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How to Quantitatively Measure Customer Experience ROI

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CX (customer experience) is a hot topic.

When Gartner research vice president Olive Huang checked in on what people were discussing on social media, she found more than:

  • 76,000 conversations on CX design
  • 146,000 conversations on CX channels
  • 163,000 on CX data and analytics
  • 82,000 on CX strategy

CX is also at the heart of 40% of all data analytics projects, according to Huang. Brands look at analytics data to see what they can do to improve the customer experience.

We know CX is important, but how do you quantitatively measure the ROI of your CX efforts?

There are just three steps:

1. Decide what you’re going to measure on the business side

2. Decide what you’re going to measure on the CX side

3. Figure out how to correlate the two

In this article, I’ll walk you through each step, provide a list of metrics you can use for both the business side and the CX side, and give you tips (and software suggestions) on how to collect and correlate the data to determine your ROI.

1. Decide what you’re going to measure on the business side

Decide ahead of time which numbers you’re going to use to measure the value of customer service. Whatever you choose, it needs to be a metric you can measure quantitatively.

Bruce Tempkin recommends that you ask which business or brand goals you think your CX metrics will influence. For instance, will improving CX prompt customers to make the same number of purchases, but larger ones?

One study by Medallia found that even after controlling for other factors, customers who rate their experiences mostly highly spend 140% more in the future than those who rate them mostly poorly.

Source

Or will they make the same size purchases, but more frequently? According to “Marketing Metrics: The Definitive Guide to Measuring Market Performance,” it’s 3 to 14 times easier to sell to an existing customer than to acquire a new one, because you’ve got a 60% to 70% chance of selling to an existing customer, but your likelihood of selling to a new prospect averages 5% to 20%.

Will they switch from calling customer support to using self-service customer support tools? Will they stay loyal, longer?

Most businesses lose 45 to 50% of their customers every five years. CX and repeat business, along with other positive outcomes, are positively correlated. Today, many business models succeed or fail based on repeat business.

In “Leading on the Edge of Chaos: The 10 Critical Elements for Success in Volatile Times,” Emmett Murphy and Mark Murphy estimate that increasing your customer retention rate by just 2% impacts your business the same as decreasing your costs by 10%.

And don’t overlook the cost of unhappy customers. Ticked off users return more products, create more customer support tickets, and complain more to their friends about your brand.

“We see that if you get customer experience right, you drive loyalty, you drive reduce churn and therefore you’re driving new revenue and incremental revenue,” McKinsey principal Kevin Neher said. “And so this is the idea of stacked wins. Better revenue, lower cost, more engaged employees. That’s the value of customer experience.”

“The bottom-line value of personalization is increased conversion, reduced churn and improved customer loyalty,” writes Gartner’s Christi Eubanks in Innovation Insight for Understanding Customer Data Platforms.

2. Decide what you’re going to measure on the CX side

Bruce Tempkin recommends that businesses measure behaviors, attitudes, perceptions, and interactions. But which survey instruments should you use? The three industry-standard formats are Customer Effort Score (CES), Net Promoter Score (NPS), or Customer Satisfaction Score (CSAT).

The Tempkin Group asked more than 170 large companies which specific metrics they regularly track. The top two metrics on the list were likelihood-to-recommend and interaction-satisfaction measures, with more than 80% of respondents using one or the other or both. More than three-quarters of respondents use NPS.

People who use NPS claim it correlates tightly with profits and growth.

Source

Martha Brooke is chief CX analyst and founder of InterAction Metrics, a customer survey, service evaluation, and customer experience planning firm. “You may want to consider a score that accounts for multiple elements of the customer experience, weighted by what matters most to each customer and their situation,” Brooke said. “The one number that InterAction Metrics uses to aggregate the many elements of customer experience is QCI [Quality of Customer Interaction] Score.”

The bottom line, according to Brooke, is that the metric that you use “will depend on how you are using your survey data and how actionable it needs to be.”

Learn more about your options by reading What Are CES, NPS, and CSAT? Understanding When to Use Which.

