A question I get sometimes: “Of course we want to value customers, but is doing so definitely tied to revenue?” The answer is unequivocally yes. I’ve been talking about this for years, as have many of my colleagues, professional acquaintances, and friends. If you boost customer experience, you boost revenue. Yes, yes, and yes. But it’s still a question out there to many people.
Why? It’s not 100 percent how business “was” done — and change is hard for people. Business for a long time was about the power of brand. Brand is still important — don’t get me wrong there — but customer experience is as important (or more important) these days. One thing that happened is our religious focus on growth. Companies get to growth (typically) through new revenue streams. But a lot of times, when you introduce new revenue streams, you flood an already-existing market. Think about how many variations and flavors of coffee we have now. In the early 1980s, we probably had 150 less. This creates “a paradox of choice.” When you have so many options, oftentimes you make the choice based less on the brand and more on the experience. So in a roundabout way, companies pushing for consistent quarter-to-quarter growth have ultimately made customer experience a crucial metric in business.
And now, back to the revenue gains question.
A new Forrester report on customer experience and revenue
It’s called “Drive Revenue With Great Customer Experience 2017” and it’s also summarized on Forbes here. There are a lot of good stats in the article. Here are a few:
- A one-point increase in the CX Index score of a mass market auto manufacturer is tied to $873 million in additional revenue.
- In retail banking, having an excellent CX rating and increasing it by 1 point can drive revenue 4x as opposed to having a sub-par CX rating and increasing it by one point
This study was done across 13 industries. One of the authors was Maxie Schmidt, who wrote a post on the “CCO money question” as well. The CCO money question is exactly what you would expect: other executives turning to you and asking, “This is all well and good, but how is it tied to the bottom line?”
The bottom line conundrum in business as a whole
Logically, when something isn’t tied to the bottom line, it tends to get less attention from executives. For example, there’s research that more compassionate work cultures are tied to revenue increases — and have better CX. But the research is academic and somewhat anecdotal.
While some work cultures are amazingly compassionate, the bulk of them are probably not. It’s tied to the same reason: “compassion” doesn’t always show up on a balance sheet, so people with decision-making authority have less reason to care about it.
Maxie’s arguments about CX and revenue
Maxie Schmidt, one of the authors of the Forrester study, gave Forbes a few reasons she thinks that CCOs and companies as a whole struggle with this “tying CX to revenue” piece. Namely, she sees it in part as a data issue:
Good CX leads to revenue because customers don’t churn, buy more or get other customers to buy. But most companies cannot measure those behaviors at the individual customer level. And even if they could, they’d still not know the quality of each customer’s customer experience. And data isn’t available in a format that allows firms to correlate both.
She also sees it as a timing issue:
The revenue upside doesn’t always materialize immediately. If a customer just bought a pair of shoes, it may take a while before the customer needs another pair of shoes and goes to buy at that store again.
I’d agree with both, but I also think it’s a unification issue. You need to align and unify with the rest of the leadership team. They need to understand what you’re doing, why you’re doing it, and how it benefits them and the overall organization. When you get to that sweet spot around one-company leadership, I think the revenue lessons are much clearer to everyone involved.
What else would you add, or have you seen, about revenue generation from good CX?