Retail Customer Experience: The Financial Discipline of Customer Experience
Despite the growth in commitment to customer experience within organizations, it is still managed more like an art than a science. This results in the current mindset that when tough times hit, customer experience is treated like a "nice to have" and not as a mandatory, integral part of the value to customers.
I have noticed that there are certain recommendations missing from the discussion about how to save American industry. For example, no car company has suggested that in order to achieve a more appealing price point for customers it will reduce costs by shipping cars without tires -- making tires an optional accessory. Along the same line, no proposal was raised to eliminate windshields or maybe seat belts. The reason is quite simple: A car is not a car without those items.
The same logic applies to customer experience. Your products and services are not the same without delivering a proper customer experience.
If this is indeed the case, you may wonder why customer experience programs are being cancelled or reduced to a minimum today. The answer is simple. The car industry is cognizant of the financial consequences of delivering cars without tires. They, and others, do not know the financial impact of reducing or canceling customer experience. The case for customer experience is still based on general industry statistics and other generic substantiation.
Where did we go wrong? We failed to build a data-driven financial decision-making platform to guide management decisions. In every phase of the experience from promise (done by sales and marketing) through delivery (customer service, finance, operations, etc.) to loyalty and repeat business, there are unique customer experience costs.
What is the result? We are being given the message: "We are fully committed, but you need to do it with no budget."
It is not too late. These economic challenges should force us to rethink our programs and establish the data-driven decision-making platform to substantiate the required investment. When building the economics of customer experience you need to consider the following components:
- Return on Investment (ROI): What elements of customer loyalty could be improved as a result of enhancing the customer experience? To do this, examine the five Ps of customer experience - Preference, Profit, Portion of budget, Permanence of relationship and Promotion - to others.
- Return on Nothing (RON): The impact on customer spending and behavior in the absence of customer experience. Will customers reduce their commitment to your organization and spread their purchasing across your competitors?
- Experience cost units: How much does it cost to handle an exceptions request or a dispute? All customer experience costs units need to be identified with the full corresponding financial impact.
It is time to move from the "nice to have" column of the CFO to the "must have" column.
Discussion Question: Does the lack of financial measures around customer service often cause those areas to be cut during difficult times? If so, what are the challenges of putting a financial cost on customer experience efforts?