Forrester 2020 CX Summit: “Get Funding or Get Fired” – Making a Business Case for CX

Businesses are taking a hard look at the cost of acquiring customers against the value that existing customer relationships bring. In 2020 especially, during a recessionary economy, this conversation has become acute. The stakes are high. Either invest well into CX or you might be out of business. This was an undercurrent from different talks I heard during the second day of the 2020 Forrester CX Summit.

It Costs More to Acquire Customers Than to Keep Them

For example, Forrester Analyst Laura Ramos discussed a commonly accepted pearl of wisdom about the cost of acquiring a new customer versus keeping one. You’ve heard this before, right? 

“It costs more to acquire customers than to manage a relationship.” And the data shows that loyal fans also deliver revenue: 

Indeed, we have known that customer loyalty is important for years. As she noted, due to Fred Reichheld’s research in the financial services space, we have known for a while that it costs 5x as much or more to find a new customer than it does to retain a customer. And this reality is true in the B2B space: Forrester’s research shows that B2B marketers say it costs 5X or more to acquire than keep a customer. 

Why the Conversation about Customer Acquisition Cost Has Been Reignited

Why then is this conversation gaining currency again? One word: COVID-19. The pandemic has, of course, forced many businesses to go into survival mode while they’ve reacted to the recessionary economy. Retail alone suffered historic drops in sales in March and April. Everyone is looking for ways to invest more carefully into their growth. 

“Internal budgets are being cut and external demand is decreasing in this pandemic environment, so now is the time to invest in customer marketing,’” Ramos said.

For this reason, the conversation is focusing more on the value of a great customer experience – CX that improves business performance (a theme we discussed in our post about Day One). And yet . . . to be truly data-driven about investing wisely into CX, you need to go beyond the cost of customer acquisition. To really build a business case for investing into CX, you have to dig deeper.

But Businesses Need to Dig Deeper to Create a CX Business Case

Fortunately, the Forrester event did that, too. 

In his discussion “Get Funding or Get Fired,” Forrester Analyst Harley Manning said, “Only one metric makes the difference between a company expanding their CX programs and eliminating programs. That metric is not the NetPromoter Score. It’s not the Customer Effort Score. It’s not even Forrester’s beloved Customer Experience Index. It’s money.”

Especially in this pandemic-affected economy, companies that are expanding their CX programs must have a clear understanding that those programs help them make and save money. So, if you want to get your CX initiative off the ground, you have to build a business case that tells how much economic benefit. Harley illustrated how to do that with a one-sentence business case:

How to Get Started with a CX Business Case

The magic question is how do you quantify that economic benefit? Manning suggested there are two ways to do that:

  • Estimate cost savings.
  • Estimate increased revenue from your CX initiative. 

In order to quantify cost savings from your CX initiative, you should take the following steps:

  • Create a list of CX problems you need to solve – let’s say, for improving your contact call center.
  • Conduct a root-cause analysis on each problem
  • Create a scope of projects to fix each problem by addressing their root causes.
  • Make reasonable assumptions about the percentage of calls you’ll eliminate for your contact center
  • From there, apply a formula – and this example is geared toward a call center:

This is how you quantify how much money a CX improvement can save your company. 

A CX Business Case in Six Steps

The other approach you can take is to quantify increased revenue that will be generated by your CX initiative. In order to do that you can create a data-driven business case in six steps:

In today’s climate, businesses need to take data-driven CX to a new level of rigor. Cost of acquisition and savings? Those data points are foundational. But a business needs to turn that data into a compelling business case. And when you do, be ready to unlock the value of effective CX. As Laura Ramos illustrated, creating engaging CX creates long-term benefits such as growth and advocacy:

In today’s climate the most successful and believable business cases will likely focus on one or more of these 4 core objectives that help maximize customer lifetime value (CLV) — putting that super fan to work as an advocate. 

At Isobar, we help companies create enduring value all the time in our experience-led work whether that be via a time-bound digital activation for a client like Adidas or an ongoing transformation for a client like ZWILLING. Contact us to learn more. 

 

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