The era of companies pursuing growth at any cost is over — the high cost of customer acquisition means that businesses are focusing more on increasing profitability as opposed to simply growing revenue. To achieve that, they need to get more value from their existing customer base, which means optimizing their CX function — not only to keep customers happy but to keep them spending.
While we know intuitively that providing a better customer experience has a direct impact on customer satisfaction, retention, and lifetime spending — all key factors in increasing profitability — accurately measuring the impact that CX teams have on the bottom line is challenging, for a number of reasons.
And to maximize the value that CX can bring to the table, there’s a need for a deeper understanding of its impact at an organizational level — and more effective collaboration between departments.
Why has measuring CX impact been difficult until now?
The traditional metrics used to measure performance in CX teams are not as straightforward as those in other departments. Sales performance, for example, can be expressed in hard numbers. If call center A’s sales team is signing up more new customers than their colleagues at call center B, then they’re doing a better job. Likewise in marketing — customer acquisition costs can be calculated down to the cent, and moving the needle in the right direction translates to marketing success. With CX it’s a little more blurry.
Metrics that we naturally relate to CX performance — for example, customer retention, churn, and CSAT — can all be measured quantitatively, but the impact that the CX team has on those metrics isn’t as easy to quantify.
In most businesses KPIs are isolated within departments — e.g. sales performance is tracked separately from product performance, which is tracked separately from CX performance. This puts CX teams at a disadvantage, as much of the real value that their work creates ends up being measured as an output on another department’s scoresheet.
The difficulty in quantifying the impact of customer satisfaction
Unfortunately, in many companies, CX teams are relegated to the status of cost centers, rather than revenue drivers — with the associated risk of cutbacks or budget freezes when the business faces economic challenges.
In fact, CX has a significant impact on marketing, sales, and product development — but how can CX leaders demonstrate that?
It’s important to recognize that CX has its own KPIs that are critical for business success — but also the impact of changes to those metrics on the wider organization needs to be measured and communicated. Classic CX metrics include:
- Average response and resolution times
- Customer churn rates
- NPS or CSAT scores
- Customer lifetime value
To gain a true picture of the value-add that CX teams contribute, what’s needed is a more unified approach to measuring CX impact across the organization.
Aligning CX metrics with business outcomes
To prove the significant impact that CX initiatives can have across the wider business, it’s important to maintain effective two-way relationships between CX and other departments.
CX leaders need to be plugged into the objectives and priorities of the other teams in the business to ensure that they can provide targeted value.
For example, if the product team is launching a new feature in the next update, CX can analyze customer conversations following the launch to pass vital feedback and insights into how well the update has been received by customers and highlight any issues or concerns.
Or if the sales team is releasing a new subscription pricing structure, CX is best positioned to monitor the effect on customer sentiment or churn and report back.
The ability of the CX team to deliver these actionable insights into customer thinking and behavior — which help drive results in other teams — provides leverage when seeking sponsorship from department heads for new CX investments.
If product, sales, and marketing leadership have a clear picture of the potential benefits of a given investment, it’s much easier to agree on measures to share the burden — for example, splitting part of the cost of a new AI tool between the sales and product team budgets in recognition of the impact it will have on each of their KPIs.
Strategies for measuring the impact of CX investments
So, how can we measure the real impact of investment in CX? The key goal here is to be able to make a one-to-one link between a CX interaction or initiative, and a specific gain for the business - reduced churn, increased revenue, etc. Let’s look at some examples of how this can work.
Utilizing advanced analytics for continuous improvement
Analyzing customer behavior by segment allows CX teams to pinpoint the value that they’re adding, and match that to desired business objectives.
For example, you could segment all customers who have interacted with the customer service team in the previous quarter by the average response time that their query received. Then, plot that against the sales for each segment in the current quarter. If you find that customers who received a faster response were more likely to purchase again in the future, that’s a great argument for investing in people or technology to reduce response times further.
Or, look at the total resolution time for customer issues from a specific period and map that against customer churn. If customers whose issues were resolved more quickly were more likely to stay with the business, then that demonstrates the need to focus resources on keeping resolution times as low as possible. And in each of these examples, you should be able to assign a value to the intervention CX makes, which will help predict the ROI of any investment.
Of course, the other challenge is that persuading the data science team to assign resources to CX initiatives can be challenging — with competing demands from other teams seen as more direct revenue drivers. That’s where cross-departmental communication is key.
