Linking the Human Experience to Value

This post is the result of a collaboration with Luke Soon. 

Many customer experience transformations stall because leaders can’t show how their efforts will create value. Customer Experience Managers that patiently build a business case that quantifies the value of their work will secure buy-in, build internal momentum, and ultimately obtain funding for their programs.

The road to failed CX programs is paved with good intentions. Executives are quick to see the end-game benefits of a customer-centric strategy – more satisfied customers, increased loyalty, a lower cost to serve, and more engaged employees – but often fail to clearly understand what a superior customer experience is worth and exactly how it will generate value. At a recent roundtable, fewer than half of the CX leaders present could say what an extra ten points of Net Promoter Score (NPS) would be worth to their business.

 Many companies begin their efforts to change their CX with a broad aspiration to improve it. Executives launch often disruptive initiatives trying to delight customers but often fail to quantify the economic outcomes of this goal, so their efforts end up having clear costs and unclear near-term results which hinders their chances of securing funding for their programs.

 CX transformations invariably raise questions about business policies, cross-functional priorities, and how to invest in innovation. Without a quantified link to value and a sound business case, such strategies often can’t show early gains, build momentum among functional executives, and, ultimately, earn a seat at the strategy table. In motor racing parlance, they stall on the starting grid.

 There is a better way that is anchored in science, fresh research, and a structured methodology. We also find that the most successful programs are self-funding — early wins remove costs from the system and simplify the business. Those savings can then fund medium-term initiatives to innovate, to change the trajectory of the customer experience, and to support some of the bolder actions. With a self-funding business case, a CX program can maintain momentum and build buy-in throughout an organisation.

However, make no mistake: building an unambiguous link between CX and value requires patience and discipline. CX Managers trying to quickly “move the needle” will skip the step of investing early in an analytic approach for the sake of speed, but that is a mistake every time. When establishing a link to value is done well, it provides a clear view of what matters to customers, where to focus, and how to keep the customer experience high on the list of strategic priorities.

In essence, getting the logic and the math right for a successful program requires a structured approach and real science to achieve three objectives: building an explicit link to value, directing investments to where they will do the most good, and designing a detailed road map populated with early successes to self-fund the transformation.

Building an Explicit Link to Value

Companies investing to improve CX must be clear about what it is actually worth and exactly how the improvements will generate value. To build this link, start by defining the customer behaviour that creates value for your business and then follow customer satisfaction over time to quantify the economic outcomes of different experiences. Several steps can help:

Develop a Hypothesis About Customer Outcomes that Matter

Start by identifying the specific customer behaviour and outcomes that underpin value in your industry. For example, in the telecom sector, more satisfied customers should be less likely to churn, have fewer issues that escalate into requests for support, and sign up for more products. While airlines will focus on capturing a greater share of trips and trip revenues and on lowering the cost to serve. Business outcomes will vary by industry, but the principle is the same: postulate three to five hypotheses about the outcome measures that deliver value.

 Hypothesis Examples:

• *   Financial Services: More satisfied customers will increase their deposits, use more products, and have fewer issues that require customer support.
• *   Media: Improved CX will lead to higher subscription renewals and lower churn rates.
• *   Public Service: Improved citizen experience will lead to higher satisfaction with public services, less complaints to the government overseer and increased compliance with regulations.

Link What Customers Say To What They Do

Multiple studies have found that what people say and do are two entirely different things so the next step is to link satisfaction survey data (what customers say) with operational data (their behaviour over time, or what they do). Begin by building a customer-level data set of the results of past surveys that asked respondents about their overall satisfaction or willingness to recommend your products or services. Using an email or customer identifier (with due regard to customer privacy concerns and in compliance with applicable regulations, of course), most companies can link survey results back to their databases.

Query your customer database to pull down two to three years of monthly operational data for each priority outcome measure. For example, a pay TV company matched its historical willingness-to-recommend survey responses at a customer level on the one hand with two years of monthly data on customer retention, cost to serve, revenues, product upgrades, and referrals on the other and found a huge disconnect between what customers said and did.

Analyse the Historical Performance of Real Customer Cohorts

Using customer data linked to survey respondents, analyse customers you designate as satisfied, neutral, or dissatisfied over a period of one to two years. How much less subject to churn are satisfied customers than dissatisfied ones? How much more likely are they to generate expensive support calls? Or add additional lines of business? Or default on loans?

For each segment of customers, summarise the one to two-year outcomes. From the data, the more detailed and specific areas of improvement we can glean – the stronger the link to value creation and opportunities for improvement. Leading CX companies use this data to estimate the value at an enterprise level of moving 5 percent of their dissatisfied customers to a neutral status.

