Six Financial Metrics in CX

Organizations often settle for NPS as a comprehensive assessment of customer satisfaction, but CX work is more complex. Linking CX efforts to tangible financial outcomes is necessary to communicate effectively with the CFO. This article explores examples and warns against relying solely on customer surveys to measure customer experience.

Six Financial Metrics in CX

Financial metrics revolve around the company’s financial health, including sales, profit margins, costs, and similar factors. These metrics help companies evaluate their economic performance and identify areas for improvement. Non-financial metrics focus on other aspects of the organization, such as customer satisfaction, employee satisfaction, and product quality. We can’t measure these metrics in monetary terms, but they are still crucial for assessing how the organization is performing. Non-financial metrics are often assumed to impact the future development of financial metrics. For example, decreased customer satisfaction leads to reduced revenue per customer.

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Six Financial Metrics in CX

To demonstrate the impact of CX, it is essential to be clear about which customer experience initiatives can influence financial metrics. In other words, linking customer experience work to the business is crucial. Here are some examples of financial metrics that can indicate a positive customer experience:

Revenue per customer: If customers are satisfied with the product or service, they are more likely to continue using it, purchase more products, or upgrade to more expensive options.

Reduced complaint costs: If customers are satisfied with the product, it is less likely that problems or errors will occur, leading to complaints, and this can result in reduced costs for handling complaints and thus increase the company’s profitability.

Increased sales: Satisfied customers can spread positive reviews about the company to other potential customers, improving sales and thus expanding the company’s revenue.

Increased repeat sales: If customers are satisfied with the product or service, they are more likely to return and make more purchases, which can boost the company’s repeat sales and thus contribute to its profitability.

Fewer lost customers: If customers are satisfied with the product, they are less likely to switch to another product or terminate their service, which can reduce the number of lost customers and thus increase revenue and company profitability.

Reduced customer service costs: A well-designed product that is easy to navigate enhances the customer experience and minimizes the need for user support issues. The reduced costs for handling customer service issues will increase the company’s profitability.

Example: A company can lower its customer service costs by mapping the customer journey and identifying issues through a fictional global retail company called “GlobalMart.”

GlobalMart has an extensive presence worldwide, with stores in many different countries. The company has a centralized marketing department responsible for global campaigns and customer offers.

GlobalMart began noticing an increase in complaints and a decrease in customer satisfaction locally. It then initiated a customer insight effort to identify the root cause, which consisted of a selection of customer and employee interviews, AI analysis of customer service issues, and customer feedback. Through a clear visualization of the customer journey, GlobalMart identified a pattern of confusion and frustration regarding the global mailings. This was a clear indication that there was an obstacle in the customer journey

GlobalMart used customer journey-based insights to develop an action plan to halve the “campaign issue” type in their global customer service. Factors such as the average cost per customer service issue and the number of problems avoided through improvements were included to estimate the savings.

GlobalMart had previously handled 10,000 unnecessary customer service issues per month due to confusion about global campaigns, with an average cost of $10 per issue (including personnel, infrastructure, and other related expenses). By reducing these issues by 50%, the company would make an annual saving of $600,000, excluding other economic benefits from improved customer satisfaction and increased customer loyalty.

10,000 issues/month x 50% x $10/issue = $50,000/month

Four Risks with Common Non-Financial Metrics: Customer Surveys with Questionnaires

Most CX organizations devote significant resources to tracking various metrics from customer surveys in the form of questionnaires. One of the biggest challenges with customer surveys is ensuring an adequate response rate. The risk of a low response rate is that the result may differ from customers’ actual opinions, leading to incorrect decisions. These decisions can, at worst, worsen the customer experience, but above all, they can lead to incorrect resource prioritization. There are also other risks associated with using customer surveys as the sole method for measuring customer experience:

Selection bias can occur when the company does not receive feedback from all its customers but only from a specific group, for example, if the survey is only sent to a specific customer group or if a particular channel is used to send out the survey. It can also happen that only customers with a strong opinion about the company respond to the study. To avoid selection bias, using different channels to send out surveys and ensuring that the survey reaches the right customers are essential.

Question bias can occur when the questions in the survey are formulated in a way that leads to a particular answer. For example, questions like “Did you like our product?” or “Was our support good?” can lead to a positive response because they are formulated in such a way that the respondent feels pressured to respond positively. To avoid question bias, it is vital to compose the questions neutrally.

Response bias can occur when customers respond to the survey in a way that does not reflect their actual opinion or behavior. This can happen if customers want to maintain the company’s reputation and if they want to give positive feedback for various reasons. So-called social desirability is a common form of response bias. Respondents are more likely to respond in a way they believe the survey requires rather than honestly answering it. This may be because respondents want to appear in a positive light or avoid being labeled as unreliable, controversial, or inconsistent.

Over-reliance on results is another problem with customer surveys. Companies may make decisions based on survey results without considering other factors affecting the customer experience. It is important to remember that customer surveys only provide part of the picture and that other factors, such as customer behavior and customer relationship quality, are also essential to consider.

Customer Experience Management extends beyond simple measurement of customer satisfaction. Effective communication with those responsible for finance requires linking CX initiatives to actual financial results. This means understanding and using both financial and non-financial metrics. In this article, we have explored these metrics and highlighted the risks of relying solely on customer surveys to assess customer experience. Customer surveys can provide valuable insights, but they only sometimes capture the complete picture, which can lead to incorrect conclusions and missed opportunities for improvement.

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Helen Rigamonti

Helén Rigamonti has more than 25 years of experience as an executive manager. She has led several major projects aimed at improving CX in various organizations, including B2B, B2C, and non-profits. She combines her expertise in organizational development with her current roles as an author, interim manager, educator, and speaker to enhance customer experience and lead customer-centric change. Helén is part of the management team and a course leader in several educational programs for customer experience management, including at IHM Business School. She is also the Swedish ambassador and a member of the management team of the European Customer Experience organization. Her latest book on CX is “Customer Experience Management på svenska - konsten att leverera rätt kundupplevelse” (Customer Experience Management in Swedish - The Art of Delivering the Right Customer Experience).

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