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CloudCherry – Tying Financial Goals to CX Metrics

James GilbertJames Gilbert | March 19, 2019

“Firms will continue to regard CX as a collection of continuous improvement projects until they see an irrefutable, directly attributable connection to returns.” – Forrester, Hardwire Customer Experience 2018

This is the challenge that every CX leader needs to overcome. In order to prove their value to the company, secure the budget and buy-in they need to make changes, CX leaders must demonstrate an “irrefutable” connection to business metrics.  This requires a massive sea change in the metrics and strategy the profession is currently using to measure their success.   

But the good news is, as Tom Mouhsain says in the Forrester report cited above, “there is sufficient auditable evidence to link CX to all of the major financial performance drivers that determine profit — and ultimately to the return on shareholder equity.”  

It’s a big challenge, but with the right strategy, and the right data collection abilities, it’s no longer insurmountable. CX can be tied to the financial goals of your business.  

NPS can’t be your North Star 

Traditional CX metrics like customer satisfaction, customer effort and NPS are not directly tied to making money moves. While these metrics can help CX and marketing teams tell descriptive stories about the state of the customer’s experience, they aren’t credible when it comes to making business decisions.  

NPS was always meant to be a proxy for true customer loyalty, because we didn’t have the means to measure it before. But we’ve gotten into the habit of continually trying to improve NPS without actually asking why. Does it actually move the needle? At what point does increasing NPS have decreasing returns?  

Instead of simply continuing to improve NPS, CX pros need to expand their dashboard to include financially meaningful metrics that speak directly to their impact on the balance sheet and P&L. When that happens, CX teams will be keen to talk finances, while the CFO becomes an advocate for CX due to the financial success they are driving.  

The Three Levers CX can pull to impact business goals 

When moving from traditional metrics to financially credible success metrics, CX leaders have three levers they should look at; increasing revenue, reducing costs and lowering risk.  

Increase Revenue 

Improving the customer experience intuitively drives revenue through encouraging upsell opportunities, decreasing customer churn and increasing customer advocacy. Connecting these numbers to CX improvements is the tough part.  

Forrester has research-backed evidence that improving CX does, in fact, have an impact on revenue, across the financial industry. In their 2017 report “Drive Business Growth with Great Customer Experience” their models demonstrate “revenue potential clearly increases with higher CX Index scores.” 

Reduce Costs 

A stronger CEM program can reduce unnecessary costs for the business. Through reducing complaints, eliminating extra effort due to bureaucracy and redundancy and optimizing infrastructure, CX teams can massively impact the cost of servicing customers. But beware (and more on this later): cost cutting simply for the sake of the budget doesn’t have the same impact.  

Lower risk 

A positive customer experience and an engaged company develops trust between customer and company. This increased trust leads to more openness and a willingness to share data. For the financial industry, this is critical in understanding customers and accurately assessing risk.  

An increase in trust can also reduce the rate of loan defaults or fraudulent policy. Lowering risks through CX improvements provides another method of tying CX policies to financial and business goals.  

Keeping CX Front and Center in Cost Management Outperforms Indiscriminate Cost-Cutting  

Rather than looking for cost efficiency, companies must keep the golden ratio of CX in mind: Cost per Income (CIR). CIR compares the cost of servicing customers with the income they generate. The lower the cost to serve higher income customers, the better. This is how businesses make money. And CX teams have a lot of opportunities to improve this ratio.  

In particular, companies can improve CIR by increasing the number of products each customer is using. This naturally decreases the cost to serve each individual customer, making the business more efficient and increasing customer profitability.  

How can Companies increase the number of products per customer? Through personalization, upsell opportunities and increased engagement. In other words – through delivering a well-executed customer experience.  

Importance of Journey Mapping 

The key to cost cutting strategically and to linking improvements to financial metrics is by connecting every action to your customer journey map. Take this example from the Forester report:  

DBS used journey mapping and digitalized processes like new account openings and credit applications to save 1.1 million customer hours and 327,000 employee hours, living up to its mantra of “Live More, Bank Less.” DBS distinguishes between digital and traditional customers and analyzes costs related to transactions, services, and customer acquisition alongside income per customer. This enables the bank to compare the CIR, share of profit, and ROE contribution of both customer groups. DBS found that digital customers are 42% of its customer base but account for 72% of its profit; have a ROE of 27% versus 18% for traditional customers; and have a CIR that is 22% lower than traditional customers.”  

All of that information can only be uncovered through the process of journey mapping. Understanding the paths each segment of customers travel allows DBS to attribute differences in customer income to differences in CX.  

Companies can benefit from customer journey mapping exercises in many different ways. By looking at frequent transaction types, they can streamline processes for customers and employees. This pulls on the revenue level because customers like to do business with companies that make it easier, but it also pulls on the costs lever because it reduces inefficiency. It doubly impacts the golden CIR – a big win for the CX team’s challenge to connect improvements to financial metrics.  

Using Proxy Metrics to tie CX to Financial Metrics 

In order to connect financial goals to CX metrics, teams need to create a chain from traditional metrics to the three levers discussed above: increased revenue, decreased costs, and lower risks.  

These proxy metrics breakdown the financial goals into measurable units that can be wired to customer experience results. For example, revenue might be broken down into increasing the number of products per customer, where CX is responsible for increasing the number of authentic touchpoints between customers and product educators. If CX can prove that as touchpoints increase, customers are more likely to convert on upsells, they’ve connected their activities to a financial goal by using proxy metrics.  

Don’t forget to pull out your customer journey map!  Distributing proxy metrics and indicators across the entire customer lifecycle right from account sign-up can help recognize possibilities for additional revenue and cost efficiencies. Revenue doesn’t just happen once – it’s an ongoing process across multiple channels and touchpoints – just like the customer experience.  

Don’t delay the process 

It takes time to build the models that your individual business will need to prove linkages between CX and finance. As stated in the Forrester report, “DBS Bank needed three years of data to confirm the relationship between customer engagement, satisfaction scores, proxy metrics, and the impact of digitalization on financial performance.” The takeaway? Be patient, but start now.  

If you’re struggling to connect financial metrics to CX improvements, you’re not alone. Book a demo with CloudCherry today to start your journey.