This edition of Julia’s CX Mini Masterclass series explores best practices for evaluating customer impact when making major business decisions. Building on the concept of customer journey on-ramps/off-ramps, show host and customer experience expert, Julia Ahlfeldt explains how you can leverage your knowledge of the customer journey to prioritize business initiatives, create a CX roadmap, and guide your organization towards making customer-centric decisions which will ultimately drive profitability.
An ounce of prevention is worth a pound of cure
CX professionals are often the guardians of the customer journey within their organization. This comes with the responsibility of ensuring that the organization continually evolves towards customer-centricity, which is no small task. CX professionals may be able to influence changes that are deliberately made with the customer experience in mind. But businesses are constantly evolving and changing, launching new products and implementing revised systems, and most of these changes fall outside of the remit of a centralized CX team. This business evolution has an impact on resulting customer experiences, so it is equally important, though more challenging, to ensure that decisions made by other teams within the organization are done with the customer in mind. Without this, CX professionals, will constantly find themselves “fixing” a broken customer journey. It is much more effective to foster awareness about customer experience impact to help the business proactively and deliberately evolve towards customer-centricity than to be in a constant mode of fire-fighting.
The good news is that CX professionals can leverage their understanding of the customer journey, Customer Lifetime Value, and the financial ramifications of on-ramps and off-ramps to help businesses understand customer experience impact and make the right choices.
Build your CX roadmap to demonstrate value
In episode 21 I spoke with Marnitz Van Heerden of Hollard insurance who described how his organization has evolved from one with a centralized CX team, to a federated model, whereby responsibility for customer experience is distributed across the business teams. The federated model is the ultimate goal for many businesses, but the reality on the ground is that most CX practitioners still operate in an environment where CX is managed centrally. In this case, CX practitioners have to plan and prioritize their efforts.
If you’ve ever mapped the customer journey, you know that it can be daunting to tackle a long laundry list of pain points within the customer journey. I suggest starting by evaluating your journey in terms of the on-ramps and off-ramps. Look at where you have your busiest off-ramp, or where you are losing the most customers. You should consider this as your starting point for affecting CX change, because it’s where you’ll be able to demonstrate business value. So if for example, if your customer journey research indicates that customers are off-ramping at sign-up or after their first month of usage of your product, look into which one of these represents the bigger impact in terms of opportunity cost or lost customer assets, and tackle that one first if you can. As you improve the experience and are able to impact on the flow of the off-ramp, you can show how each retained customer, through their CLV, reflects money which didn’t walk out the door.
Proactively evaluating customer experience impact
One of the tough realities of the business world is that decisions are often made in a vacuum. Operations, IT and other teams will make decisions or launch initiatives with their own KPIs in mind. These objectives may or may not directly align with CX. This is where things can get interesting, because an IT or ops team might be really excited about a new platform or process that will help them achieve their department goals, while being oblivious to what this means for CX. The key is to insert customer-centric thinking into that vacuum!
CX professionals can do this by helping their colleagues understand how their efforts impact the customer experience, so they can factor it into their decision-making criteria. The goal is to mitigate business changes that might inadvertently create a negative experience, and gradually get others in the organization to be thinking about things in a more customer-centric way.
My suggestion here would be to first use your customer journey to identify what elements of customer experience are most likely to upset or delight your customers. Whatever moves the needle either extremely positive or extremely negative, can be used to help other teams evaluate the impact of their efforts. Next, try to include this as a formal component of the planning process. Whether that takes the shape of a customer impact assessment as part of CapEx approval or some sort of CX rating that has to be incorporated into new project approvals, see if you can establish some governance that gets teams to proactively acknowledge how their projects, initiatives and other business changes might affect customer experience.
It’s also important to incorporate CLV so that leaders understand the financial ramifications of customer impact. Often this is overlooked, only for teams to realize later that their $1 million in efficiency savings cost the business $10 in lost customers. When the vetting of new projects includes a business case with a customer element, this is much more difficult to ignore.
Quantify the customer experience impact
If you really want to get the c-suite’s attention, you can link a monetary value to your customer experience impact. In this Mini Masterclass, we’ve explored this from the perspective of mistake-avoidance, but the same fundamentals can be applied to quantify the ROI of customer experience as the result of deliberate improvements to the customer journey. If you are interested in learning more about this, please check out my Ultimate Guide to the ROI of Customer Experience which includes an overview of popular methodologies and expert guidance on how to pick the right approach.
Transcript
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[Intro music] Welcome to Decoding the Customer, a podcast about customer experience and how to realize customer-centric change in today’s dynamic business world. I’m Julia Ahlfeldt, certified customer experience professional, business advisor, and host of this program. Thanks so much for tuning in. This is episode 24.
