CX Matters is the Hello Customer podcast about what makes customers stay. In this episode, Michel Stevens of CXM Academy and Horst Remes of Onestone explain how to turn customer experience into a business case a CFO will accept.
The conversation covers a returns process that saved 300,000 euros a year by trusting customers, meter readings that differed by a few cents, why every business case is a forecast, and the arguments that win over a sceptical CEO.
What you will take away
- Customer experience improves profit through two levers: more revenue from loyal customers who recommend the company and lower costs because satisfied customers are cheaper to serve.
- A customer experience strategy should mirror the business strategy, offensive when the goal is acquisition and defensive when the goal is reducing churn.
- Many customer contacts come from a gap in the information a company gives, so closing that gap improves the experience and lowers call centre costs at the same time.
- Sending replacement devices straight away, without inspecting the returns first, saved one customer service operation 300,000 euros a year.
- Every business case is a forecast, so customer experience deserves the same standard of proof as an IT investment.
- Only one company can be the cheapest, which leaves customer experience as the main way for most companies to compete.
Jump to a moment
Michel StevensCX expert & course directorCourse director at CXM Academy, partner at goCX and host of the Table 7 podcast. Works with organisations across Europe on customer-centric transformation.
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Horst RemesCustomer strategy expert, OnestoneManaging partner at Onestone and keynote speaker on customer strategy. Trained as an engineer, he has spent twenty years on customer-centric operations, and is known for his keynote on the myths of customer experience.
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Bram De VosCEO, Hello CustomerYour host of CX Matters, the webinar and podcast series powered by Hello Customer, where every episode looks at one idea: the way you treat your customers shapes the way your business grows.
LinkedInTurning customer experience into numbers
How do you turn customer experience from stories and sentiment into numbers and proof?
Return on investment is one of the most debated topics among CX leaders. Customer experience is a business lever, and proving its value is where most teams struggle. This episode works through what a business case for CX rests on and how to connect customer metrics to cash.
Why linking CX to money is still hard
We are not paid in smileys, we are paid in euros.
Michel StevensCX expert & course directorWhy is linking customer experience to financial outcomes still so hard?
For years, customer experience was presented as a discipline about emotions: understanding how customers feel and playing to it. Nobody had a reason to go beyond that, so most CX teams never built the financial muscle. Only recently have companies started to ask out loud how customer experience pays for itself.
It should not be hard. Customer experience is an investment, like an investment in IT. For many investments nobody even asks for the ROI, because the return is assumed. CX teams, meanwhile, are pushed onto financial ground they were never trained for.
Two levers: more revenue, lower costs
Should CX teams have to talk about ROI at all?
Yes, because the reason for doing customer experience is the reason for running a business. A company has two levers to improve profit: increase revenue or reduce costs. Customer experience pulls both.
| Profit lever | How customer experience pulls it |
|---|---|
| More revenue | Satisfied customers buy more, stay loyal longer and recommend the company to others |
| Lower costs | Satisfied customers are cheaper to serve, especially when something goes wrong |
The cost side is often forgotten, and it is where frustrated customers create extra contacts, escalations and work.
Your CX strategy is your business strategy
Why are customer experience and business strategy so often disconnected?
In many organisations the customer experience strategy and the business strategy grew up as separate documents. They belong together. A company with an offensive strategy, focused on sales and acquisition, needs a customer experience built for acquisition. A company with a defensive strategy pulls other levers: reducing churn and keeping costs down.
The question for anyone working in customer experience is what their work contributes to the company's strategy right now, and what they should do to help it move forward. CX and business strategy are so intertwined that a separate CX strategy is often unnecessary.
A good process is also an efficient one
Where do the hidden costs of a poor customer experience sit?
A process that satisfies customers is often more efficient too. Customers who get peace of mind stop calling. When a question is not answered in time, the same customer emails, calls in the afternoon and sends a WhatsApp the next day. Three people end up working on a question one person could have answered, or that should never have been asked.
Many of those contacts come from a gap in the information a company gives. When a company finds that gap and fixes it, nobody needs to call: the experience improves and the cost of the call centre drops at the same time.
300,000 euros saved by trusting customers
What does trusting customers save in practice?
Fixing a process often means fighting the internal organisation. Fifteen years ago, a large customer service operation with a reverse logistics department required customers to send in a broken device, had it examined, and only then shipped a refurbished one. Yet the goal was for the customer to keep using the product, because the money was in the consumables that went into the device.
The proposal was to send a new device straight away. It was treated as heresy: what if people send us bricks? Some might. Most would not, and they would be using the product again within two days. Doing it differently saved 300,000 euros a year. This was long before online retailers such as bol.com started telling customers to just keep the broken device.
What distrust costs
Why do companies design processes for the worst-case customer?
Many businesses picture the customer as a calculating homo economicus who will cheat if given the chance, so processes are engineered around the worst case. That distrust is very expensive.
An energy company required two signatures on the meter readings whenever a tenant moved out and a new one moved in, so that both parties agreed on the numbers. Customers found it cumbersome and often impossible to arrange, and someone had to check every signature. The justification: the readings differed in over 50% of cases. On investigation, most differences were a few cents, caused by something like a fridge left running, and the biggest differences were only a few percent. The company dropped the second signature and accepted that an occasional discussion would follow.
