experience might seem challenging at first. Fortunately, calculating customer experience ROI is a good way of providing hard evidence when analyzing customer experience at your company.
What is Customer Experience ROI?
Imagine you operate a call center that has just invested in a new VoIP business phone in Canada. You’re obviously going to want to know whether or not the investment was worth it, so you’ll try to work out the return on investment (ROI).
The same principle should be applied to metrics that aren’t as easily quantifiable as the impact of a new piece of software. Customer experience ROI is the process of measuring customer satisfaction and then linking those metrics to your financial numbers.
This will produce a metric demonstrating the economic advantages or disadvantages of a particular customer service initiative, meaning you can finally assess the monetary value of customer experience in your company.
Why do you need to know customer experience ROI?
Now that you know what customer experience ROI means, it’s time to consider how it can benefit your company. Calculating customer experience ROI can be time-consuming, so it’s worth knowing why it’s important:
1. Optimize your investments
Investment in customer experience can come in many forms. One of the most straightforward is increasing the size or quality of your customer service team.
However, such investment can be quite expensive. If you can get the same level of impact on customer experience from a different source — such as improving your website so your customers are better able to self-serve — it would make sense to channel your investment in this more cost-effective direction.
This can only be done by producing a comparable metric measuring customer experience across your business.
2. Communicate impact across your business
Maybe you need to convince the CEO or another leader of the financial benefits of improving customer experience. Or you might want to persuade one branch to adopt the customer service practices of another branch.
The best way to communicate the effects of good customer service to employees who haven’t been able to see it first-hand is by pointing to numerical evidence. This can help to produce a business with an aligned vision of the importance of customer service.
3. Improve business growth
Ultimately everything you do should have one overriding aim: growing your business. Being able to quantify customer experience, you will be able to recognize the parts of your customer interaction you need to improve.
This means you can make your customers more likely to continue to use your services or recommend your business to others. Customer experience ROI is an invaluable way to build your company.
How can you measure customer experience ROI?
The advantages of measuring customer experience should be clear to any business relying on its relationship with clients. However, producing a metric accounting for customer experience is less straightforward than simply measuring the ROI on a new business phone system, for example.
As well as this, the process of measuring customer experience should be different for every company. Customer experience is a very broad topic, so you’ll need to create a specific plan to suit the targets of your business.
However, there are some basic steps to help guide you through the process of creating an accurate customer experience ROI metric:
1. Start with a detailed plan
Every business has areas they can improve. You should begin by identifying the parts of your customer experience you already know can be enhanced.
Then, think about how you can achieve these outcomes. This can be anything from overhauling your customer service team to improving your social media output by using Instagram reels.
Of course, the point of calculating customer experience ROI is to assign a financial value to customer experience. This means you should think about the monetary worth of your goals.
For instance, if you think improving your inventory system software or barcode scanner software will mean customers will receive their orders faster, consider how this will impact your bottom line — such as leading to growth in customer retention by a certain percentage.
2. Decide on appropriate customer experience metrics
To create customer experience ROI, you’ll need to be able to quantify customer experience. There isn’t a one size fits all approach here. Instead, you need to think about which customer experience metric suits the questions you’re asking.
Some popular customer experience metrics include Net Promoter Score (NPS) — which shows how likely a client is to recommend you to family or friends — and Customer Satisfaction Score (CSAT) — which measures overall satisfaction with your services or goods.
You may already have a bank of data to draw on or you might have to establish ways to measure customer experience. If this is the case for your business, you can easily quantify this through email surveys or by embedding a feedback button onto your website.
3. Build testable hypotheses
Once you’ve found your intended outcomes and located appropriate customer experience metrics, you should combine them to create a solid hypothesis you can test.
One example might be, “by increasing the amount of customer service staff we employ by X amount, CSAT scores will improve by Y amount.” You should then measure the impact of higher CSAT scores over time in terms of sales.
Your hypotheses should be short and simple. This means testing them will be straightforward — but by doing this multiple times, you will be able to build a comprehensive image of ROI on customer experience in your company.
4. Produce a cost-benefit analysis
The final step in creating a customer experience ROI is to compare your outcomes with your investments. Now that you can project revenue increases from changes to customer experience, you should subtract your costs on staff or software.
For instance, if you are calculating the ROI on improving customer experience through designing an SEO-optimized website, you should compare your customer experience metric, such as CSAT, with the costs spent on developing that website.
5. Make the most of customer experience ROI
Now that you’ve done all the hard work, you’ll want to make the most of your new metric. You should use customer experience ROI across your business to develop more effective customer service plans.
One practical way you can leverage it is by using different task management for team strategies and comparing the customer experience ROI between each approach. This will then show which is most effective.
Another way to use customer experience ROI is to communicate the benefits of investment in customer experience. Business leaders are busy people with many different decisions to consider, so explaining the benefits of customer experience in financial terms can help make your points stick.
Say you use VOIP with SMS in Canada to run meetings with your leaders. You can easily include customer experience ROI metrics in short messages rather than needing to be explained in long discussions.
Finally, customer experience ROI should be used when developing new initiatives. After a few months of measuring this metric, you should have a better idea of which areas of customer experience are most impactful. This means you’ll be able to design new ideas you now know will improve your business.
Customer experience ROI — a crucial metric for your business
Measuring customer experience ROI is a great way to quantify the impact of customer experience on your company’s balance sheet. This means you can optimize investments and train your employees to use the most effective strategies when dealing with customers or developing new products and services.
There are other ways in which customer experience can benefit your business. For example, happy customers creating different types of user-generated content, such as video reviews or written testimonials can have a significanthave significant effect on your online authority, organic search or social visibility and subsequent website traffic.
By following our step-by-step guide — including building a hypothesis and calculating the cost-benefit relationship — you’ll be able to make the most of customer experience ROI in your company.
Author: Jenna Bunnell – Senior Manager, Content Marketing, Dialpad
Jenna Bunnell is the Senior Manager for Content Marketing at Dialpad, an AI-incorporated cloud-hosted unified communications system that provides valuable call details for business owners and sales representatives using Dialpad Canada’s cloud-hosted PBX.
