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Prove The ROI of Customer Experience (WITH ACTUAL MATH!)

Simplifying CX YouTube series episode on how to prove the ROI of your CX program.

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Video Transcript

Hey everyone, Sara here from GetFeedback. Welcome to another episode of Simplifying CX.

If you’re new to our channel, our video series is focused on providing you straightforward answers to the biggest CX challenges. If that sounds relevant to you--don’t forget to subscribe to our channel! 

Before I go any further, fair warning: this video will contain a bit of math. (Warning: Math!) 

If you’d rather eat chalk than do some math—don’t worry, you’re in good company. We will get through this together. 

In this video, we’re going to answer the popular question: How do you prove the ROI of your CX program? 

First, I’ll explain the main formula for proving ROI.

Second, I’ll walk you through a specific example of how you can prove the ROI of your efforts.

The first step is becoming familiar with the formula for calculating the ROI of customer experience. You calculate the ROI of your CX program by taking your return and dividing it by your investment and, finally, multiplying that by 100.

Now, this is where it gets more complicated: The return portion requires its own formula. It’s calculated by taking your benefits, meaning the sum of money your company has gained through your CX program and subtracting from it the total amount of investment that you’ve spent to execute your program.

So if we put it all together: let’s say your return is $10 dollars and your investment is $2 dollars. Then the ROI would be 500%.

Benefits can include customer satisfaction, top-line revenue, customer retention, cost-to-serve, and cross-sell and up-sell. Just to name a few.

Investments can include employee training, new technology, and operational costs.

It’s easy to identify investments—the hard part is quantifying your benefits. 

That’s because, oftentimes, proving customer experience benefits involves taking into account quantitative and qualitative data. 

But it is do-able. 

Let’s use a common benefit, like customer satisfaction. 

If you’re like most companies, you’re probably using the metric called Customer Satisfaction Score, also known as CSAT, to measure how satisfied your customers are across touchpoints in the customer journey. 

Showing that your satisfaction score has gone up over time due to your CX implementations isn’t enough. You need to show how, even just a one-point increase in your CSAT, is impacting revenue. Let me walk you through a scenario.

Let’s say that you send out a case closed CSAT survey and receive 1,000 responses. Of those responses, 600 customers scored their experience a 4 or 5. As for the rest, 200 customers scored a 3, and the remaining 200 scored a 1 or 2.

This means your customer satisfaction score is 60% ((600) / (1,000) = 0.60 x 100 = 60% of satisfied customers). In other words, of that batch, 60% of your customers were  satisfied with their experience.

You look into the customer data and learn that the customers who rated you a 1 or 2 all thought that the wait on customer service live chat was too long.

You also realize that 92% of those customers who rated you a 1 or 2 churned (184 customers). And 80% of those who rated you a 3 also churned (160).

That means that you have lost 344 customers. Let’s assume that the average spend per customer is $500. If you’re a B2B business, this is the equivalent to your average deal size. This means that the total revenue lost is $172,000.

You figure out a new approach that requires some spend—$3,000 to be exact--but will definitely solve the issue. In fact, you estimate that this change will increase your CSAT score by 10%.

So, you implement the change and after some time send out a new batch of the case closed CSAT survey, getting the same amount of responses. And whala! Your 1-2 rating decreased to 100, your scorings of 3 remained the same (200), but your 4-5 scores increased (700). Now you have a CSAT score of 70%.

If we apply the same math we did before, you’ll find that your new revenue lost is down to $126,000.

This means that the total revenue saved, in other words, the benefit of implementing this CX initiative, is $46,000.

Now, let’s go back to the Return formula, which is benefits minus investments. In this case, it’s 46 thousand minus 3 thousand. Which results in a total of 43 thousand in returns.

If this was the only CX initiative in your program, you could prove that the ROI of your effort is over a thousand percent. Now keep in mind that this is just one example of quantifying a benefit. Once you’ve calculated all of the benefits of your CX program, you can then calculate your total return and divide it by the total investments. This will give you the total ROI of your CX program.

All right. With this information, you should be able to start the process of quantifying the value of your CX program. 

There’s a lot more where this came from so be sure to check out our complete guide in the description section of this video. 

Also, if there’s a topic that you’d like us to cover—tell us in the comments section! 

And don’t forget to subscribe now to see more videos that simplify CX. 

Until next time! 

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