{"id":50667,"date":"2021-07-30T11:16:25","date_gmt":"2021-07-30T15:16:25","guid":{"rendered":"https:\/\/www.sogolytics.com\/blog\/?p=50667"},"modified":"2023-08-10T18:55:53","modified_gmt":"2023-08-10T22:55:53","slug":"measure-the-roi-of-improved-cx","status":"publish","type":"post","link":"https:\/\/www.sogolytics.com\/blog\/measure-the-roi-of-improved-cx\/","title":{"rendered":"Can We Measure the ROI of Improved Customer Experience?"},"content":{"rendered":"

As many as half of CX leaders are not properly able to quantify the impact of customer experience on crucial business metrics like revenue or LTV. This is problematic. How can you justify the cost of building your game-changing customer experience program<\/a> if you can\u2019t clearly demonstrate its value to the board or senior management?<\/p>\n

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Like any other business program, continued investment in CX requires a concrete, quantitative business case (with reliable ROI projections). But is it even possible to measure the ROI of CX within your company?<\/p>\n

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It’s a complex measure, to be sure, which means the most honest answer might be “Well, it’s complicated…” But even if you can’t exactly measure all of it, you can effectively estimate the return on investment of customer experience (or ROX, the return on experience) with the following three approaches.<\/p>\n

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Use third-party data and research to “prove” ROX<\/h2>\n

There is a lot of highly respectable data out there.<\/p>\n

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Research by Gartner<\/a> found that low-effort interactions cost companies 37 percent less than high-effort ones. They also confirmed something we all intuitively know: high-effort interactions are more likely to make customers disloyal \u2014 by a factor of 10.<\/p>\n

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Saving costs and retaining customers are the principal ways in which CX improvements affect ROI. As we\u2019ve seen, making life easier for customers keeps them loyal and therefore saves money. So how do you know what problems to fix? You ask the customers!<\/p>\n

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McKinsey reported on an energy company who, through speaking with customers, reduced the number of steps required to set up an account from 18 to five. This resulted in<\/a> reduced complaints, recovered staff hours, and measurably lowered costs.<\/p>\n

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These are just two of many examples where companies have self-reflected, fixed some obvious problems, and directly profited from the work \u2014 without generating any new sales or launching any marketing campaigns. Where problems already exist, CX improvements are inherently likely to have a positive ROI.<\/p>\n

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Estimate the dollar value of customer retention<\/h2>\n

Increased customer retention is the gold standard for CX improvements. It\u2019s what every CX campaign is looking to achieve: make the product so good, so effortless, and so valuable that customers don\u2019t even bother looking at alternatives. In addition to the less-tangible reputational boost and word-of-mouth referrals, improved CX directly correlates with retention.<\/p>\n

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Increasing customer retention<\/a> by just 5 percent has been shown to increase profits by as much as 25 to 95 percent\u00a0<\/a>\u2014 while this is an unhelpfully open value, it is accepted that better retention leads to higher profit. While there is an upper limit to how much brands can squeeze current customers for, CX improvements are a definite boon to customer retention and LTV.<\/p>\n

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Let\u2019s imagine your SaaS customers spend an average of $250 annually on your products, but you lose 100 customers a year to churn. If CX improvements prevent just one of those customers leaving every month, you can put a powerful dollar value on those gains \u2014 nearly $3,000 in this case.<\/p>\n

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The higher the average customer value and the better the retention, the bigger the financial motivation to invest in customer experience<\/a>!<\/p>\n

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Depending on the nature of your business and what you\u2019re selling, the symbiosis between improved CX and increased LTV can become almost self-perpetuating. The better you make the customer experience, the more customers are willing to pay for it.<\/p>\n

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Assess the less measurable benefits of CX improvement<\/h2>\n

As we\u2019ve said, results of CX improvements aren\u2019t always strictly measurable. But introducing both functional (speed, ease of use, reduced effort) or emotional improvements, brands can get happier, more satisfied customer that:<\/p>\n

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