How to measure customer experience impact: CX Mini Masterclass – E73

This CX Mini Masterclass explores practical ideas for how to measure customer experience impact beyond the usual-suspect CX measure like NPS and CSAT. From efficiency gains to market share growth, there are many options for CX professional to demonstrate their value to the business. Show host and customer experience expert, Julia Ahlfeldt, shares tips for how to measure and quantify the impact of your CX efforts. If you’re tired of being shackled to your CSAT or Net Promoter Score and want some inspiration on how to demonstrate the business impact of CX, then this episode is for you.

Don’t lose sight of the bigger picture

CX professionals are constantly looking for ways to demonstrate their value and worth to the business. Sometimes it seems like all roads lead to metrics and measures. Often, this results in score chasing. CX thought leaders, such a Jeanne Bliss, have famously raised the flag about the dangers of score chasing, as it’s a surefire way to have everyone take their eye off the prize. When CX professionals become obsessed with Net Promoter Score, Customer Satisfaction or other metrics, they can easily lose sight of the bigger picture: how customer experience helps brands thrive and grow.

Of course the classic CX metrics serve an important function. There is plenty of research showing that happy customers are good for business, but when it comes time to have conversations about things like business budget allocation, “happy customers are good for business” has an uphill fight against “we’re going to save the business $2 million dollars next year”. Executives are, after all, beholden to their own performance metrics, and most of these are related to classic business indicators like market share, profit and loss.

It’s up to CX leaders and their teams to share stores about the business impact of CX, in a way that will resonate with decision-makers. 

Look for efficiency

What’s good for the customer experience is often good for the business. When a customer experience involves a lot of hurdles or extra steps, it probably means there are the same hurdles and extra steps going on from a process perspective. If a CX initiative simplifies or cleans up the customer journey, there is an opportunity to look at how that translates into business efficiency. If a simplified journey means less behind-the-scenes processing time, that’s an efficiency gain. If experience changes proactively address an issue that is linked to a high volume of customer calls, that’s also an efficiency gain.

In the business world, time is money. If journey improvements result in time saved, that can be quantified as a cost savings or as time that can be diverted into a more productive activity. For example, if a journey improvement results in a reduction of 10 calls per day at an average of 5 minutes per call, that means 50 minutes per day of time saved. This could translate into money saved through more efficient resource planning or revenue gained by diverting those 50 minutes of agent time to some outbound revenue-generating customer interaction.

Customer understanding improves business accuracy

The more that organizations know about their customers, the more precisely they can interpret customer needs and tailor interactions. Often these insights emanate from a CX team, so CX leaders should not be shy with highlighting the results.

So how do we measure customer experience impact? One way is to look for how improved accuracy of understanding customers might drive efficiency. For example, if a sales team is armed with more accurate information about their customers, it might reduce the initial back-and-forth with customers, enabling them to save time when providing recommendations. It could also streamline the process of making a sale. In these examples, improved accuracy of information about customers translates into an efficiency gain for the sales team, much as a reduction of calls meant an efficiency gain for the call center team in the previous example.

Improved accuracy can also drive improvements in customer lifetime value (CLV). And if you aren’t familiar with customer lifetime value, be sure to check out episode 22. If CX efforts to better understand customers translate into improved revenue per customer, higher conversion or better retention rates, these results can easily be linked to CLV. For example, if tailored communications are being sent out on the back of more accurate information about customer, this might immediately translate into repurchase, or lower churn. 

Get granular

Impact on customer lifetime value isn’t limited to improved accuracy of understanding customers. Any place where the customer journey has been improved, there may be an opportunity to investigate if this has catalyzed an improved revenue per customer, better retention or reduced churn (aka the key ingredients of CLV).

It’s easiest to make the cause-and-effect link when CX professionals measure customer experience impact on as micro a level as possible, e.g. looking at how a single change in the journey impacts immediate behavior. The micro links are easier to find within highly transactional journeys like retail or travel. Subscription-based journeys like banking or utilities are a little trickier because the time horizons are longer and the repurchase transactions are few and far between. That doesn’t mean CX professionals can’t still make an argument for the aggregate impact of journey improvements on customer lifetime value over a longer period of time.

Quantify the value of referrals

In a world of abundant choice and overwhelming information, consumers are increasingly turning to friends, family and colleagues as a primary source of information about when and where to spend their money. We also know that happy customers are more likely to recommend brands to others, so customer referrals are a great way to connect customer experience to market share growth.

If improvements to the journey catalyze an increase in referrals from the affected customers, this should absolutely form part of the story about CX impact. New customers mean larger market share and the value of customer base growth can be quantified by multiplying the number of new customers by the average customer lifetime value.

Take business impact to the next level

If you really want to speak the language of your CFO, take your CX business impact measurement one step further by incorporating a CX ROI calculation. If you’ve figured out how to measure customer experience impact as outlined above, you’re already 99% of the way there. Check out my Ultimate Guide to the ROI of Customer Experience to delve deeper into the topic of CX ROI calculations, including an overview of popular methodologies and expert guidance on how to pick the right approach.

Want to keep learning about CX?

If you’d like to checkout more of these CX Mini Masterclasses or listen to my longer format CX expert interviews, check out the full listing of episodes for this CX podcast.

Decoding the Customer is a series of customer experience podcasts created and produced by Julia Ahlfeldt, CCXP. Julia is a customer experience strategist, speaker and business advisor. She is a Certified Customer Experience Professional and one of the top experts in customer experience management. To find out more about how Julia can help your business achieve its CX goals, check out her customer experience advisory consulting services  (including journey mapping, CX strategy development, experience innovation, leadership workshops and CX ROI measurement) or get in touch via email.