3. Figure out how to correlate the two to determine your ROI

You want to make decisions on where to invest your CX dollars based on how satisfaction shapes revenue. But to do that, you’ve got to know how satisfaction impacts revenue.

Now you’ve chosen which business metrics to measure. Again, these could include:

– Purchase amount
– Purchase frequency
– Number of calls to customer support
– Loyalty
– Product returns​
– Number of customer support tickets
– Number of complaints to their friends about your brand

And you’ve also chosen which CX metrics to measure. Again, these could include:

– CES
– NPS
– CSAT
– QCI
– Other likelihood-to-recommend scores
– Other custom scoring systems

Whichever CX metric you’ve chosen to measure, Tempkin recommends that you group your customers into three to five categories based on their responses to your survey questions. For instance, if you’re an NPS user, you can group customers into Promoters, Passives, and Detractors.

Now you need to find out how customers in each group are performing relative to your business metrics.

Let’s say you’ve chosen to measure purchase amount on the business side and NPS on the CX side. What’s the median purchase amount for Promoters, Passives, and Detractors? How much do they differ? If they don’t differ much, this combination of metrics probably isn’t going to be very illuminating for you.

Once you know, for example, what loyalty is worth to your company, and you know the difference between Promoters and Passives when it comes to loyalty, then you can estimate what the ROI is of moving customers who are now Passives to Promoters. Now you know how much it’s worth to you to move customers to higher CX levels.

How do you find out how customers in each group are performing relative to your business metrics? Data is the key.

How to correlate customer data

You should have a profile for every person who has ever made a purchase, opted in to receive emails, or created an account online that includes their contact information, demographic data, activities, and notes.

Don’t forget about prospects. The Tempkin Group survey found that less than 20% of companies believe they do a good job measuring satisfaction for non-customers, including prospects and former customers.

You want all that data in one place to make everything easier. First, it means customer service agents and salespeople both know where to go to get important background information on customers and prospects, which helps them personalize the interaction and waste less of the customer’s time rehashing information your brand should already have close at hand.

But for our purposes today, the main benefit of consolidating the information is to make the analysis easier.

Not only should you consolidate customer data, but you should set your systems up so information flows in and updates automatically in real time.

Okay, so how do you do this? Software!

Do you already use help desk or customer service software?

Check to see if it’s got customer feedback functionality. For example, Help Scout and LiveAgent both make it easy to collect feedback from your customers with ready-made (yet also customizable) feedback buttons you can put anywhere on your website. TeamSupport has built-in tools to help you collect and report on customer feedback as well. That way feedback and support are already connected, and then you just need to connect sales and marketing activity.

If your support software doesn’t have customer feedback functionality, choose an app that integrates with your customer service or help desk software. For example Intercom.io integrates with Zendesk.

Here’s more Customer Service Software That Helps You Run CES, NPS, or CSAT Surveys.

No matter which apps you choose, all sources of customer data, including your CRM, POS software, eCommerce platform, web analytics, and email marketing software, should integrate with minimal manual effort.

The value of measuring CX efforts

It’s vital to measure every CX effort in terms of quantitative ROI. It’s hard to to build, measure, and continuously optimize if you don’t know what will yield the best results.

“If you don’t take the customer view, then you’re just optimizing something that might not need to exist at all,” McKinsey principal Kevin Neher.

To help you measure CX, check out our 5-step guide to getting actionable customer feedback, our customer experience software directory, and 3 great customer experience software options compared.

Looking for Customer Experience software? Check out Capterra's list of the best Customer Experience software solutions.

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About the Author

Cathy Reisenwitz

Cathy Reisenwitz helps B2B software companies with their sales and marketing at Capterra. Her writing has appeared in The Week, Forbes, the Chicago Tribune, The Daily Beast, VICE Motherboard, Reason magazine, Talking Points Memo and other publications. She has been quoted by the New York Times Magazine and has been a columnist at Bitcoin Magazine. Her media appearances include Fox News and Al Jazeera America. If you're a B2B software company looking for more exposure, email Cathy at cathy@capterra.com . To read more of her thoughts, follow her on Twitter.

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