Is customer experience management a growth strategy or a cost strategy?

When customers have a poor experience, results include churn, refunds, returns, service inquiries, escalations, negative word of mouth, and more marketing and sales expense to offset all of the above for continual increases in revenue. There are hidden costs, too, such as lost productivity associated with trouble-shooting and escalations, CXM technology outlays and teams to run them, employee morale and turnover tied to negativity, and longer sales cycles due to distrust. That’s a big iceberg!

On the flip side, good customer experiences can lead to growth via repeat business, expanded purchases, referrals and recommendations, co-innovation, price elasticity, forgiveness for mis-steps, and lower cost to serve. Good customer experience management can also contribute to growth through analytics, nurturing, incentives, digitalization, and attractiveness. That’s high potential!

Do the gains outpace the costs? If you’ve let go of customer experience staff or efforts recently, then perhaps you concluded “no”. Could the costs be lower and the gains higher? Certainly!

Every member of your C-Suite and Board should know these 3 keys to lower CX costs and higher CX gains:

CX Annuities are your path to highest growth through customer experience management.

CX annuities is a phrase I coined. It has 2 parts: the fund and the interest.

  • The “annuity fund” is generated by using customer experience insights to permanently prevent prevalent issues. In the status quo, you have committed to a perpetual budget for the costs of poor experience listed above. When you prevent recurrence of the causes, you free-up money, resources, time, energy, morale, and opportunities.
  • The “interest” is generated by redirecting your “annuity fund” to higher-value endeavors. Freed-up money, resources, time, energy, morale, and opportunities can produce exponential gains.

The advantages are far-reaching. For example, imagine the value reaped by redirecting engineers from trouble-shooting to innovating. Even your customers may become more productive in their revenue growth through the absence of former prevalent issues in your relationship. Brand preference can grow even in hard times when your competitors choose skimpflation, shrinkflation, and inflation — while you can rise above those trends.

Here’s a glimpse at the hundreds of CX annuities we achieved when I led customer experience company-wide at Applied Materials in Silicon Valley. Is your CXM generating gains like this?

  • 16X reduction in customers’ time for service
  • Exceeded customers’ expectations by 75%
  • 10X increase in customer productivity
  • 23X reduction in lead time from 5 days to 5 hours
  • 6X improvement in trouble-shooting cycle time
  • $1M savings monthly to the customer
  • 80% reduction in customer engineers’ cycle time
  • 75% reduction in customer-reported bugs/issues

Customer-Critical Factors are the better predictors of CX growth than NPS, effort scores, health scores, etc.

Customer-Critical Factors (CCFs) is a phrase I coined for KPIs that generate CX annuities. CCFs are true leading indicators because they predict what customers will soon experience. Comparatively, NPS and other index scores are visible to you only AFTER customers experience something. 4 steps to identifying CCFs:

  • Conduct a statistical correlation analysis (aka key driver analysis; KDA) between an index score and contributing factors, such as responsiveness, knowledgeability, absence of defects, etc. This reveals key drivers of customer loyalty, i.e. success factors for CX gains.
  • Apply Pareto analysis to each key driver. This prioritizes efforts by the 80/20 rule. The “useful many” issues in your Pareto chart are typically “quick wins”. These are good to resolve, but you must address the “vital few” symptoms if you want to see massive gains.
  • Find the root causes of each “vital few” symptom. Ask “why is this being allowed?”, and repeat that question until you reach the 5th why. This is typically the true root cause. Unless it is resolved, the high costs of poor experience will prevail.
  • Identify something you can track internally to monitor progress of your action plan to prevent recurrence of the 5th why. This is a CCF.

CCFs are scientifically sound predictors of what customers will soon experience. This is the KPI you should focus on in meetings, compensation, and recognition. It’s far more influential to customer-centric thinking and behaviors than traditional CXM KPIs. Accordingly, CCFs generate far more than CX annuities. CCFs shape future efficiency, effectiveness, risk reduction, collaboration, and trust.

Silo-smoothing is your ultimate key to automatic CX excellence.

Silos are things that should be connected, but aren’t. Essentially, everything listed in the opening paragraph of this article is evidence of a silo. 5 operational silos (channel, data, systems, process, organizations) are shaped by 5 execution silos (vision, assumptions, goals, metrics, handoffs). 3 steps to silo-smoothing:

  • Focus your CXM governance council on silo-smoothing. What they figure out will accelerate your CCFs and CX annuities.
  • Position your CXM leader as a facilitator of silo-smoothing. As the steward of CX insights, this leader is pivotal to customer-centered thinking for every efficiency and expansion endeavor and managerial ritual (reviews, approvals, etc.). Anything at odds with what you’re trying to achieve with customers, and what customers are trying to achieve in their world, is waste. Silo-smoothing facilitation is a partnership with every leader in your enterprise.
  • Aim to prevent CX issues from occurring. Everyone in your enterprise ecosystem can help or hinder. When they use CX insights and CCFs as their performance criteria, you’ll have fewer execution silos and operational silos. You’ll see greater mutual respect, accountability, and shared vision. Use CX insights as the basis of SWOT analyses, strategic plans, policies, and contingency plans. Accordingly, avoid snafus such as Southwest’s holiday shutdown, JC Penney’s rebranding fiasco, Toys R Us bankruptcy, Wells Fargo and US Bank’s fake accounts. A lifetime value mindset is your greatest ally to risk prevention, which is itself a growth factor.

Embrace these 3 keys to stellar CX growth: annuities, CCFs, and silo-smoothing. As you do, you’ll find that many of today’s typical CXM programs are fingers in a leaky dam wall. As you strengthen the foundations, you’ll achieve the same goals more efficiently, happily, and prosperously.

By Lynn Hunsaker, CCXP, RTP