Why ROI of CX is critical for business growth

Jan 12, 2022
CX Thought Leadership

As we read more and more about how to evolve customer experience (CX) measurement and metrics in the post-pandemic economy, it's clear that one metric in particular will become even more crucial to organizations – ROI. The financial impact of the pandemic has increased pressure on organizations to reduce costs, drive efficiency, shorten speed to market and improve sales, all while attracting and retaining top talent. Organizations are already experiencing increased scrutiny on short- and long-term investments with ROI as a core requirement, but the vast majority of organizations do not have a clear and consistent way of quantifying the ROI of CX. 

Why is CX ROI so important? Because, with limited investment dollars, CX leaders will need to quantify the business benefit of CX initiatives to compete with other business cases to drive action and secure funding. If you can clearly link your CX to business outcomes, then your ROI will show how you are changing and growing the business -- not just how you are improving your CX/Net Promoter Score (NPS). Converting CX metrics into actual customer numbers and bottom-line statistics that are consistent with how the rest of the organization operates will align your initiatives and enable short- and long-term business trade-off discussions. To have a chance of securing necessary resources (e.g., funding, technology, capacity), you must be able to prove that investing in CX drives revenue, reduces costs and/or reduces risk.

Setting the foundation 

Start with the foundation of articulating a CX vision for your organization that is aligned to your brand promise (e.g., what you are promising to customers) and how and where it should be delivered in your most frequent or most impactful customer touchpoints. This vision becomes the guide for your brand’s CX measurement strategy and helps you prioritize where and how to measure your customer experiences. To be effective, this vision must be embedded in the organization’s frameworks and priorities and be communicated widely and consistently by all senior leaders. As with all organization-wide priorities, key CX success metrics must be included in scorecards and reported on regularly alongside other business and operational metrics.

Marketers are accountable for the development and articulation of our brand promise and customer value proposition, but it is equally important to ensure the experiences customers have across touchpoints are delivering on these promises. It is no longer acceptable to view the delivery of customer experiences as another group’s accountability. In order to meet customer needs and expectations and win in the market, all groups across an organization must understand the brand promise and deliver it consistently in each touchpoint with consumers/customers. 

Regardless of the CX metric you use (that’s for another blog), it is important to have a consistent measure of your customers' perceptions of the experiences they have with you. This is the foundation of developing a framework/approach for business casing the ROI of CX. Once you have a sound CX measurement program in place, you can conduct analyses to understand which experiences have higher or lower CX, and what the drivers of these metrics are. From here, you can provide your organization's leadership with direction on where to focus to improve CX delivery. 

Building a high-level view of the financial value of good CX (promoters) and the risks/losses of poor CX (detractors) is an essential first step. Examples of CX financial linkages to explore and analyze include whether:

  • Promoters = more profitable, return a higher margin, higher spend levels, deeper relationships/cross-sell, lower cost to serve, better retention and increased referrals and word of mouth basket size, renewals, subscriptions 
  • Detractors = less profitable, lower margins, shallow relationships, higher and faster defection/attrition, higher cost to serve, and drive negative word of mouth and increased complaints

Building a simplified framework

Once you have the foundational elements in place, the next level of business casing CX consists of sizing and quantifying the specific impacts of CX improvement initiatives. The first critical dimension that you need to quantify is the overall investment required for the CX improvement or initiative, including technology, capabilities, hiring, training, communications, etc. Once you have a solid estimate of the investment required, you need to articulate the associated benefits of the investment including how it makes money, creates efficiency, builds a competitive advantage and/or reduces reputation risk.

In an upcoming webinar hosted by the CMA CX Council, we will recap the importance of ROI of CX, how to build the foundational elements, and walk through a simplified framework that can be applied at the initiative level. Join us on March 30, 2022 to learn more.

Jennifer Lang, CM
VP, Customer Experience, Innovation & Insights, TD Bank Group

Ursula Green, CM
Vice President, CXO, Halmyre Strategy Inc.

Lesley Haibach, CM
EVP, Service Line Leader – Customer Experience
Ipsos Canada




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