What if you learned that by improving one aspect of your business by a single percentage point, you could increase revenue by a billion dollars? Or that by improving this same part of your business you could dramatically boost your market valuation? This would get your attention, would it not?
More in a moment, but spoiler alert: the aspect is customer experience (CX).
As businesses set budgets late last year, many leaders were forced to take a hard look at their planned spending in anticipation of an economic downturn. While budgets ebb and flow, CEOs will always care about three core metrics that drive business forward: revenue growth, profit growth, and stock price. If an investment or initiative doesn’t contribute meaningfully to one of these, it will be cut when there are business headwinds.
Which brings us back to CX. It may seem a vague area that even seasoned executives have a hard time understanding, but it’s worth the effort—the benefits of improving CX can be substantial.
How substantial? In a 2022 research report, Forrester found that if auto manufacturers improved their CX by one point, it could lead to more than $1 billion in additional revenue on an annual basis. And a recent analysis by Qualtrics indicates that companies with highly rated CX saw a stock price increase of 45% between 2019 and 2022, while CX laggards saw their stock prices decrease by 21% over the same period. While many companies find CX value hard to measure, there’s no doubt the payoff for CX investments can be substantial.
Cognizant Digital Experience CX experts have identified four key questions that business leaders should be asking to create a focused, customer-centric organization that can deliver CX that drives value for consumers and businesses alike.
1. How do we drive customer lifetime value (CLV)?
Organizations that fail to use this data-driven, customer-centric approach to understanding their current customers are already behind the competition. CLV, often forgotten or neglected, is the best measure of current and future growth. It creates a long-term, holistic view of the experience you are delivering customers and ties in actual and projected revenue you can use to identify your most valuable customers—and develop retention and growth strategies to keep them.
Increasing the value of your existing customers is a great way to drive growth, and the best way to start is by quantifying as many customer touchpoints as possible—measuring here isolates leading indicators of future value. When do customers recognize the need for your services, how do they find your business, how often do they order and what specific items are they ordering, when do they call customer support, and why are examples of datapoints in the customer journey that should be included. This can be a daunting task, as it involves pulling seemingly disparate data that may be siloed in different areas of your business. If it were easy, everyone would do it—do the hard work and be different.
Connecting operational data and revenue to key aspects of CX is vital in justifying important investments for your business. This data-driven approach leads to a greater understanding of CLV, which can be turned into action by targeting specific investments to make improvements in the experience. These experience improvements can then be quantified with an expected return on those investments. This laser focus on CLV helps to prioritize investments based on their impact to top-line revenue in the near and long term.
2. How might our customers’ buying patterns change in 2023 and beyond, and how will customer journeys evolve?
Buying patterns shifted significantly during the pandemic to address supply chain issues, increasing reliance on e-commerce, and remote work. The question now is to what extent these changes will remain in a post-pandemic world.
Customer behavior is expected to regress back toward pre-pandemic norms to some extent, but digital advances are here to stay. It’s crucial that you understand how your customers’ journeys are evolving and where there are opportunities to move ahead of trends and differentiate yourself from competitors.
Knowing the moments that matter now instead of relying on dated assumptions arms you with the insight you need to improve the things that matter most to your most important customers. The gap between knowing your customer and guessing what they need is a significant point of differentiation for any business, as it shows the business is actively listening and building the experience customers demand.
The methodologies to understand customer behavior do not have to be complicated, but they do need to be intentional. It could be as simple as 10 customer interviews per quarter. But the framing and execution of these interviews is so important. Where we see clients fail with even this direct approach is the inability to turn off the sales switch and just listen to understand. Your customers will be happy to tell you the challenges they are facing without getting a sales pitch at the same time. The partnership with customers that comes from these types of discussions is monumental and difficult for your competition to replicate.
One Cognizant client, a U.S.-based airline, recently launched an effort to get to know its customers better. We led the client through a design thinking, behavior-centered approach. Insights were gathered through in-depth customer interviews, secondary research, and stakeholder work sessions, with our behavioral science expertise layered in.
The result was a strategic redesign of the airline’s mobile app; dynamic tools and assets to help the client better understand the mindset of its customers; and a roadmap to guide future innovation and digital strategy, the whole predicated on growth.
3. How well leveraged is our existing tech stack to support these segments and journeys?
If you believe you have answers to the first two questions, now is the time to ensure your tech stack is aligned to the customer segments and journeys that are most impactful to your business. The tools and applications you use must be mapped both strategically and technologically to support these efforts.
The first step is cataloging and mapping the technologies that enable personalized e interactions with your customers to exceed their expectations. Personalized interactions demonstrate how well you know your customers and inspire loyalty as a result. As a simple example, Customer A might be price sensitive and would appreciate knowing about discounts or rebates on products they regularly use. Meanwhile, Customer B might be excited to know about new products and services.
Being able to execute on personalized messaging at scale across the entire customer base is fundamental to a top-notch CX program. As another example, you might use personalization in a rewards program to enhance CX and drive repeat purchases. How these tools and applications strategically align to priority segments and moments that matter are foundational to executing a strong CX strategy.
Through this gap analysis, you will likely find overlap in the capabilities of existing tools and applications in your tech stack. Given the current state of business, it is important to eliminate duplicated capabilities to reduce cost and complexity.
4. Where should we invest to drive both rapid returns and long-term differentiation and value?
Achieving organizational buy-in on new investments is vital, especially in today’s uncertain climate. After identifying overlap and gaps in your existing tech stack, you can build a list of potential partners, tools and applications that will close existing gaps. Of course, these gaps will be specific to your organization and situation.
Some of the most popular tools you might be familiar with already are Qualtrics, Salesforce, Zendesk, and HubSpot. The list is long, and some tools are better suited for customer listening while others are better suited for direct customer support or personalized communications, but ultimately these tools must work together to build a cohesive best in class customer experience. This list can be helpful as a starting point, but you should look for partners that can help you with quick and measurable CX wins that help you know your customers better, connect the data, or enable a better, more personal experience. Equally, your partners should help ensure that you are using the full set of capabilities of a given platform before introducing another one for marginal gains. Ultimately, these are the partners that will unlock differentiation for your business.
To learn more, visit the Digital Experience section of our website or contact us.
This article was written by Mark Taylor, Senior Vice President and the Global Practice Lead for Cognizant Digital Experience.