The big payoff of advanced technology is not greater efficiency; it is leveraging tech for enhanced problem prevention, proactivity, and empowerment. The challenge is quantifying the payoffs in a manner Finance deems credible.
I was recently asked to review a forecast of technology trends and innovations for a large industry association that was executed by a leading benchmarking firm. The assessment reviewed everything from digital connectivity and RFID to artificial intelligence and blockchain and included case studies from industries ranging from supermarkets to airlines. At first, it seemed comprehensive. Later, it hit me that the benefits cited were almost all efficiencies, with a few fuzzy references to enhanced performance. The impact of technology on the customer experience (CX) was missing from the assessment. Ironically, the biggest payoffs for the companies would be the CX benefits.
In many companies, cost cutting is king. Only lip service is given to investment in satisfaction and enhanced loyalty. Managers in many companies are almost embarrassed to cite enhanced satisfaction and loyalty because they are convinced that Finance will not give such benefits any weight. If designed and implemented correctly, technology provides a bigger payoff through enhanced loyalty, margins, word of mouth (WOM), and engagement. Much of my new book, the second edition of Strategic Customer Service, is devoted to using technology to prevent customer problems and facilitate effortless service in a way that CFOs and CMOs can measure and support.[i]
Much of this function is what I call delivering psychic pizza, e.g., I ring your doorbell and say, “Here is the pizza you were about to order!” Amazon and Intuit are examples. My experience is that less than one-third of technology vendors understand the CX side of technology impact. Your job as the technology buyer and CX advocate is to assist and ultimately force the vendors to quantify their impact. The following section provides basic principles followed by a table that applies CX metrics to specific areas of tech impact.
Three Pillars of CX Financial Impact Beyond Cost Savings: Retention, Word of Mouth, and Delight
The three pillars of financial impact stem from the basic tree diagram of customer problem experience in Figure 1 below. The basic data describing customer problem experience and complaint behavior results in outputs of loyalty and WOM shown on the righthand side of the chart. Figure 2 shows the customers at risk when the behavioral data is applied to 200,000 customers.
Enhanced technology can reduce the number of customers at risk shown in Figure 2 in five ways:
- Problems can be reduced by using video and emails to onboard customers and proactively/just-in-time educate customers and communicate account and shipment status.
- Technology can enhance service via empowering CSRs with real-time data and response guidance.
- The website home page can highlight the top five issues customers encounter—preventing the problems as well as facilitating self-service and reducing calls if they do occur.
- A more actionable Voice of the Customer (VOC) can be created via easier data capture and analysis, which powers the Continuous Improvement activity. This, in turn, reduces problems and customer attrition. A supplemental benefit of preventing problems and enhancing service is the enhanced WOM in Figure 1 above.
- Use humorous videos and response guidance on creating delight, which enhances WOM and thereby reduces marketing expense. Customers won by WOM are less price sensitive and spend more.[ii] Chart 1 shows the positive impact of delight experiences on loyalty. WOM is often doubled by delight.
To quantify WOM, customers should be asked how many associates they have told. To get closer to an estimation of sales impact, customers can then be asked, to the customer’s knowledge, how many of those told took action on the recommendation. Usually half of survey respondents state they do not know how many took action. However, the other half will feel comfortable providing an estimate. This estimate allows an estimation of sales produced by WOM.
While consumer affairs professionals are very familiar with the above concepts and calculations, technology companies have not adopted them in calculating benefit statements, thereby understating the payoff of implementation. The following section suggests how consumer affairs and CX executives can evaluate proposed technology offerings by quantifying the impact on problem prevention, easing service effort to enhance satisfaction and loyalty, and promoting positive WOM.
Metrics for Quantifying the CX Impact of Technology Tools
Technology affects CX in a myriad of discrete ways. Examples include proactively confirming transactions (purchases, charges, and deliveries), notifying of problems and changes (delays and short shipments), empowering CSRs via knowledge management systems (KMS), educating on avoiding problems, and just-in-time (JIT) training on using additional product functions and aspects. Service and marketing executives who want to invest in these functions can estimate their impact on loyalty, satisfaction, problem rate, positive word of mouth (PWOM), and sensitivity to price. Vendors selling technology who provide case studies illustrating these impacts with quantified metrics will have a much more powerful business case for customer purchase.
