Why is it so hard to prove the ROI of CX?
Originally published: https://www.linkedin.com/pulse/why-so-hard-prove-roi-cx-gareth-johns/
Why is it so hard to prove the ROI of CX?
In a recent post I looked at some of the challenges with current methods for collecting customer experience data. This was based on an article by McKinsey which, as well as highlighting speed and precision of insight, also focussed on an inability to prove a concrete ROI as a significant challenge for most CX initiatives. The article stated that only 4% of CX leaders believe they were able to calculate a decision’s return on investment.
This issue was also the focus of a recent guide by Forrester on how to build a persuasive CX business case. While much of the guide was a good step by step approach to building any business case what really caught my attention was the assumption that the impact of CX initiatives should be measured primarily by traditional CX metrics (such as customer satisfaction or net promotor scores) before making a tenuous link between these measures and financial outcome.
I strongly believe this is where CX leaders are going wrong, losing interest, belief, confidence and ultimately backing in the boardroom and missing out on the transformative impact they should be making.
Using the right KPIs
To be taken seriously CX leaders need to focus much more on the metrics that actually matter to a business. Any real initiative should be about improving customer experience of course, but this shouldn’t simply be limited to improving customer experience scores. The success of the initiative should be measured by, for example, increases in customer conversion, average transaction value, average basket size or number of repeat visits or decreases in churn or cost to serve.
These are the metrics that the business is already likely to be tracking and care most about and the ones that actually lead to a return on investment. So why aren’t these the first ones to be discussed?
I think the main issue which stops CX leaders from adopting this approach is a concern that there are so many other factors that can impact these harder measures (and so many other initiatives that will be claiming the benefits of any improvements) that they won’t be able to prove that it was their initiative which led to the improvement. The issue becomes one of attribution — understandable but problematic.
NPS ≠ CX
I’d argue that this is equally so with the most commonly used customer experience scores. All measures will be impacted by decisions in other departments around hiring practices, product pricing, promotions and store placement as well as external factors such a competition and as we have seen in the last year, wider uncontrollable issues in the economy and society.
Believing NPS is only impacted by the CX team and their initiatives is a fallacy. It is therefore much better to accept that almost any benefit realisation is going to be messy, but still focus on the measures that actually matter rather than those that nobody else is claiming.
A secondary issue for CX initiatives — especially those that are focussed on changes in staff behaviour or initiatives at an individual store or branch — is on measuring compliance with the initiative. This is often overlooked when designing the initiative and presenting the business case and where improvement is required.
If as a CX leader you can’t measure whether your initiative has even happened properly, then you are on very shaky grounds for claiming any benefits regardless of the metrics you adopt.
Doing the right thing, not the easy thing
Even with a better written business case, stronger financial measures of success and confident measures of compliance — there is still a big watch out when placing too much emphasis on the business case. The danger is that only business cases that are easy to prove and track get approved. It is this behaviour that sees CX initiatives pigeon holed to streamlining the processes in the call centre or rolling out self-serve tills, measuring the resulting cost savings, rather than actually addressing customers wants and needs with a focus on growth and innovation.
This greater leap into the unknown is obviously easier to do in a business that already strongly believes and puts the customer at the heart of their decision making process but ultimately if you are a CX leader in a business that doesn’t inherently believe in customer centricity you are already in trouble and no amount of clever business case creation is going to improve your situation.
How TruRating can help
When we began our working relationship with an apparel sports retailer, the store team were facing similar challenges to those described above. They believed that there were specific behaviours that all staff should be adopting to improve the customer experience and increase spend but they had no way to prove this and get wider buy in for a full rollout.
By providing a way to ask specific questions to customers directly using the point-of-sale, tied to transactions and with response rates over 80% they were able to first track compliance in a set of test stores and then, because of the link between response and actual transactions, they were able to focus directly on the impact of the initiative on average transaction value rather than just on a customer satisfaction score.
Ultimately there were able to show that a full rollout and compliance to the new sales approach would lead to a 5% increase in like for like revenue for a fairly minimal investment in staff training.
Putting CX centre stage
While access to better data can obviously reduce many of the challenges described above ultimately leaders need to change their behaviour and thinking regardless of what data they have available. They must first focus on what matters most to customers, ensure that they can prove that CX initiatives have been properly executed and ultimately be brave enough to be measured by the existing financial measures of the business.
This is what will lead to confidence in the board room but most importantly better outcomes for customers.
