Many, if not most of you, believe effective management of customer experience makes good business sense because it leads to repeat purchasing, increased share-of-wallet, positive word-of-mouth, and a number of other behaviors that enable companies to achieve desired financial and other business results. In fact, faith in these anticipated outcomes has set into motion more than a few “customer focus” initiatives in companies throughout the world.
Still, in business as in spiritual matters, faith will be put to the test. At some point, no matter what their stated beliefs or commitments, senior managers, employees, and shareholders will demand evidence of the “bottom-line” impact of customer satisfaction and loyalty. They will demand evidence that investments made in improving customer experiences and relationships actually contribute to revenues, profits, and other desired financial and market performance outcomes.
Being able to report, for example, that your company’s Net Promoter Score has increased 5 points during the past quarter probably will get senior management’s attention. However, being able to specify what that increase means in terms of revenue growth, increased share of wallet, or improved market share will be riveting, and will go a long way toward sustaining support for investments into customer experience software and programs.
It should come as no surprise, then, that results of the Voice of the Customer Challenges and Practices Survey, recently conducted by MaritzCX, reveal that linking customer experience measures to financial and other business results is a linchpin in truly effective VoC programs. As the exhibit below illustrates, sixty (60) percent of firms having very successful VoC programs have developed an effective method of addressing this issue.1 In other organizations, this number is only 27 percent. Nearly one-half of all “Blue Chip” companies we surveyed are still trying to figure out how to link customer experience to business results, and 21 percent of these say that this is the “most important challenge we must be able to address within the next 12 months.”
So, how do the successful organizations do it?
Some companies use measures like repurchase intent as a proxy for actual customer behavior. They construct models that demonstrate how measures such as customer satisfaction or customer-perceived value impact – and can be used to predict – repurchase intent. The results are heuristic, in that they enable managers to visualize the potential effects of customer experience on customer behavior. In some cases, the analysis includes an attempt to “monetize” the results. For example, let’s say 20% of new SUV owners who are surveyed indicate they probably or definitely will not repurchase that same make/model when it comes time to replace the vehicle. If the SUV is priced at $20,000 on average, and 100,000 such vehicles are sold annually, we might project that $400 million in annual sales revenue is at risk unless the causes of customer dissatisfaction with the vehicle are identified and eliminated.
For some managers and executives, the above approach will not do. They demand more tangible evidence. They want to see a direct connection between customer experience measures, actual customer behavior, and actual financial results. So-called linkage analyses are required in such cases. Data captured from surveys (usually at an earlier point in time) must be integrated with data on actual customer spending or account activity (usually captured at a later point in time). In a property and casualty insurance company, for example, we might survey customers who have filed claims to gauge satisfaction with the way their respective claims were handled. Later, we might link these survey data to policy renewals to determine the strength and form of the relationship between customer satisfaction and actual customer retention or attrition. Knowing how much each policyholder actually spends annually (and for how many years s/he has done so), we would be able to express the effect of customer satisfaction or dissatisfaction in both behavioral and financial terms.2
The examples presented above all look at how an individual customer’s evaluation of his/her experience is linked to that customer’s behavior (or behavioral intent), and ultimately, to revenues. This is not the only strategy that can be used to demonstrate how customer experience is linked to business results. Sometimes, the relationship can be explored using a company’s outlets or locations as the “units of analysis.” For example, my colleague David Ensing performed an analysis in which he demonstrated how its customer satisfaction survey “history” could be used to predict whether an auto dealership stayed in or went out of business.3 Data from customer surveys were included in his analysis, but they were analyzed at the dealership, rather than at the customer level.
The link between customer experience and business results also can be established by examining how customer and financial scores from a corporate dashboard move together over time. One of the best early illustrations of this approach was furnished by AT&T, which was able to demonstrate that changes in a measure of customer-perceived value preceded changes in AT&T’s market share. This “lead-lag” relationship compelled management to focus on improving service elements that drove customer-perceived value.4
Has your organization successfully demonstrated the connection between customer experience and business results? If not, you need to do so. The specific approach your organization uses will depend on a variety of factors, including selecting the “right” customer metric, market structure and maturity, consumption cycles, and availability of data required for analysis. The emerging world of “Big Data” undoubtedly will make efforts to link customer experience to business results easier than they were in the past. Regardless, success in establishing this link will have a major impact on the sustainability of your organization’s customer experience investments. So, get started!
- Organizations having “very successful” VoC programs are those in which: (a) the VoC program has met its objectives and fulfilled senior management’s expectations; and (b) measures of both customer satisfaction and retention have improved during the past year. ↵
- For more on linkage analysis, see Brandt, D.R., Gupta, K. and Roberts, J. (2004). “Burden of Proof.” Marketing Research, (Fall), pp.14-20. ↵
- Ensing, D. (2010). “Driving Yourself Out of Business.” Quirk’s Marketing Research Review (March), pp.58-61. ↵
- Gale, B. (1994). Managing Customer Value. New York: The Free Press; pp.79-83. ↵