9,708% CXM ROI? And Far More!

Quantifying CX ROI has been a top challenge, but it's amazingly simple when you take the right approach.

Imagine a CX issue that is chronically at the top of every CX report in Service, surveys, churn, and so on. This CX issue costs 20 hours weekly for Customer Service reps and 4 hours weekly for escalations and paperwork associated with returns, refunds, etc. Your CX team has met with engineers who helped determine the root cause of this prevalent issue. They estimate that the root cause can be permanently stopped in 9 months by working on it for 30 hours per week. What will the ROI be? [This example uses small numbers for Service, such as a small manufacturing business, to prove the point of huge ROI potential for your much larger costs to serve.]

Your CX team doesn't have access to all the data for this issue, but this past month, this issue caused these costs: $30K returns, $12K credits, $8K discounts, $6K loyalty incentives, $4K technologies to address it, and $80K lost sales. For the hours mentioned above, average salary plus fringe benefits of these people is estimated at $90K per year, which is $43 per hour.

To determine the ROI of permanently resolving this chronic issue, you calculate:

• $1.68M per year to serve this issue (sum of costs for remedies, tech, churn)
• plus $54K per year (hourly salary x hours to resolve each instance) = $1.73K
• $50.6K one-time investment to stop this issue forever (hours x salary)
• 9,708% ROI to stop this issue: [($50,625 - $1,734,000) / $1,734,000] x -100

Wow! That's ROI that clobbers everyone over the head. It's simple logic: of course, you want to invest in stopping recurrence of this prevalent issue.

Actually, this ROI is extremely understated! The true ROI is much, much higher:

• $1.734M cost of this issue is a single year: without eradicating its root cause, $1.734M in your budget will be tied up next year, 5 years from now, etc.
• In upcoming years, this figure is likely to expand as you add more customers.
• Many other costs of this issue were not included in our quick calculation: (a) longer sales cycle and lower conversion rate due to doubts among prospective buyers from negative word-of-mouth of customers affected by this issue, (b) lower productivity due to ongoing internal correspondence about this issue to a lot of managers, (c) staff burnout and turnover, (d) etc.
• Re-allocate this $1.734M+ to high-value opportunities, and your ROI will continue to snowball (blossom) year after year.

Yes, some issues will require a lot more to resolve. For creative and accurate conclusions to complex issues:

1. Collect customer comments associated with the issue.
2. Rank order the comments by theme in a bar chart (Pareto).
3. Select the themes representing 80% of the total comments (80/20 rule).
4. Arrange a half-day workshop with a 6-8 representatives from different business areas to review a sampling of comments for each top theme.
5. Give the group 2 hours to read through comments (symptoms of the issue) and put sticky notes on the wall for (1) why are we allowing customers to have this symptom? (2) why are we allowing THAT? (3) why are we allowing THAT? and so on until you get to the 5th why.
6. Create a single-page action plan to address the 5th why. Typically, the 5th why is the actual root cause. When it is eradicated, the symptom will not happen anymore. Therefore, customers' experience is free of this issue, your budgets and talent are freed-up from this issue, and doubts disappear.

I've used this method with many dozens of groups around the world and in every functional area. We used it a bit differently: all 50+ groups got their own correlation analysis to identify key drivers of loyalty that they affected. Every work group got their own workshop, and they each made 2 action plans. Therefore, we had 100+ CX improvement action plans underway every year. This is a glimpse of the savings we generated for customers and for ourselves:

The whole point of customer experience work is to ensure a 1-to-1 ratio between what customers expect from your value proposition and what you deliver. All CX techniques are optional. As long as you meet or exceed expectations, it's a good experience. So, the keys are (a) understanding expectations, (b) managing expectations to be realistic, and (c) driving performance accordingly.

Your CEO has learned how to do this for the investor community. You can learn how to do it for customer experience, partner experience, and employee experience, too. It's the key to minimizing tremendous waste and maximizing sales, productivity, creativity, and prosperity for everyone.

I welcome your questions and comments about these recommendations.

Author Lynn Hunsaker coined the phrase "Experience Leadership" to represent what's needed in the 2020s to pivot to far greater trust, respect, values, and value.

To fast-track your pivot, Experience Leadership Mastery guides you within 2 to 10 hours across every managerial level in customer, partner, and employee experience combined.

As ClearAction's CX Day gift to you, this complimentary webinar will help you make 2024 your most efficient, customer-centric, and growth-generating year ever. This is a 15-minute encore presentation from Lynn Hunsaker's 90-minute session at CXPA's 2023 CX Leaders Advance conference.

Fast-Track Your Success:

1. How to Quantify CX for Buy-In and ROI

How to apply costs and/or revenue to ANYTHING you are doing.

• What would you like to quantify?
• How are you approaching it to-date?
• Would you like to quantify it even more impressively?
• Would you like to connect it to C-Suite’s financial ratios?

Join this session to learn how! (90-min Mondays in 2023 or privately scheduled)

2. Experience Leadership Mastery Sessions

Experience Leadership is for beginners and experts.

‘Leadership’ influences all. ‘Management’ controls some.

You learn how to influence internal engagement to prevent issues for customers, employees, and partners. Issue-free experience is automatic experience excellence. This drives indisputable ROI, maturity, differentiation, and career enjoyment. It can prevent austerity, layoffs, inflation, skimpflation, shrinkflation. Experts XM Leadership (CRCs) + XM Fundamentals + CCXP (live public session or privately scheduled or standalone self-paced)

Join any 90-minute session Thursday, Friday, or Saturday in 2023

3. Involve Internally for CX ROI & Maturity

Deep-dive in customizing your playbook with invigorating success nuances and templates guided by peers and Lynn Hunsaker:

• Speak Every Function’s Language, Insights for Every Group
• Personality Bridges, Drive Accountability
• Maintain Engagement, Motivate Collaboration
• Discuss full playbook of 6 templates

Join this CX Leaders Retreat to super-charge your customized CX playbook

4. CX Leaders' Silos Playbook or Growth Playbook

• Keys to Execution Silos: assumptions, vision, handoffs, goals, metrics
• Keys to Operations Silos: data, systems, channels, processes
• Insights Strategy: almost-free VoC, insights maximum value
• Value Strategy: designing value, efficiencies value
• Engagement Strategy: external and non-customer-facing stakeholders
• Metrics Strategy: leading indicators, holistic dashboard

Join CX Leaders Masterminds for any 4-week series

Subscribe to our newsletters:

1. 'Ease of Work & Business' Growth for your C-Suite and Board.
2. CX Skill-Building for Marketing, PX, CX, CS, and EX professionals' self-managed career growth. YOU are a vital cog in your enterprise's success in the ways you collect, communicate, and champion experience insights!
3. Clear Ways to Influence Action for CMOs and CCOs' indispensable value.
4. ClearAction Continuum newsletter: roundup of what's new and upcoming.