The historian Rutger Bregman makes a related case in Humankind: most people are kind and honest, even though films and literature train us to assume otherwise. That can be a hard sell to people who are distrustful by profession, such as CFOs who must avoid being fooled.
Speak the language of the person in front of you
How do you win over a CFO?
CFOs are human too, and they are accountable for a lot, so they look for certainty. The answer is to find the right language. Some CX programmes run on a back-of-the-napkin calculation, largely because of how they are positioned in relation to the business strategy and within the internal culture. Others run on deep models of customer lifetime value. Both can work. Speak the language of the person in front of you: if the C-level is very rational, make the case in rational terms.
Some investments are also made on principle. Nobody argues about the ROI of a factory floor when a company needs a factory; it builds the factory and expects the return to come. That is no argument against a business case. It means the right case depends on who you are talking to.
Every business case is a forecast
Every business case is a forecast.
Horst RemesCustomer strategy expert, OnestoneHow do you calculate the return on customer experience?
Customer experience ROI is messy. Marketing, and advertising in particular, has struggled with the same problem for decades, because many factors play a role and an investment made today does not pay off tomorrow, next month or even next quarter.
The first question is what the business case has to prove: more budget, a justification of past investments, something else? Metrics such as customer lifetime value help, though CLV uses the past to predict the future, which makes it a forecast. So is the case for a new IT system, which also estimates what it will save and bring in. Customer experience gets held to a stricter standard for no good reason. The guide to customer experience ROI walks through the calculation.
Start from the business goal
Why does the business case for CX so often feel like an uphill battle?
Because companies often start from the solution. Someone becomes convinced they want a particular tool and sets out to prove it, and every conversation turns into an uphill battle. Starting from the business need works better: agree on the strategy and where the company wants to go, then ask which tools that requires and pick the best one.
Conversations with leadership should be about business goals, never about a gimmick. A useful first question: two customers are talking about us, so what do we want them to say? The answer shapes the experience, the processes and the offering. Two more questions follow. Is there a clear strategy? And can it be explained so that everyone in the organisation understands their role in it? Then experiment, because nobody knows exactly how something will turn out, and measure whether it contributes to the goal.
Functional, emotional and social needs
How well do companies really know their customers?
Many organisations believe they know their customers so well that research is unnecessary. A decade ago, one insurer wanted an app that let customers upload accident photos to start a claim, assuming every customer would have the app on their phone. Assuming instead that the customer does not have the app leads to a different solution, such as a web application that is available at the moment of an accident.
A better starting point is the job to be done, mapped across the functional, emotional and social needs of the customer. Companies are good at the functional part, such as processing a claim. They are worse at the emotional part, such as knowing when the money will arrive. One leasing company found that the end of a lease always went badly, because damage to the car's rims came as a financial surprise at the final inspection. The real question was how to give customers a heads-up six months earlier.
The social part is the most forgotten. Companies measure customer satisfaction and rarely say what they do with the results. Telling customers that their opinions were asked for and acted on is itself part of the return on investment.
One argument for a sceptical CEO
If you are looking for acquisition in your business strategy, you need to look for acquisition in your customer experience strategy.
Michel StevensCX expert & course directorWhat one argument would convince a CEO who doubts the financial value of CX?
You can lead a horse to water, but you cannot make it drink. Customer experience is one strategy among three: be the cheapest, have the best product, or be customer-centric. A company that succeeds with the first or second can do without the third. Everyone else has to compete on customer experience.
You can only be the cheapest in one way. There is more than one way to have the best product, and more than one way to deliver the best customer experience. Even two low-cost airlines that fight on price, such as Ryanair and Wizz Air, differ in how customer-friendly they are.
The second argument is to tie customer experience to the business strategy. If the strategy is acquisition, the CX strategy is acquisition too: the two need to shake hands. When a CX team can show that everything it does helps the company reach its goals, leadership gets on board.
This article is an edited summary of the conversation. For every word, watch the full episode in the video above, or click a section title to jump to that moment.
Questions this episode answers
How do you calculate the ROI of customer experience?
Start from what the business case needs to prove, then link customer experience to the two profit levers: more revenue from loyalty, repeat purchases and referrals, and lower costs because satisfied customers are cheaper to serve. Metrics such as customer lifetime value help, and like every business case, the result is a forecast.
Why is customer experience ROI hard to prove?
Customer experience was long treated as an emotional discipline, so few CX teams built financial skills, and its effects take months to show, much like advertising. The return is also spread over revenue and costs, which makes a single number messy.
How does a better customer experience reduce costs?
Satisfied customers contact the company less, and a well-designed process is often both more satisfying and more efficient. Repeat contacts about the same unanswered question across email, phone and chat are a direct cost that clear information and peace of mind remove.
What does distrust of customers cost a company?
Processes built for the worst case add checks, delays and staff time for every customer. Sending a replacement device before inspecting returns saved one customer service operation 300,000 euros a year, even though a few customers abused it.
How do you convince a sceptical CFO or CEO to invest in customer experience?
Speak their language, and tie customer experience to the business strategy: an acquisition strategy needs a CX strategy built for acquisition. Then show that everything the CX team does serves the company's goals.