A tech assessment that is only inwardly focused is seriously deficient. The impact on CX should be a critical component. Chart 2 provides key metrics of tech CX impact along with the operational and financial impact metrics. Ease is the omnibus metric for being easy to do business (ETDBW), which is highly correlated with value for price paid.
Click to enlarge photo.
Getting Finance and the COO’s Attention
The most successful pitch for investment in tech includes the quantified impact on customer focused operational metrics across the customer journey, including:
- Problems prevented by proactive communications (sales and onboarding are great places for preventive education).
- Contacts about status (in most companies, 30 percent of operational contacts are about status).
- Reduced calls on “how to” via customer education, which also enhances ETDBW.
- Enhanced ease of resolution in terms of resolving complex problems, e.g., auto company found out-of-warranty issues were much easier to resolve because educated customers feel treated fairly (the customer accepted responsibility), resulting in higher retained loyalty.
- Less frustrated employees due to fewer repetitive, preventable problems.
- Actionable VOC that has measurable process impacts, e.g., streamlines processes and makes company ETDBW.
- Fun and delight enhances social media and PWOM as well as increases loyalty due to enhanced value.
- When customers and employees believe the company is listening, they give more frequent feedback and input, resulting in stronger bonds and a more effective VOC process.
Translating operational metrics to financial impact includes:
- Reduced problems translate into reduced external damage, e.g., less revenue loss due to disloyalty and lost sales from negative WOM—for every five customers who no longer encounter serious problems, one is retained who otherwise would be lost.
- Reduced problems translate into reduced internal damage, e.g., less time handling preventable issues and lower employee frustration lead to lower service cost and lower turnover among good employees.
- Reduced problems translate into reduced sensitivity to price, e.g., ability to charge more if there is perceived superior quality and ETDBW.
- Enhanced delight translates into enhanced loyalty and PWOM—customers won via WOM are 25% more valuable, and marketing costs are dramatically less.
- VOC creates accountability, provokes action, and moves the needle on specific issues.
Take Action Now
For CX, service, quality, and marketing executives being pitched technology, ask about satisfaction metrics and impact on problem prevention, customer education, proactive service, and enhanced response capability for thoughtful customer engagement.
For tech firms selling technology, focus your pitch on the revenue payoff of problems prevented and higher margins earned from proactive service, and the delight and PWOM resulting from enhanced engagement.
Operational impact can be translated into revenue-oriented market actions. Service and CX technology buyers should demand examples of tech impact on customer problem prevention, proactive response, education, enhanced resolution, and ability to be proactive. The company insights staff should assist in evaluating the vendor-presented data.
Technology vendors should focus on CX solutions and avoid pitching functionality. Examine the customer journey to identify opportunities for customer problem prevention, education, proactive communication, engagement, and delight. The key is to quantify the CX impact on the customer and her loyalty and PWOM.
Send comments or complaints to email@example.com. You can get more guidance on implementing technology, empowerment, and delight from my new book, Strategic Customer Service, 2ed, published by Harper Collins in March 2019. Website: customercaremc.com.
 John Goodman & Scott Broetzmann, Strategic Customer Service, Harper Collins, 2019.
 Christophe Van Den Bulte, Emanuel Bayer, Bernd Skiera and Philipp Schmitt, Journal of Marketing Research, February 2018.
 Chip R. Bell, Sprinkles,
Greenleaf Boo Group Press, 2015.
John Goodman is vice chairman of Customer Care Measurement and Consulting (CCMC). He graduated from Carnegie Mellon University with a B.S. in chemical engineering and earned his MBA from Harvard. The universal adages “It costs five times as much to win a new customer as to keep an existing one” and “Twice as many people hear about a bad experience as a good one” are both based on his research. Harper Collins published the second edition of his book Strategic Customer Service in March 2019. He has also published Customer Experience 3.0
with the American Management Association in July 2014. Over the past 40 years, John has managed more than 1,000 separate customer experience studies for 45 of the Fortune 100 companies as well as nonprofit and government entities.