If you’re new to the show, welcome. If you’re a returning listener, it’s great to have you back. This episode is part of my CX mini masterclass series here on Decoding the Customer. These weekly episodes are published each Thursday and are designed to give you punchy, bite-sized overviews of key customer experience concepts are preparing for the CCXP exam, or are a seasoned professional looking to brush up on a few basics, this series will help you improve your knowledge, skills, and performance to stand out as a customer experience professional.
And if you’re looking to learn about how customer experience best practices are put into action or to be inspired by global customer-centric thought leadership, be sure to check out my longer-format interview episodes, which are published on the first Thursday of each month. Last week, we explored customer journey on-ramps and off-ramps and how these can be used to demonstrate the return on investment from customer experience. Today, we’re going to look into how you can help your organization evaluate customer impact when making major business decisions. We’re going to stay with the concepts of on-ramps and off-ramps and explore how you can leverage your knowledge of the customer journey to prioritize business initiatives, create your customer experience roadmap, and guide your organization towards making the right customer-centric decisions, which will ultimately drive profitability.
If you happen to be out for a run or cooking dinner while you listen to this, and hear something that you’d like to remember later, don’t worry about writing it down. You can find an overview of the key concepts that we’ve covered today in the show notes for this episode, which are on my website, julia-ahlfeldt.com or decodingthecustomer.com. Let’s dive in. So we’ve all been in that situation where, as customer experience professionals, we’re sitting in a meeting, listening to a colleague explain some new platform or process, when suddenly we’re filled with terror as we realize that this change will totally undermine the customer experience.
We sit there and think, while fuming to ourselves, “How could they do this? Didn’t they realize how this would damage the customer experience? We’re going to be losing customers left, right, and center.” Well, the answer is that in most cases, your colleagues weren’t thinking about the customer. And this probably wasn’t happening out of malice, as most people aren’t out to get the customer.
They just aren’t always thinking about things from the customer’s perspective when they make decisions. Siloed business management can be the root of this, but these kinds of oversights can also just be the result of a lack of widespread understanding of the journey among others in your organization. And you can’t prioritize customer experience in your decisions if you don’t understand the impact of business changes on the customer experience or haven’t quantified the financial ramifications. That’s where we as customer experience practitioners come in.
It’s our job to elevate the topic of customer experience, make customer experience a strategic priority, and help people understand how upstream changes to systems or processes can result in downstream catastrophes that push customers towards off-ramps on their journey. In episode 22, I talked about how to calculate customer lifetime value, which is a really effective way to associate monetary value with customer relationships and begin to position customers as assets within the business. In episode 23, I covered how you can use customer lifetime value and your customer journey to prove the return on investment of customer experience efforts, by demonstrating how negative or positive experiences can result in the gain or loss of customers as assets. What we’re going to cover now builds on those two episodes and looks at how we can leverage this in preemptive business planning that will help an organization steer itself towards decisions that result in better customer experiences.
Because, as many of our mothers told us when we were growing up, an ounce of prevention is worth a pound of cure. Today I’d like to talk about two different types of preemptive planning. First off, let’s touch on customer experience roadmaps and prioritizing customer experience efforts. In episode 21, I interviewed Marnitz van Heerden from Hollard Insurance, who described how his organization has evolved from one with a centralized customer experience team to a federated model, whereby responsibility for the customer experience is distributed across the business teams.
The reality is that most customer experience practitioners operate in an environment where customer experience is managed centrally. And in this case, these customer experience practitioners have to plan and prioritize their efforts. And you know, if you’ve ever mapped the customer journey or done a customer experience evaluation or diagnostic, that it can be really daunting to tackle the long laundry list of pain points within the customer journey. You start racking your brain: where to start?
It feels like so much is broken. Well, I can help you with some tactics for how to do that. I suggest starting by evaluating your journey, or your customer experience diagnostic results, or your survey results, in terms of the on-ramps and off-ramps. Now, remember that these are points where customers either initiate or terminate interactions with an organization while fulfilling some broader need in their life.
Look at where you have your busiest off-ramp, or where you’re losing the most customers. You should consider this as your starting point for effecting customer-centric change, because it’s likely to be where you’ll get the most bang for your buck and where you’ll be able to demonstrate business value. As you improve the experience and are able to impact the flow of that off-ramp, you can show how each retained customer, through their customer lifetime value, reflects money which didn’t walk out the door. Conversely, you can also prioritize your biggest opportunity to amp up your customer on-ramp, and focus on a couple of opportunities to improve customer acquisition in conjunction with opportunities to reduce customer attrition.
