How Successful Companies Link CX Metrics To Profit
Customer experience (CX) metrics such as CSAT, NPS, and CES are essential tools for measuring customer satisfaction and loyalty. However, many organizations struggle to link CX metrics to profit and understand their impact on revenue and profitability.
In this article, we will explore how CX professionals can use these metrics to drive business growth and success and calculate the ROI of CX initiatives.
CSAT (Customer Satisfaction)
Customer satisfaction (CSAT) is a popular CX metric used to measure a customer’s level of satisfaction with a product or service. It typically involves asking customers to rate their experience on a scale of 1-5 or 1-10. While it is a valuable metric, CX professionals must look beyond the number and understand how it impacts the bottom line.
Let’s say you are a CX professional at a restaurant chain. You recently spearheaded initiatives which have increased CSAT scores by 10%. While this is a positive outcome, how does it impact the bottom line?
To tie CSAT to the bottom line, you need to look at metrics such as daily footfall (traffic), and average ticket size. It is important to note what these metrics were before the implementation of the initiative, that way you can identify if there’s been an improvement or not.
If an increase in daily footfall and average ticket size, it can lead to a significant increase in revenue and profitability.
Example:
Imagine you are a CX professional at a restaurant chain. After conducting customer feedback surveys, you identify that customers are dissatisfied with the quality of food and service, leading to a low CSAT score.
Based on these insights, to improve CSAT you recommended that the restaurant chain implements new training programs for staff, make updates to its menu to include higher quality ingredients, and invest in kitchen equipment to improve food preparation.
If after the business has implemented these recommendations, you notice the CSAT score increased by 15%, you should also look for corresponding improvements in areas such as increased table turnover, footfall, average ticket size, and increased customer loyalty. With these insights, you can tie the impact of your CX initiative to the bottom line.
NPS (Net Promoter Score)
Net Promoter Score (NPS) is a widely used CX metric that measures customer loyalty and advocacy. It involves asking customers a single question – “How likely are you to recommend our product/service to a friend or colleague?” Customers are then scored on a scale of 0-10 and grouped into three categories – detractors, passives, and promoters.
While NPS is a great way to measure customer loyalty, it can be challenging to tie it to the bottom line. To do this, CX professionals must understand the impact of NPS on customer acquisition, retention, and revenue.
Let’s say you are a CX professional at a SaaS company. You launch a new feature that improves NPS scores by 20%. While this is a positive outcome, how does it impact the bottom line?
By analyzing metrics such as customer acquisition costs and customer lifetime value, you can see the impact of NPS on revenue growth.
Example:
Suppose you work for a software company that offers a subscription-based service. After conducting NPS surveys, you find that customers are generally satisfied with the product but are unhappy with the customer support provided. To improve NPS, the software company implements a new customer support system that includes a self-service knowledge base, chatbot, and 24/7 live support.
After implementing these changes, NPS scores increase by 25%. To tie this improvement to the bottom line, you’ll need to analyze metrics such as customer acquisition costs, customer lifetime value, and churn rate. You find that the improvements in customer support have led to higher customer satisfaction, resulting in reduced customer churn, increased customer lifetime value, and reduced customer acquisition costs. All of these factors lead to higher revenue and profits for the software company.
CES (Customer Effort Score)
Customer Effort Score (CES) measures the ease of doing business with a company. It typically involves asking customers how easy or difficult it was to complete a specific task, such as placing an order or resolving an issue. Like CSAT and NPS, it is a valuable CX metric, but CX professionals must look beyond the number to tie it to the bottom line.
Let’s say you are a CX professional at a telecom company. You launch a new self-service portal that improves CES scores by 50%. While this is a positive outcome, how does it impact the bottom line? To tie CES to the bottom line, you need to look at metrics such as call volume and customer churn. If the new self-service portal reduces call volume and customer churn, it can lead to significant cost savings and revenue growth.
Example
Imagine you are a CX professional at a telecommunications company. After conducting CES surveys, you find that customers are dissatisfied with the wait times and complexity of the customer service phone system. To improve CES, the telecommunications company implements a new self-service portal that allows customers to easily troubleshoot issues and access account information.
After implementing these changes, CES scores improve by 50%. To tie this improvement to the bottom line, you analyze metrics such as call volume and customer churn. You find that the improvements in the self-service portal have led to reduced call volume and reduced customer churn, resulting in cost savings and increased revenue for the telecommunications company.
Case Study: Best Buy
Let’s borrow learning from Best Buy & the implementation of their CX program in 2017.
Best Buy is a multinational consumer electronics retailer that was struggling to compete with online retailers like Amazon in the early 2010s. In 2012, the company launched a turnaround plan called “Renew Blue” that focused on improving the customer experience to drive sales growth.
Best Buy’s CX program was led by its Chief Customer Officer, who was responsible for driving the company’s customer-focused strategy. The CX program was structured around four key pillars: customer-centricity, employee engagement, operational excellence, and financial performance.
To measure the success of the CX program, Best Buy used a variety of CX metrics, including:
- Customer satisfaction (CSAT):
Best Buy used CSAT surveys to gather feedback from customers after they made a purchase. These surveys asked customers to rate their overall satisfaction with their shopping experience, as well as specific aspects of the experience like product selection, store layout, and customer service.
- Net Promoter Score (NPS):
Best Buy also used NPS surveys to measure customer loyalty and advocacy. These surveys asked customers how likely they were to recommend Best Buy to a friend or colleague, on a scale of 0 to 10.
- Customer Effort Score (CES):
Best Buy also used CES surveys to measure how easy it was for customers to complete a specific task or achieve a specific goal, such as finding a specific product or getting technical support.
In addition to these metrics, Best Buy also used transactional surveys to gather feedback from customers after specific interactions, such as a support call or a visit to the Geek Squad. This allowed the company to identify areas where they could improve the customer experience and address specific pain points.
Based on the insights gathered from these CX metrics, Best Buy implemented a variety of initiatives designed to improve the customer experience, such as:
- Expanding their price-matching policy to include online retailers like Amazon, to remain competitive and address one of the top pain points identified by customers.
- Investing in employee training and development to improve customer service and product knowledge, as well as to promote a culture of customer-centricity.
- Improving the in-store experience by reducing clutter, enhancing product displays, and providing personalized service through the Geek Squad.
- Enhancing their e-commerce platform and mobile app to make online shopping more convenient and user-friendly.
Over the next few years, Best Buy saw significant improvements in its financial performance. Between 2013 and 2021, the company’s revenue grew from $39 billion to $47 billion.
During this same period, Best Buy’s CX program was recognized with several awards, including a JD Power award for customer satisfaction and recognition from the Temkin Group for excellence in customer experience.
Overall, Best Buy’s success in linking CX metrics to profit demonstrates the power of customer feedback in driving business success. By implementing a comprehensive CX program and measuring the impact of their initiatives using CSAT, NPS, and CES, Best Buy was able to improve customer satisfaction and drive revenue growth, even in the face of intense competition from online retailers.
In conclusion, by tying CX metrics such as CSAT, NPS, and CES to specific business metrics, CX professionals can demonstrate the impact of their initiatives on the bottom line to management.
Whether it is through increased customer satisfaction and loyalty, reduced customer churn, or cost savings, understanding the impact of CX initiatives is crucial for driving business growth and success.
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