customer experience

CX: Returns on Investment and Learning

April 2, 2016
by Toby Bottorf

Last week I was honored to speak on a lively panel sponsored by the Customer Experience Professionals Association (CXPA), addressing the topic members want most to discuss: capturing and communicating the return on investment for customer experience (CX) initiatives. Practitioners often struggle to get this kind of work funded and prove its value in advance.

Rich Dorfman of Eastern Bank and Maxie Schmidt-Subramanian of Forrester Research moderated the panel, winningly titled “Does Delighting Customers Really Drive the Bottom Line?” I was particularly interested in participating because, relative to the other panelists and the heart of CX work, my experience is much more qualitative than quantitative. I wanted to understand what a deep commitment to data science looks like, and how to frame data-based business cases. I also hoped to advocate for a design thinking approach to data, and articulate ways of finding financial value in more qualitative customer understanding.

Harley Manning of Forrester opened with the foundational economics of customer experience: Forrester’s own CX Index demonstrates the connection between growth (CAGR) and CX. He explained the establishing preconditions for the connection: that customers must be free (not captive) and that the market be meaningfully differentiated. This research made a strong impression on me when I heard it at the Forrester CX conference last year.

I learned a great deal from Joyce Maroney, who directs the Workforce Institute at Kronos. She pointed out that a SaaS model will focus attention on customer experience. Since customers can choose to leave at any time in a subscription model, and because they exhibit more measurable behavior, their experience connects directly to the bottom line. Her perspective on the value of qualitative feedback confirms what we also see at Continuum: learning not only what people are doing, but why, is valuable information in helping define solutions. At her organization, this feedback is inherently valid: their CEO actively monitors customer feedback and takes time to personally email employees who do commendable work.

Joyce’s situation is not the norm: In my experience, senior leadership does not always buy in. We’ve seen that nothing makes the emotional case for the value of customer understanding better than getting out of the office and meeting customers in their complicated everyday lives. I urged the audience to find any way possible to get leaders to understand customers personally. That experience is always surprising. It can be transformative for executives to understand their customers, on their terms. Customers’ subjective and emotional experience is the reality of our business context.

Customer research always provides more value if it is actionable: a treatment plan, not just a diagnosis.

Shawn Mullin made the entire audience envious of his description of the “data lake” at EMC, and the team of data scientists that works to extract patterns from unrelated data sets. It’s exciting to imagine the kinds of generative hypotheses that can come from looking at evidence from Mullin’s approach. I believe broad and connected data will be more valuable than deep and narrowly focused data, especially for helping inform strategic decision-making. Design thinking focuses on uncertain futures and open problems, seeking to make inferences across seemingly unrelated data sets. Design thinking is consilient thinking.

Innovation and CX

I was asked about the relationship between innovation and customer experience, which is where much of my recent work has focused. Empathy and understanding of customers is an essential input to growth strategy (in line with Forrester’s CX index). Customer research always provides more value if it is actionable: a treatment plan, not just a diagnosis. For this reason, most of our research is qualitative. Numbers are best suited to fixing broken elements of a business. But stories, qualitative evidence, are where we find confidence in the market appeal of entirely new ideas.

Returns on Investment

Greater customer understanding offers two enormous returns on investment. First, there are often great savings associated with determining fit and killing or modifying something before committing resources to scaling it and marketing it. Deciding not to do something can be an expensive decision if made late in the process. CX insights can deliver enormous savings in money not spent on the wrong ideas, and align increasing investments with increasing confidence as ideas are developed.

CX insights can deliver enormous savings in money not spent on the wrong ideas, and align increasing investments with increasing confidence as ideas are developed.

To do this, companies must understand piloting as a learning process, not a step on an automatic path to scale. They must also distinguish between small investments for prioritizing and developing ideas, and (later) much larger investments for scaling those ideas. Removing costs in this manner is a way of making customer experience work self-funding.

The Return on Learning

The second great source of value in CX work is its return on learning.

Qualitative customer insights are always broader than the specific answers they provide to targeted questions. When we investigate how well an idea resonates with customers, the answer almost always suggests other viable ideas. That information must feed into the development and prioritization of CX initiatives in a holistic way. Every CX initiative tells us something we can apply to the next offer in the pipeline. To capture this value, all CX initiatives should ask this question: What new information about our customers’ needs and values will this help us collect?

Every CX initiative tells us something we can apply to the next offer in the pipeline. To capture this value, all CX initiatives should ask: What new information about our customers’ needs and values will this help us collect?

CX strategy that is based on a holistic and empathic understanding of customers ensures that your value proposition and products align with the needs and values of your most important customers. This kind of CX strategy is closely connected to an innovation roadmap with concrete short-term initiatives that point to a longer-term vision.

Organizations work hard to resolve the tension between marketing and IT, created by the emergence of CX—that is, bridging customer intelligence and user experience (UX) design. That cannot happen quickly enough, because the next integration imperative for CX is emerging: customer experience is also necessarily connected to product development, particularly in experiential businesses like finance and healthcare.

Customer-centered businesses pose three crucial questions about customers in three different parts of the organization. Product development asks: What should we offer? UX asks: How should we do it? Finally, CX asks: How is it performing? Answer these questions together and you’ll deliver value that customers will recognize.

Image by Elliot Stokes/ CC/by-sa/2.0

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