How to tie CX to business success in three simple steps
In 2022, the Forrester CX Index dropped for the first time in years, with nearly twenty percent of US brands seeing a drop in customer experience.
Towards the second half of 2022, an increasing number of companies fear a recession and put their spending under scrutiny.
At the same time, companies still struggle to link CX projects to business outcomes and their metrics, let alone to financial metrics. In addition, Forrester predicts that also in the next few years, CX teams will lack critical design, data and journey skills.
In parallel, there is an increasing number of companies that deliver software and/or services that are intended to help businesses improve their CX. In the past years, CX has established itself as a whole new category of software. Many a company has repositioned itself to become a CX vendor, examples including all major CRM vendors, but also call center specialists like Genesys. And, naturally, a good number of these new CX actors got — and get — acquired by bigger fish. A very good example of this trend is the decrease in the number of independent journey orchestration vendors or the concentration of chatbot vendors into conversational AI vendors. Of course, this list cannot be exhaustive in any case.
So, clearly vendors are betting big on CX being a growth market, while their clients still struggle to justify the expense into CX. This leads Forrester to predict that twenty percent of CX programs will be stopped and the teams correspondingly disbanded and probably be merged into other parts of the organization.
Why is this?
Although the true differentiator of every business nowadays is not product, price or promotion/placement but the customer experience, many companies haven’t made this understanding part of their corporate DNA. There is no clear understanding about what key drivers of their customer experience are, in other words, what their customers actually want — and how they want it. Oftentimes, there is no key metric that defines CX. Often some metrics like NPS, CSAT or first contact resolution rate or average time to resolution are measured. What then is still missing is the next level, its linkage to a business outcome metric is missing.
In consequence, CX leaders have the problem that they cannot directly link the outcomes of their projects to improved business outcomes. Even worse, in an environment with multiple projects with overlapping results, the leaders of the other projects can, or at least claim to. The consequence is at least a loss of influence of CX leaders, if not the dissolution of their initiatives.
This will also lead to businesses losing their ability to differentiate themselves via a superior CX and to two main groups of businesses: the first one being leading companies that continue to focus on differentiating via customer orientation and thus CX, and another bigger group that falls back to traditional means. The latter group will find itself in the downward spiral of a price war, as products and placement become increasingly commoditized.
As counterintuitive as it sounds, the solution is to continue to invest into CX. The way to do this is to make CX a measurable part of the business strategy and therefore to connect it to strategic KPIs, which unambiguously show the value of the outcome of a CX project.
Build an analytical framework
This way, it is assured that the core CX metric that you use is relevant to all business stakeholders, most notably the customer. It can be demonstrated how improving this metric contributes to business success. It is aggregated upwards and decomposable into its detail metrics.
Using this approach, each part of the organization, each team member can understand how the own objectives contribute to business success.
A simplified example is as follows. Revenue growth is a business objective. Many companies are measuring their NPS or customer satisfaction and the customer lifetime value, CLV. CSAT as well as NPS can be tied to customer interactions. For either, CSAT or NPS, buckets like negative, neutral, positive, can be defined. This gives customer segments or cohorts. For these cohorts, it is possible to calculate an average CLV. This CLV will increase from the negative to the positive bucket. So, an increase in CLV can be tied to the business objective of revenue growth and CX projects targeting at moving customers from one bucket to a higher one can be initiated. Now, identify what pain points lead to the low CSAT/NPS. A project to address this pain point can be implemented. What is important afterwards is to measure the outcome over time.
As said, this is simplified. Ideally, it needs measures on three different time horizons, short term, i.e., the next few weeks and months, mid-term, i.e., twelve to 18 months, and long term. The reason for this is that short term improvements may not lead to a longer-term benefit. An example for this is improving the support in an onboarding process. Making this support more efficient does not necessarily make the customer renew the contract. That’s why the longer-term metrics need to be tracked as well.
Some of the hard work lie in creating a sound analytical framework and then in building and testing hypotheses on why customers are in the “unhappy” bucket. Again, this analytical framework is largely company specific.
Identify where the bang for the buck lies
From there it is possible to identify the most pressing customer pain points and to identify the ones that promise the highest returns. Here, it is important to not lose the picture for the customer journey. Focusing in on individual touch points does normally have limited results. Instead, identify the journeys that matter most to the customers and then the pain points in these journeys. This is best done by doing three things:
- Talking to the customers, using focus groups etc. Customers will tell quite clearly where the problems lie, especially, if they recently went through the journey and if there is a benefit for them.
- Talking to the customer service employees and their managers who normally get the brunt of the issues. They will have good ideas on how to resolve the issues. They are doing it day by day.
- Analyzing the benefits of fixing the pain points in the terms of the analytical framework, process cost reduced, and employee satisfaction increased.
This exercise gives a clear indication on what should be done and how it could be done, also where there are poor workarounds.
The output is a first set of project candidates, based on a set of clear customer and company priorities, combined with an impact. Based upon the idea of using three time horizons, there are quantifiable short-term, mid-term and long-term benefits.
Working via the analytical framework including process cost and employee satisfaction data, the business cases are there.
Build a roadmap
This set of project candidates can be turned into a roadmap, using importance, urgency and “low-hanging fruit” as decision criteria. It is also possible to balance the portfolio of project candidates along expected pay-off periods, so that the program ultimately is self-funded, i.e., longer term investments can be funded out of improvements with a shorter time to value.
Last, but not least, revisit and reprioritize the portfolio in regular, e.g., quarterly rhythms, also weighing achieved benefits vs. planned benefits, to do two things. First, this enables to adjust the portfolio to changing priorities, including new project candidates. Second, it allows for a refinement of the analytical model by incorporating results from projects.