Customer Experience: Is it a Cost or an Investment?

Customer Experience: Is it a Cost or an Investment?

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Adam Ramshaw
Adam Ramshaw has been helping companies to improve their Net Promoter® and Customer Feedback systems for more than 15 years. He is on a mission to stamp out ineffective processes and bad surveys.
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How you answer this question seems to depend almost entirely on where you sit in the organisation. If you are inside the Customer Experience tent, then you’ll answer “Investment”. If you’re outside it, then you will probably answer “Cost”.  However, I think that it’s not so a much a question of where you sit in the organisation, but which you think comes first – the customer experience budget or the business outcome?

Let me explain what I mean through the use of an example.  We currently have a client who are re-vamping their customer save team

We’ve been helping them look at all aspects of the team: how it interacts with other parts of the organisation, which calls it should take, how it should report, etc.  One of the questions that came up is “We have x staff so which calls should we route to the save team?”

Let’s look at how we might respond to this question and what it means for the cost or investment view. Currently, the company perception is the save team will be the size that it is now and it therefore has a set cost.  The CEM Efficiency, percentage of callers saved is also known.  So the business outcome, customers saved, can be calculated based on the number of calls the staff can take.

As you can see when you start the conversation with the CEM implementation cost, in this case the size of the team, you tend to form the view that CEM is a cost. With this approach your CEM initiative is constantly open to the question of “can’t we cut costs in this initiative”.  You will always be on the back foot.

However let’s look at this from the other direction.  Suppose we started with the business outcomes: the value of customers saved.

You can use a tool like our Return on Retention estimator to get a quick estimate of this value.  As you would expect different customers have different save values depending on their product usage and cost to serve.

Now we decide to set the CEM expense (size of the team) to meet the business outcomes that we want based on the CEM efficiency, i.e. percentage of callers saved.  If we want to save the maximum value we simply set the team size to be able to handle all calls from customers of a certain value or higher.

Our new approach looks like this:

With this approach we tend to form the view that CEM is an investment.  If we want to reap a business outcome of x then we need to invest in a team of size y.

This brings me to the key point that I want to make.  Whenever you are investing in customer experience management you need to start with the business outcomes that you seek and then identify how they will be achieved and how much it will cost.

If you start from business outcomes then you are on the front foot by providing an investment option for the company rather than trying to justify another cost.

I've created an Excel based Customer Lifetime Value Estimator. Download it Here