Encouraging cross-departmental collaboration on CX
“Customer-centric” is a label that many companies happily apply to themselves — but whether they actually walk the walk is a different matter.
In reality, without the detailed understanding of customer sentiment and intent provided by an effective CX team, it’s impossible for other departments such as product, sales, or marketing to align their objectives with genuine customer needs and desires. So establishing an effective and proactive CX function is in everyone’s interests — but it’s important that this value is made visible.
Defining common goals and metrics between departments is therefore critical in order to enable a comprehensive approach to CX with buy-in and alignment from the entire organization.
The benefits of a comprehensive CX approach
In a siloed approach the visible impact of CX is limited to those metrics already traditionally associated with customer service — and even then it can be hard to prove that improvements in these metrics have a real bottom-line impact.
Enhanced customer loyalty and reduced churn
Customer engagement — expressed in terms of loyalty and retention — is a key indicator of CX success. But it’s important to be able to see a more detailed view of the specific initiatives which boost these metrics so that you can accurately direct investment. For example, you can compare the churn rates of customers who’ve contacted the support desk regarding a delivery query, versus those who had an issue with delivery but didn’t reach out, to establish whether effective customer support improves retention.
Increased customer lifetime value (CLV)
Similarly, CLV may be intuitively linked to CX activity, but what’s crucial is to demonstrate the dollar impact that CX initiatives have in increasing this metric. If you can show specific uplifts in spending which are directly related to positive customer support experiences — even those which may have started out as a negative interaction — then the value that proactive and timely support adds is much easier to demonstrate.
Demonstrating the wider impact of CX activity.
Taking a more comprehensive, cross-departmental approach to CX can deliver additional benefits in other areas. And although quantifying these can be more challenging, if you can do so, it gives a clearer picture of the total value that CX is bringing to the table.
Higher sales performance
For example, as DTC companies shift away from a top-down ad-driven approach to customer acquisition, to focus on developing the grass-roots and community support which can attract new customers to their brand, CX becomes a vital revenue driver by impacting customer satisfaction and therefore increasing word-of-mouth marketing.
Improved brand reputation
Brand perception can be a challenging metric to quantify, but if CX teams can use AI tools to analyze conversations and measure customer sentiment — across different demographic segments, for example, and then map that to increased sales or a greater frequency of referrals, it’s possible to prove a direct impact.
Better product initiatives
With more effective collaboration between CX and product teams, companies can optimize their product strategy based on data-driven insights, responding to hot-button issues to deliver more needs-focused updates or changes. This can create a positive feedback loop where closer alignment between product strategy and customer needs drives greater engagement, which results in increased feedback to CX, which drives further improvements.
Examples of successful CX initiatives driving revenue growth
At Lang, we work with CX leaders to help them transform their teams into proactive, predictive revenue drivers that also provide actionable insights on customer thinking and intent to other teams across the business. Here are two examples of how CX improvements have driven revenue growth in real-world businesses.
Case study 1: Stride Health
At Stride Health, investing in AI has paid off in a number of ways — 40% faster response times, $25k/week lower staffing costs, and a 21% reduction in email traffic. But most importantly, it has helped increase their total closures of health plans year-on-year.
“Thanks to Lang, we have been able to produce more closures with fewer agents. We did 50% more than the previous year — and that’s a 6x multiplier on our initial investment.”
— Blaine Dively, Director of Member Experience
Read the full Stride Health case study here
Case study 2: SimplyWise
Implementing AI has allowed the CX team at healthcare platform SimplyWise to respond instantly to crucial onboarding questions — which has boosted conversion rates from trial to paid plans by 10%. That’s in addition to a 38% reduction in response time and a 65% decrease in time-to-resolution.
“Lang has allowed us to be more responsive, and to focus on things that actually matter — feedback on our products and interactions that customers actually value. It’s become core to our customer experience and product.”
— Allie Fleder, Co-Founder
Read the full SimplyWise case study here
Until you can accurately measure the impact that CX initiatives and investments have on broader organizational objectives — principally revenue and profitability — it’s difficult for CX leaders to make the case for further investment in their department and to demonstrate their team’s position as a revenue driver rather than a cost center.
To achieve that recognition, cross-departmental collaboration is vital — both to align CX activities with the goals and objectives of other teams, but also to demonstrate the impact the CX contributions have on achieving those aims.
And by successfully demonstrating their impact on key metrics such as revenue and profitability, CX teams are in a far stronger position to pitch for further investment — whether in implementing new technology or developing their people — and are better able to predict the ROI that that investment will bring to the business.