customer experience roi

Customer Experience ROI: Is It a Myth?

Customer experience ROI is an increasingly important topic, especially with business leaders anticipating an economic recession. One of the top customer service challenges for the next 18 months is demonstrating the return on investment in the customer experience. But are business leaders looking at it all wrong? Is the very concept of customer service ROI a myth?

According to British CX expert John Sills, author of the just-released The Human Experience, it may well be. The book is a must-read for anyone in a customer-focused organization. Sills shares his 25 accumulated years of wisdom about customer experience, often through humorous examples, like this one from media relations specialist Jamie Douglass:

“I just went to the local pizza place and tried to use one of their 2-4-1 vouchers, but the guy insisted he could only accept the voucher if you booked the table over the phone. So I went outside and called them. The same guy picked up the phone and conducted the entire conversation 100 per cent straight, looking at me in the eye through the glass door!”

Check out some customer service memes if you need more humor for your customer experience role.

Most of us can probably relate because so many businesses are stubbornly inflexible. Sills encourages his readers to adopt less mechanistic and more human customer interactions. In his experience as a partner at The Foundation, it’s a proven method that drives ROI and reduces costs.

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What is Customer Experience ROI?

What do we usually mean when we talk about customer experience ROI? Part of the problem is that it doesn’t have a fixed definition, and that definition could change from one organization to the next.

“They normally mean, ‘Show us how it’s gonna make money. Show us how it’s gonna generate revenue,’ and that’s a difficult question to answer sometimes,” Sills says.

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“If you’re releasing a new product, that’s much easier. But if you’re looking to provide a service that costs money, but it doesn’t directly make money, you have to try and prove revenue using kind of a mythical array of metrics, like if we get this many more customers that are satisfied, they’ll buy this many more products from us,” Sills adds.

Sills isn’t alone in the observation that CX leaders struggle to quantify customer experience ROI.

“There are almost no organisations measuring ROI in one standardised way, or similar to others, since what matters most for company X may make no sense to company Y. ROI could mean revenue generation, growth, or even satisfying leaders’/partners’/customers’ expectations. In my experience, in each division, group or new acquisition, the expectations about CX programmes and large initiatives related to ROI are very different,” Ricardo Saltz Gulko, founder of the European Customer Experience Organization, says in a recent MyCustomer report.

Upselling in Customer Service

Oftentimes, pressure to deliver ROI causes managers to push customer service reps into selling products—often at inopportune times. This practice is called “upselling,” and can often damage the overall customer experience and leave customers with a bad taste in their mouths.

However, Jeff Toister, author of The Service Culture Handbook, offered suggestions for how to implement upselling intelligently.

Toister was once a contact center training supervisor, given the responsibility of getting enthusiastic customer support reps to upsell, and he wasn’t allowed to offer incentives. So he had to get creative.

One thing he did was let his customer service agents offer unpublished discounts on slower-moving items. Then he provided the reps with basic product information to keep handy while on calls.

“And it wasn’t a script but it was kind of a workflow to help agents bring it up in a very natural way to customers,” Toister says.

Toister also ensured that all five contact centers he was working with got samples of the items the company was promoting, so service agents could touch and feel them.

“And just by doing that, we added a million dollars in incremental revenue. Without giving anybody an incentive. We just made it easier for them to do a great job,” Toister says.

“We just made it easier for our agents to sell,” Toister adds.

What makes customer experience ROI a​​ “myth?”

In The Human Experience, John Sills outlines three customer service myths, one of which is the myth of return on investment. But how could revenue possibly be a “myth?” Perhaps a better way to say it is that businesses are setting the goalposts in the wrong places.

Sills writes in the book:

This is where the traditional question of the ‘Return on Investment of Customer Experience’ is flawed. It’s not simply about working out how many more products can be sold by installing a new webchat function.

Sills argues that CX leaders need to take a more holistic view of return on investment, looking beyond what’s easily calculated in a spreadsheet.

“More often than not it’s the cost of inaction. That’s the problem,” Sills tells us.

Sills calls out a phenomenon he calls “failure demand”—coined by John Seddon of Vanguard Consulting—which is how much extra demand is placed on your contact center because the customer issue wasn’t resolved the first time.

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“It’s really bad for customers, and it means you get repeat phone calls,” Sills says. He mentioned an energy company he worked with where 35% of the incoming calls were from customers who weren’t happy with the first answer they received. Those unnecessary calls add extra stress to already stressed customer service agents and force businesses to increase their headcounts.

Automation software like TextExpander can reduce time spent on repetitive messages and make your team more efficient, but it’s best to avoid the need for redundant work in the first place.

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Sills also mentions a car company that could simultaneously improve its ROI by improving the customer experience.

“They send me three letters in three different envelopes on the same day. That customer experience cost them money. Cut that out, you reduce your mailing costs by a third, and it’s better for the customer. That’s what I think return on investment should really be looking at,” Sills says.

A better way to approach customer experience ROI

In The Human Experience, Sills outlines three ways companies can better orient how they measure ROI:

  1. Improve overall customer sentiment with an excellent customer experience.
  2. Work proactively to prevent unnecessary customer complaints and resolve customer issues quickly to improve overall efficiency.
  3. Consider lost opportunities that bad customer experience generates.

These things might be tough sells for CX leaders since they’re not easy to compile in a spreadsheet or present on a graph, but they have proven benefits.

“We worked with one of the big supermarkets here. We went from loss-making to 14 consecutive quarters of growth. We worked with one of the big fashion retailers here and added about another 90 million to their annual profits. A project we did recently with empathy bumped their NPS score up 10 points in just a month. We’ve had another one where NPS went up 35 points over the year and email open rates went up 60% over the year as well,” Sills says.

Sills cites a UK Customer Satisfaction Index report from 2018 that says:

“Organizations that maintain higher customer satisfaction than their sector average have achieved stronger turnover growth, profit and employee productivity than those whose customer satisfaction is below the sector average.”

“If you look at the UK and the likes of Tesco, EasyJet, Sky, Handelsbanken, and Timpson. They’re all organizations that were, for large parts of their history, very customer-led and tripled, quadrupled their profits, and tripled and quadrupled their share prices as a result of doing this,” Sills adds.

So, to improve your customer experience ROI, focus on the customer experience. You’ll sell more product, improve your customer retention, and grow revenue. 

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