Comments on: Yes Australia, There Is A Return On Customer Experience Investments too http://blog.protopartners.com.au/2010/02/09/yes-australia-there-is-a-return-on-customer-experience-investments-too/ We believe in challenging the traditional approach to servicing customers. We believe in thinking differently by first understanding what it is like to stand in your customers shoes before we decide how to best service them. Sat, 26 Jun 2010 13:08:09 +0000 hourly 1 http://wordpress.com/ By: Don Peppers http://blog.protopartners.com.au/2010/02/09/yes-australia-there-is-a-return-on-customer-experience-investments-too/#comment-112 Don Peppers Sun, 21 Feb 2010 15:18:30 +0000 http://blog.protopartners.com.au/?p=258#comment-112 As great as the analysis by Jon Picoult is, and it is certainly a helpful contribution to the discussion, the fact is that it will still not be sufficient to convince most financial executives when discussing the pros and cons of specific initiatives. On Jon’s original article, I posted this comment, and I think your readers will be interested in the issue outlined here: Overall financial success that is correlated with better customer experience at a company is great, but it hardly helps a marketing executive during a debate with other executives at the firm about how much investment a company should make in which kinds of experience-improving services. It has become fairly easy to “prove” that good customer experiences have some kind of impact on a company’s results, but Martha Rogers and I have always been struck by the fact that all these indicators are inherently non-financial metrics - even the ones you've outlined in your post here. The problem is that you still can’t actually quantify the financial benefit of, say, investing an extra $25 million in contact center training, or installing software and re-engineering a system for $50 million, in order to improve the customer experience. And, if your marketing exec says, well if we want a good customer experience then we should just DO these kinds of things, then our question is: What if the cost is $100 million? Or $500 million? See the problem? At some point a balance has to be struck, but where? Simply saying that CXP leaders tend to have better financial results than CXP laggards won’t solve the hard problem of resource allocation. To solve this problem you need a metric for the benefits of customer-experience-management that can be converted to dollars and cents. That’s why we invented the financial metric, “Return on Customer,” a precisely quantifiable measure of the efficiency with which a company’s customers are creating value. Lately, there has been more attention paid to the ROC metric, including a recent piece in the UK’s Marketing Week magazine here: http://preview.tinyurl.com/yz8ahq9. One of the important benefits of ROC is that this metric can be increased not just by acquiring more customers or by generating more sales, but also by improving the customer experience your current customers encounter. And in fact, changes in Return on Customer can be sued to derive a precisely measurable financial value of the individual customer experience, by itself, because good experiences are directly translatable into increased lifetime values. If your readers want to learn more about it quickly, we have also posted a brief synopsis of the ROC concept and metric on our own blog here: http://preview.tinyurl.com/yjrwfah. As great as the analysis by Jon Picoult is, and it is certainly a helpful contribution to the discussion, the fact is that it will still not be sufficient to convince most financial executives when discussing the pros and cons of specific initiatives. On Jon’s original article, I posted this comment, and I think your readers will be interested in the issue outlined here:

Overall financial success that is correlated with better customer experience at a company is great, but it hardly helps a marketing executive during a debate with other executives at the firm about how much investment a company should make in which kinds of experience-improving services. It has become fairly easy to “prove” that good customer experiences have some kind of impact on a company’s results, but Martha Rogers and I have always been struck by the fact that all these indicators are inherently non-financial metrics – even the ones you’ve outlined in your post here. The problem is that you still can’t actually quantify the financial benefit of, say, investing an extra $25 million in contact center training, or installing software and re-engineering a system for $50 million, in order to improve the customer experience.

And, if your marketing exec says, well if we want a good customer experience then we should just DO these kinds of things, then our question is: What if the cost is $100 million? Or $500 million? See the problem? At some point a balance has to be struck, but where? Simply saying that CXP leaders tend to have better financial results than CXP laggards won’t solve the hard problem of resource allocation. To solve this problem you need a metric for the benefits of customer-experience-management that can be converted to dollars and cents.

That’s why we invented the financial metric, “Return on Customer,” a precisely quantifiable measure of the efficiency with which a company’s customers are creating value. Lately, there has been more attention paid to the ROC metric, including a recent piece in the UK’s Marketing Week magazine here: http://preview.tinyurl.com/yz8ahq9. One of the important benefits of ROC is that this metric can be increased not just by acquiring more customers or by generating more sales, but also by improving the customer experience your current customers encounter. And in fact, changes in Return on Customer can be sued to derive a precisely measurable financial value of the individual customer experience, by itself, because good experiences are directly translatable into increased lifetime values. If your readers want to learn more about it quickly, we have also posted a brief synopsis of the ROC concept and metric on our own blog here: http://preview.tinyurl.com/yjrwfah.

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