Examples:

• *   Financial Services: Analyse churn rates, transaction volumes, and loan default rates among different customer satisfaction segments.
• *   Telecommunications: Compare churn rates and the number of support calls among satisfied, neutral, and dissatisfied customers.
• *   Media: Assess the impact of customer satisfaction on subscription renewals and content engagement.
• *   Healthcare: Evaluate patient outcomes and retention rates based on patient satisfaction levels.
• *   Public Service: Analyse citizen compliance, complaints to the government overseer and satisfaction rates with different public services.

Look at the Trend to Take a Forward-Looking View

Successful CX programs look forward, not backward, in assessing the link to value. Building a business case solely on historical loyalty data may overinflate the economics in ways that bias investment decisions. For example, since 2009, the stated loyalty of customers has dropped by 20 percent for pay TV companies that provide an average customer experience. By looking at year-on-year changes in outcome measures for dissatisfied, neutral, and satisfied customers, companies can build a view of where the link to value is heading.

Track Outcomes

In our experience, the best approach to quantify the value of the customer experience is to track outcomes over time for each customer segment that matters. To set priorities and quantify payouts for improving the customer experience, every company with a program to improve it should be able to link satisfaction directly to business outcomes.

Direct Investments to Where They Will Do the Most Good

To be confident that your CX program will generate a positive return on investment, building a link to value is necessary but not sufficient. The next step — where most companies fall short — is to base priorities for initiatives and opportunities on their importance to customers.

What Matters to Customers

To do this well, a company must create a model of what matters to customers, a graded short list of customer pain-points to eliminate or fix, and a view of opportunities to innovate as seen from the customer’s perspective. One way to do this is to build something I call an ‘Experience Calculator’ – one that rates, ranks and prioritises all atomic transactions and services in journeys and episodes; tagged to associated pain-points. For example, if we see a concentration of red-spots in a heat-map, say when it’s about a specific sub-journey, we can double-click and see what needs to improved, ultimately lessening or removing friction (there) altogether.

Focus on Customer Satisfaction Issues with the Highest Payouts

Customer experience pain-points are not standard across industries. For example, in health insurance, improving the experience of customers who are dissatisfied with the service so that they become merely passive about it has more economic impact than migrating such “passives” to the category of people willing to promote the service. However, in retail banking, every promoter does matter — moving someone from the 80th to the 90th percentile of satisfaction can have a significant economic payout. Using the link-to-value analysis outlined earlier, determine if it would be more valuable to reduce the number of detractors or to create more promoters, and then focus your portfolio of customer initiatives on achieving that goal to maximise the return on your investment from the start.

Examples:

• *   Financial Services: Focus on reducing the number of dissatisfied customers by improving service quality and response times.
• *   Telecommunications: Prioritise initiatives that reduce churn and increase customer satisfaction through better service and support.
• *   Media: Concentrate on enhancing the content delivery experience to reduce churn and increase engagement.
• *   Healthcare: Improve patient satisfaction by reducing wait times and enhancing the quality of care.
• *   Public Service: Target areas where citizen satisfaction is low and implement initiatives to improve service delivery.

Build a Model Around What Matters to Customers

End-to-end customer journeys, not individual touchpoints, are the unit to measure when setting priorities for your customer experience investments. Why? Research has found that journey performance is significantly more strongly linked to economic outcomes than just touchpoints alone. Modelling customer satisfaction around journeys rather than touchpoints enables you to determine the most important end-to-end journeys across customer segments.

Start by rethinking the scope of existing surveys. Test whether they cover the most important customer journeys and lesser elements of customer satisfaction. Next, expand your customer data set so that it links up with operational data as well as input from employees and customers. This relates to the ‘Experience Calculator’ concept – the idea is, if we’re able to assign a score to each pain-point within stipulated journeys, we’re able to assess the value creation potential of ‘fixing’ these pain-points.

By translating customer satisfaction into measurable business metrics, CX managers can highlight their role in increasing revenue, enhancing customer loyalty, and reducing churn. This data-driven approach not only validates their efforts but also fosters a culture of continuous improvement and accountability. Ultimately, by proving the tangible benefits of their work, CX managers can secure the resources and support needed to create exceptional, enduring customer relationships.

Luke Soon is a business transformation professional with over 25 years’ experience leading multi-year human experience-led transformations with global telcos, fintech, insurtech and automotive organisations across the globe. He was the lead partner in the acquisition and build-up of the human experience, digital and innovation practices across Asia Pacific with revenues surpassing $250 million. He helps clients activate their Purpose by monetising innovation and building new revenue streams (experience equity), starting with their why. His personal purpose is to install the primacy of humanity in the experience economy and exponential age. Connect with him on Twitter and LinkedIn.