89% of companies expect to compete mostly on the basis of customer experience as of 2016 (Gartner). Yet, this much-discussed topic is not fully understood and embraced by the C-Suite in some companies.
For CFOs who are increasingly asked to assist with strategic decision making across the company, it is essential to understand the economic impact of customer experience (CX). Without proper insights, a CFO may dismiss certain budgets as “nice to have” when they could actually provide strategic advantages and gains.
A negative customer experience can quickly become a hidden reason for decline, loss of customers, and damage to brand reputation. On the other hand, with the right monitoring, attention, and investment, customer experience can be a powerful driver of growth and revenue. In today’s competitive market, providing a positive customer experience is essential for long-term success.
Customer experience represents both the macro and micro views of your company. On a macro level it is your company philosophy; which is either customer centric, or it is not. (Yes, companies can thrive and be customer centric). On a micro level, it is every interaction you have with clients, both actual and perceived. Make no mistake, providing a consistently top notch customer experience takes work. For that reason, many companies prefer to pretend CX doesn’t matter or that it is a passing fad. This short sighted thinking will have a negative impact in both the short and long term. Conversely, with a new perspective and better business practices, creating a positive customer experience boosts revenue, client retention, brand image and creates brand ambassadors.
Virtually no industry is immune. CX affects small, large, B2B, B2C, and cuts across all industries, including healthcare, higher educational and government. The platform, voice, community and impact that social media gives today’s customers is unprecedented. A single negative comment that goes viral can compound and cause significant damage. The customer defection rate is rising at an alarming rate in many industries because consumers do not feel loyalty or appreciation from brands.
CFOs should know that with respect to CX, traditional KPI that companies measure are not sufficient. While all companies experience churn periodically, what many do not realize is they may be driving customers away. Oracle [link] cites that intangible assets account for 80% of the value of companies in the S&P 500 Index. The report further stated that “respondents to the global survey cited the top value drivers for their businesses as customer satisfaction (76%), quality of business processes (64%) and customer relationships (63%).”
Impact of intangibles on Customer Experience:
In my research and nearly 30 years of business experience, I have identified nine key areas, which I call Critical Churn Triggers™ that companies should monitor regularly. These triggers include some of these intangible assets. The relevance to CX may be clearer for some triggers. The ones with a less obvious connection to CX (in bold below) pose a greater danger to a company’s revenue, retention and brand image because they may not be regularly watched.
Critical Churn Triggers:
1 Perception & Perspective
2 Infrastructure
3 Service and Conflict Resolution
4 Customization
5 Value over Price
6 Employee Engagement
7 Poorly/Undeveloped Managers
8 No Formal Client Retention/Nurturing Efforts/Programs
9 Siloed Information within Companies
CFOs should note the correlation between these areas and metrics in their company. Further, they should consider each as a potential source of increased revenue. When reviewing budgets or ranking the importance or approving proposed projects, CFOs should always weigh the potential impact of CX, and consider it a top priority.
1. Perception & Perspective
Don’t let your own rhetoric cloud your vision. Just because you say your customers love working with you, that does not mean they agree it is a smooth, enjoyable journey for them.
When was the last time you put yourself in the shoes of your client and traced their path? Without vital feedback from, and a true understanding of your customers you can lose them. Potential Revenue Opportunity: With a better understanding and ongoing dialog with clients, companies can increase brand ambassadorship, as well as offer more relevant, revenue-driving products/services.
2. Infrastructure
Infrastructure takes many forms, and cannot be “set it and forget it” areas of any company. Left unmonitored, cracks in infrastructure can be a big revenue drain. Conversely, for example, correcting a flaw in a website can save millions of dollars in call center calls. Companies that rely on brokers, distributors or other outside sales reps for sales consider this: If you are not providing them the tools (infrastructure) they need to best serve their customers, they will look elsewhere for better-equipped partners. Takeaway: You have no idea how much revenue you may be losing because of frustrated clients and/or brokers who negatively view working with you.
3. Service and Conflict Resolution
A customer is four times more likely to buy from a competitor if the problem is service related vs. price or product related (Bain & Company with Harvard Business Review). While CX is not the same as Customer Service, the service and treatment customers receive has a direct effect on their impression of the company.
Resolving conflict is essential to retaining client relationships. Ditch the scripts and give your CS team the tools and latitude to solve problems, not transfer them to another department. Our brains are wired to respond to stories; many times the end of the story is all that is remembered. Therefore, when you can put a positive end on a mediocre or poor story/experience, that can save a business relationship, boost client retention and prevent negative association with a brand.
4. Customization
Whether you serve large or small, B2B or B2C, we all have become accustomed in our personal lives to a certain level of customization. Think about a simple search on Amazon. Their algorithms will automatically recognize and recommend other products that we might be interested in, or that people “like us” have already purchased. Facilitating the buying experience, particularly in retail, is just one look at customization.
In the corporate world, customers also want and appreciate the ability to personalize and customize. A key to success is understanding customer needs and wants, and how they like to interact with your brand, and then delivering in that way. Investments in personalization are on the rise because it drives revenue and engagement.
5. Value Over Price
Create the experience that wins out over price. Create Fans. Become the problem solver, ally, and partner that your clients would not want to leave for any reason. Create a positive experience that customers will want to repeat, and hopefully, refer. CFOs need to be aware that the experience is often the differentiator in a crowded market that drives retention and brand ambassadorship.
“Buyers have stated that they will pay 30% more for superior customer experience” (Rightpoint, 2016)
I challenge each company to envision ways they can uplevel their CX. Clients are willing to pay for it, thus increasing revenue.
6. Employee Engagement
The effects that engaged or disengaged employees have on customer experience is among the most overlooked in all companies. Engaged employees are the ones most likely to drive the innovation, growth, and revenue that their companies need (Gallup’s State of the American Manager Study). The same Gallup study revealed that less than one-third of Americans are engaged in their jobs.
One of the four largest CX failures is that employees are not empowered to assist the customers (SDL study)
CFOs should consider that employee engagement and recognition programs are not ancillary. Engaged employees directly affect the experience of the customer, and very often the first impression of a potential customer. Companies commonly overlook the impact Employee Engagement or Experience has on CX, and therefore revenue.
7. Poorly or Undeveloped Managers
Companies often promote incorrectly based on length of service vs. qualifications. Per Gallup, only 35% of U.S. managers are engaged in their jobs. The same Gallup study reported that 50% of American adults had left their jobs to get away from their manager in order to improve their overall life during their career.
CFOs should know that when sufficient managerial and leadership training is not provided, it can have immediate negative effects on revenue, employee, and eventually client retention.
8. No Formal Client Retention/Nurturing Efforts/Program
A company’s clients are not mind readers. They do not know how much a company values their business unless they are told and shown appreciation. Relationships must be nurtured, regularly and on multiple levels or clients will turn to competitors who do make these efforts.
9. Siloed Information within Companies
Segmenting or siloing information within companies causes delays for clients, adds extra steps and time for employees, prevents all involved from having a complete picture of the project at hand. This stems from competitiveness, poor infrastructure, laziness and archaic systems, among other reasons. The bottom line is that siloing can cause lost revenue, poor brand image, and client defection.
With this perspective, CFOs can take a more strategic and insightful view of departmental and line item budgets that can have significant impact on revenue, retention and brand image. Monitoring of intangibles and how they impact customer experience can reveal potential Critical Churn Triggers™, that can be turned into growth opportunities.
