Monday, December 17

RoI from CX: it’s (not) the numbers, stupid!

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The process by which you get them is just as important

Are you frustrated at the lack of attention from senior management for your customer experience improvement programmes? Do you seethe with jealousy when other departments get investments to build a shiny new system and you can’t get enough people to analyse complaints data? Are you fed up with CX being seen as “intangible” or “nice to have”?

These are the messages we get all the time from our clients and contacts – and we can empathise with that because the paradox is that having a genuine customer focus offers massive benefits, but so few companies seem to be able to capitalise on it.

What’s going on?

To adapt a phrase associated with former US President Bill Clinton: it’s the numbers, stupid! Put simply, if you can’t get your CX investments to demonstrate an impact on the bottom line in the way that other investments do, you’ll be stuck in the “nice to have” category.

Problem is, if getting return on investment (RoI) numbers for CX were that simple, everyone would be doing it. But they’re not, for the simple but frustrating reason that CX does operate in the world of intangibles.

RoI for dummies

Throughout my career I’ve had to develop business cases for various things from marketing programmes to channel strategies and lean sigma projects. I frequently need to do something similar in my non-work life – two recent examples include:

  • Buying a new acoustic bass guitar to save my back from lugging an amplifier to music group practice.
  • Persuading my in-laws to invest in a new mattress so that we can visit them without subsequently needing physiotherapy to overcome the effects of a night in their somewhat uncomfortable spare bed.

These business cases are straightforward: there’s a cost (in the case of the bass, quite low) and a benefit – both relating to reduced back pain in these examples so that’s a very tangible outcome.

It’s definitely at the “RoI for dummies” level.

But we’re dealing with something a little bit harder – I’m not talking about mattresses now – with customer experience.

Some benefits are, or should be, straightforward to quantify. Let’s say we want to put more of the customer journey online: the cost saving from having fewer people in stores or call centres will be easy to calculate and match against the investment required. If we design the online system right then we won’t see a dip in satisfaction scores either, and it might be easier to up-sell or cross-sell related products through the customer’s journey, so we can measure a benefit from increased revenue per customer as well.

But what if we want to invest in front-line staff capability through training or making more team leader time available for coaching? Unless your training is specifically to do the job faster (cost saving) or to up-sell or cross-sell (increasing revenue), then you are likely to be basing your case on improvements to customer satisfaction or advocacy – measurable, yes, but tangible, no.

RoI for humans

To get from intangible fluff to dollars and cents benefits, you need to recognise that business cases are a human process. In other words, it’s rarely a hard number, mechanical process of cause-and-effect. This doesn’t let CX off the hook but if means that rather than being just the numbers, it’s the process by which you get them that’s important.

So, is there a definitive process for doing this?

Short answer: no.

The process you use to establish the link between intangibles and measurable benefits will need to fit within the culture of your organisation – anything different will most likely be rejected – but it should have the following elements:

Agreement on purpose and priorities

Organisations that have a clear purpose – their “why” – find it much easier to set priorities. As Antonio Nieto-Rodriguez points out in a paper for HBR, organisations should define a hierarchy of purpose, where the organisation’s purpose or strategic vision cascades into a set of priorities – the things that are the most important over the next two to five years. Clarity on these enables different projects to be scored against these priorities.

Agreement needs to be genuinely cross-functional as well, grounded in a mature discussion about the strategy and owned by all areas.

Discussion of the forces affecting the business in future

The context within which the organisation sits has a direct impact on priorities. For example, a financial services company may see its purpose as enriching the lives of its current and future customers, but if the sector that they are operating in is being threatened by low-cost competitors, they may see the priorities for the next two years as lowering their cost base to compete or they may wish to differentiate themselves on other factors such as service.

If the organisation isn’t clear on these two strategic elements then projects will be prioritised on the basis of political influence, existing biases and so on. A CX improvement project may get the green light in such an environment but would most likely be cancelled if a new “pet project” arrived on the scene.

Establish dependency

Benefits management is a proven approach usually applied to technology deployment to establish some rigour around investment decisions. The key tool in this is the benefits dependency network. This links “features” to business drivers via objectives and expected benefits and organisational changes. (There’s a good article on this – again on HBR – which avoids much of the academic jargon that bedevils this area.

In my view, benefits dependency is far too useful to be left to enlightened techies as the key thing is that it involves a facilitated discussion between stakeholders about what’s important. This gets to the essence of the CX RoI problem: the process by which you discuss priorities, investments and predicted results is just as important as the management information you use to track it.

Let’s take my recent guitar purchase as a very simple example. Thinking about my decision, the benefits dependency network that informed it looks like this:

Obviously, a business example would be more complex but the important thing to bear in mind is that in thinking about the link between the simple features of my new guitar, I’m having to think about what’s important to me. In the same way, a discussion about the benefits of CX improvement yield important discussions about what’s important to the business.

It doesn’t matter if you don’t use a benefits dependency network; the important thing is to have the conversation.

Get the proof

The unavoidable truth is that once you have identified the link between improvements in customer experience and business benefits you will need to find evidence that supports the linkage.

This process is made easier if the quality of the conversation around benefits is good. In other words, if you come out of it with a linkage between say, spending more time talking to customers, customer satisfaction and increased sales that’s a working hypothesis that you can then gather data for. Of course, detractors may point to other ways to drive up sales but if the conversation is managed correctly, those “other ways” should be included in the benefits discussion.

A simple excerpt from a benefits dependency network in such a situation might therefore look like this:

In this example both sales training and CX training are agreed to have an impact on increased revenue. If the organisation is happy to invest in both, then the RoI case should include both. Detailed analysis of individual agent performance – satisfaction, time spent, sales achieved – may prove that one investment has more impact than the other.

And that’s the risk: going down this route may mean that you discover that your organisation does favour business outcomes that don’t require further investment in improving CX. Personally, I think that’s unlikely as once you start down the route of an open and honest discussion of what the organisation’s priorities are you’ll find you’re on a level playing field where the benefits can be evaluated alongside other initiatives.

I’ve had many years’ experience of these kind of conversations so if you’d like to discuss how to develop these ideas further in your own organisation then please get in touch with me.

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About Author

Business strategist, consultant and change manager who helps companies become genuinely customer-centric. Nick delivers customer-driven business transformation projects and has worked across many industries including banking and finance, insurance, telecommunications, industrial and public sector. Has held senior roles with variety of blue chip names including BT, Royal Bank of Scotland, CSC and Sema Group. Currently Head of Delivery at NextTen Innovation Solutions

1 Comment

  1. As an ‘enlightened techie’, can I just say thank you for proving that there’s life for Benefits Dependency Networks outside of IT projects. The BDN is the best and most widely applicable tool in Benefits Management practice. It deserves to get some good publicity.

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