HomeBlog Four Ways to Justify Investing in Customer Experience

Four Ways to Justify Investing in Customer Experience

October 01, 2014|Megan Heuer

Customer experience is a top priority these days, but to get the investment you need to do it right, you need to make a strong case.

Here’s a riddle for you: What is it? It doesn’t create demand (except it does). It doesn’t generate revenue directly (but you can’t generate revenue without it, and you’ll generate less if it’s bad). It costs money (except when it saves money). What is it?

CustomersAnswer: Customer experience.

In a recent study of more than 200 b-to-b companies in the U.S. and EMEA, 68 percent said customer experience is “absolutely critical” to their overall position in the market. Given that majority, it’s interesting that just 19 percent have made it their “single biggest focus” in 2014. This disconnect is likely due to how hard it is to win funding for customer experience investment, which to some business leaders can seem like a bottomless pit of costs without a clear return on investment.

It’s time to make a better case. When b-to-b companies tell us they want to become “customer obsessed” and improve their customer experience, it’s generally for one of four reasons. It’s important to understand the reason, since it drives experience investment and overall commitment to change. Without this commitment, and a powerful reason for it, it’s hard to win investment in customer experience and even harder to maintain. The rationale for investing in customer experience defines how to build the business case and how to track results. Without this, support will be lackluster at best.

To help you avoid that fate, here are the four major reasons for customer experience investment, and suggestions for building a return-on-investment story for each one:

Reason 1: Retention rates are a problem, and this churn is hurting growth goals.

When a company loses too many customers, growth takes longer and costs more. Investment is required to understand, then fix whatever is causing customers to leave. A willingness to be honest about the causes is also required. A compelling business case must show the links between fixing what’s broken, keeping more customers, and increased growth and profitability. Even a small percentage improvement in retention should be sufficient to justify investment in fixing the root causes(s) of churn.

Reason 2: Not enough new business is won from existing customers; this lack of cross- or upsell hurts growth goals.

This resembles a demand creation problem, but it can’t be solved by trying to generate more leads. When existing customers don’t buy more, or aren’t open to hearing about new offerings, it’s generally because they’re not happy with what they’ve already bought, or because the only time they get a call, it’s from someone trying to sell them something. All the “buy more” emails in the world won’t motivate growth if the causes of customer dissatisfaction aren’t addressed. Make the case that you need to understand what is and isn’t working with existing customer relationships so customers will become open to growing with you.

Reason 3: The company is moving to a cloud/software-as-a-service/recurring-revenue model; driving growth and success in the new model requires a change in customer experience.

In subscription/recurring-revenue models, customer experience is critical to growth and profitability. Companies that go down this path know they’ll have to deliver some kind of consistent non-selling outreach, but they’re not always sure how to do it. Make the case for this effort by discussing the best practices of companies with successful subscription models, the resources required to get them there, along with the financial risk of failing to invest in the post-sale customer experience.

Reason 4: Competition is tough, and it’s harder to maintain differentiation on offerings alone. Customer experience is a way to build sustainable competitive advantage and improve growth.

Competitive advantage is an overused term – what the seller considers an advantage isn’t always considered an advantage by a buyer. In markets with relative parity across offerings, the most valuable differentiator is the willingness of customers to be vocal advocates for your brand. This means the focus must be on delivering both great products and the experience wrapper around them. Make the case that investment is needed to evaluate competitors and what their customers say about them vs. what your customers say about you and what it will take to change (if it’s bad) or amplify it (if it’s already good). Don’t forget companies that are smaller than yours but have great word-of-mouth from customers. If they are growing faster than you are, they’re probably doing something right for their customers.

The big question: Shouldn’t it be obvious that customer experience investment is a great idea?

The answer: Just because it’s obvious doesn’t mean it’s easy. Often, the business case being won or lost comes down to whether the organization is prepared to invest in what it takes to deliver great customer experience. From my point of view, the answer is simple: How can you afford not to invest? But, if “because it’s the right thing to do” won’t resonate in your C-suite, try one of the four reasons I’ve described. Investment in growth is never hard to justify.

Megan Heuer

Megan Heuer is Vice President of Research at SiriusDecisions. With more than 20 years of industry and professional services experience, she has worked both in – and for – organizations to build a wide variety of collaborative sales and marketing deliverables that drive systematic, predictable growth. Follow Megan on Twitter @megheuer.

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