The magic formula for getting funding for your customer experience initiatives
Getting funding for your customer experience programs isn’t rocket science: it’s about demonstrating how it will drive your business’s bottom line. We’ll show you how.
One of the biggest challenges for customer experience professionals is how to prove the return on investment of a customer experience program. It’s a knotty issue for both the CX professional who’s making the investment ask of their stakeholders, as well as for the budget owner who’s on the receiving end of these pitches.
At the recent GetFeedback 2021 CX Impact Summit powered by Momentive, we invited a few industry experts to share their views. Dan Gingiss, CEO and founder of The Experience Maker; Shep Hyken, chief amazement officer of Shepherd Presentations; and Kate Karanovic, digital experience and corporate communications at T-Mobile, provided guidance on making a persuasive case.
The best and worst customer experience investment pitches
Gingiss and Hyken gave examples of CX pitches. I’ll call them examples A and B. If you were on the receiving end of the pitches, which one would you find most persuasive?
Example A: “Hey, boss! I want to discuss a new customer experience program. It will cost us $50,000, but we’ll make it back. We’ll create lots of social media content out of it. We’ll get more followers, and we’ll get some likes and shares. We’re going to get some influencers talking about us. I think we’ll generate some attention on Twitter and maybe even LinkedIn. I’m also hoping it will increase our NPS® scores. May I have the money to implement my program?”
Example B: “Hey, boss! I want to discuss a new customer experience program. It will cost us $50,000, but let me tell you how much money we are going to make by doing this. First of all, as you know, our customer lifetime value is $1,000 per customer. You may also know that we lose 5% of our customers every year. That’s our churn. Do you know that if we saved just 10% of those customers—half a percent overall—it’s $1 million to the bottom line?
“Now, not only do I think we can do that, but when we implement our program, we’re also going to see a 10% increase in the spend of our existing customers and a 25% increase in referrals. So our existing customers are going to stay longer, spend more, and refer their friends, which of course in turn is going to increase our customer lifetime value above $1,000. May I have the money to implement my program?”
If you’d approve B, you’re on your way to understanding how to prove ROI.
Show them the money; not just the NPS scores
What did we learn with these examples? As Gingiss explained, “When you talk to executives, especially in the C-suite, you have to speak their language. You have to talk about dollars and cents and bring them concrete numbers. And not just numbers like NPS scores—which are great for measuring how you’re doing at a moment in time but don’t tell them how much money they’re going to make. You need to show impact on the money the company makes—either in cost savings or revenue increase.”
As Hyken pointed out, “The C-suite reports to shareholders and shareholders are looking at the bottom line. If you can’t show your executives the numbers, then you’ll be wasting each other’s time.”
Learn the formula to calculating the ROI of customer experience programs
The first step is to calculate ROI, which is a deceptively simple thing to do. Here is the magic formula:
ROI = Return / investment x 100
I say it’s deceptively simple, because calculating the “return” portion requires its own formula. Return is calculated by taking your benefits—meaning the sum of money your company has gained through your CX program—and subtracting it from the total amount of investment you’ve made to execute your program.
I won’t go into all of the details here, because we offer you some great step-by-step guidance in our detailed guide: How to calculate the ROI of customer experience. You can also start with this 5-minute video: Prove the ROI of customer experience (WITH ACTUAL MATH!), which walks you through an example.
Provide customer feedback—in their own words
CX professionals already know this fact, but the data from Hyken’s customer preferences study is worth repeating to your executives over and over again: 83% of consumers are willing to switch companies because of bad customer service.
A full 79% of customers switch because they know another company will have better customer service overall. And 67% will share bad customer experiences with friends and family or even on social media, Hyken found.
“If you do not deliver the experience customers expect, they’re going to go somewhere else,” said Hyken. “If you do deliver, they’re likely to stay with you. Plus they become your brand ambassadors when you do it right.”
Gingiss agreed: “It’s incumbent upon all businesses to focus on their existing customers and make sure that they’re creating the kind of experience that makes people want to stay.”
For every customer you lose due to a bad customer experience, you need to acquire a replacement—and do so while trying to acquire other new customers. What’s the cost of acquiring a new customer? That’s a key part of your ROI calculation and will help you to show how investing in a CX program will help you retain customers and increase lifetime value.
The math is important here, but so is the customer perspective—ideally offered in their own words.
Karanovic of T-Mobile (a GetFeedback by Momentive customer) gave an example. In the early days of the pandemic, her team, which manages T-Mobile’s internal and external support, needed to pivot to a fully online customer experience. In order to continue to improve the experience for customers, Karanovic needed funding to create a timely customer feedback channel.
Karanovic explained: “I feel like from the beginning of time, everyone’s like ‘Show me the data. Show me the hard data.’ And that’s what we’ve used to make site and experience decisions.” But with site design, Karanovic said, “you have to be able to paint a picture.” Instead of going back to the drawing board multiple times, Karnovic’s team is able to use user verbatims obtained through GetFeedback to “get more of the soft data behind things.”
The customer’s voice is compelling to leadership. As Karanovic noted, “While I was able to sell GetFeedback as an option, it really helps us create better cases for all of our business cases to our senior stakeholders.” Hearing the voice of the customer can help drive better business decisions when it comes to customer experience initiatives.
The secret to customer experience investment is in your company’s bottom line
Gingiss brought the key point home: “Customer experience is not a soft skill. All we have to do is connect our CX metrics to financial metrics. That’s why it’s so important that we understand what financial metrics are important to our leaders and how what we’re doing in customer experience ties back to that. There is a direct connection.There is absolutely no doubt that when we create better customer experiences our customers stay longer, they spend more, and they refer more people, all of which affect our bottom line.”
Get investments for your customer experience programs with ease. Check out our helpful resources, including our guide: How to calculate the ROI of customer experience; our video primer: Prove the ROI of customer experience (WITH ACTUAL MATH!); and our CSAT calculator to measure your customer satisfaction score and its impact on ROI.
Sara Staffaroni is a principal content strategist at Momentive.
Net Promoter, Net Promoter Score, and NPS are trademarks of Satmetrix Systems, Inc., Bain & Company, Inc., and Fred Reichheld.