Remember, the key is to maximize your efforts where they’ll have the most impact, and to demonstrate the return on investment by quantifying the value of gained or retained customers. So for example, if your customer journey research indicates that customers are off-ramping at sign-up, or after their first month of usage of your product, look into which one of these represents the bigger impact in terms of opportunity cost or lost customers, and tackle that one first if you can. And it’s not always about the first point where customers are lost or gained. Customer experiences have a cumulative effect.
So at the point that a customer is leaving, it may be because they’re totally fed up with the previous five interactions they had with your organization, and it was really just the last one that was the straw that broke the camel’s back. And if you’re struggling to clarify the impact of this sequence of experiences, you may want to look into the results of survey questions about likelihood to remain a customer, or likelihood to recommend the product or service to others, and how this changes throughout the journey. Through doing this, you can track how experiences, positive or negative, change the customer’s emotions about the overall journey. Since customer lifetime value is underpinned by the length of the customer relationship, return on investment in this case will be based on improved duration of the customer relationship.
If customers are telling you that they are increasingly happy and more likely to stay on as customers, you should see this as an increase in retention and thus customer lifetime value. To put this into real monetary terms, if customers generate, say, $100 in profit per month on average, and you can improve the average duration of the customer relationship from 10 months to 12 months because you’ve improved a variety of experiences during the journey, you’ve just increased your customer lifetime value by $200, or 20 percent. So that’s just one way that you can start to connect the short-term efforts and incremental changes to the journey back to the higher-level financial picture. Next, I’d like to talk about customer experience impact in the context of business changes that happen outside of the realm of the customer experience team.
These are business changes that might be driven by other objectives rather than purely customer experience. This is where things can get interesting, because as IT or Ops teams might be really excited about a new platform or process that will help them achieve their goals, they might be totally oblivious to what this means for customer experience. The key here is to help your colleagues understand how their efforts impact the customer experience, so this can be factored into their decision-making criteria. The goal is to mitigate business changes that might inadvertently create a negative experience and gradually get others in the organization to be thinking about things in a more customer-centric way.
In my personal experience, I think that the customer-centric option is often just as efficient and just as cost-effective as the non-customer-centric option, but you need to be proactive and deliberate about making the right choice. My advice here would be to first: use your customer journey to identify what elements of the customer experience are most likely to irk or delight your customers. Maybe it’s wait time, stock availability, or service interactions. Whatever moves the needle extremely positive or extremely negative can be used to help other teams evaluate the impact of their efforts.
Next, see if you can include this or these elements of experiences as a formal component of the planning process. Whether that takes the shape of a customer impact assessment as part of a CAPEX pipeline, or some sort of customer experience rating that gets incorporated into new project approvals, see if you can get teams to proactively acknowledge how their projects and initiatives and other business changes might be pushing customers towards off-ramps or discouraging them from taking on-ramps. Then, bring in customer lifetime value so they can understand the value of customers that are walking out the door. For example, if a new system is projected to generate, say, a million dollars in efficiency savings, but would cost the brand $10 million in lost clients, then the business case becomes not so great.
Yet so often businesses, especially large ones, will focus on the internal number rather than thinking about the bigger picture and impact on customers as assets. It’s sometimes confounding to me how businesses don’t think about this in advance. But hopefully these tips will help you leverage your customer journey and your knowledge of customer lifetime value to help change this. Thanks for listening.
If you’re enjoying the show, please share the program with others who might be interested, or head on over to iTunes and rate this podcast. It helps others find the show too.
I’ll be back next Thursday with another CX mini masterclass, but I’m always reachable in the meantime, should you have questions or requests.
And speaking of which, I’m hoping to do some future episodes based on listener questions. So please send me your most burning customer experience questions, and you might just get your very own dedicated CX mini masterclass episode. You can send me an email, tweet, or LinkedIn message. My handle is @juliaahlfeldt, and my full contact details are listed on my website, julia-ahlfeldt.com or decodingthecustomer.com.
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Want to keep learning about CX?
If you’d like to check out more of these CX Mini Masterclasses or listen to my longer format CX expert interviews, check out the full listing of episodes for this CX podcast.
Decoding the Customer is a series of customer experience podcasts created and produced by Julia Ahlfeldt, CCXP. Julia is a customer experience strategist, speaker and business advisor. She is a Certified Customer Experience Professional and one of the top experts in customer experience management. To find out more about how Julia can help your business achieve its CX goals, check out her customer experience advisory consulting services (including journey mapping, CX strategy development, experience innovation, leadership workshops and CX ROI measurement) or get in touch via email.
