'Return on Experience' is the new ROI.

Customers are at the heart of any brand, whether making their first purchase or a life-long advocate; without them a business simply wouldn't exist. ROI, the traditional method of proving value for investments has been a standard measure to evaluate performance and becomes a key factor in the decision making process.

While ROI models use expected cash flows and costs in their calculations, they do not factor in the likelihood those returns and costs will match predictions. Furthermore, return on investment models, which provide an exclusively financial measure, fail to describe the intangible aspects of an opportunity. Specific ROI models, if not properly understood, may also in some cases lead investors to favor less-attractive opportunities.

How 'return on experience' addresses these issues?

Return on Experience is characterized by its ability to make a firm observation from its practice, analyze results, and derive lessons and actions. But it's no longer just as simple as monitoring ROI; for many brands the return on experience (ROE) can offer a more compelling and relevant metric that enables a business to gauge the effectiveness of personalizing the customer experience much more swiftly.

Why ROE is the new ROI?

We've witnessed an increased focus by organizations on customer success. A customer success manager is to provide superior value and demonstrate success for a client in an ideal scenario but, are these factors a part of the consideration set while calculating ROI? The answer is, no. ROE on the other hand is an all inclusive measure assigning a currency value to soft factors which play a key role in proving value for the products/solutions sold.

Below is a snapshot of how we can assess ROE :

Impact of ROE implementation

While ROE includes various measures based on customer experience, it's highly dependent on historical data. Vanson Bourne from Avanade and Sitecore research conducted a study to understand the effect of "Enhanced Customer Focus Plan" adopted by SMBs. Below are the results :

It may be difficult for various organizations to implement ROE in their value based selling approach as a lot depends on duration of association with clients, perceived value, invested amounts, etc. The results are promising and it's important that organizations give it a thought.