The ROI of Customer Experience

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If you’re a frequent reader of this blog and my articles, you already know that customer experience (CX) is a recurring theme for me. The reason why? I firmly believe CX is the way organisations will differentiate themselves from their competitors and win over customers. 

It would seem that I am not the only one that has sights set on the delivery of CX, as almost half of organisations stated that CX was their top focus over the next five years. The only challenge with this focus is that just as many business leaders have reported not being satisfied with their ability to show measurable impact from their CX initiatives

If you are in the half that is looking to CX as your top business initiative in the coming years, it will be incumbent upon you to be able to demonstrate the impact you are having on the business. Yes, NPS scores can be an indication of customer satisfaction, but that is not likely to get you the necessary investment needed to drive CX. 

Below I have listed a few things to consider when looking to measure the ROI of CX which when demonstrated can help get more budget to drive these all too important initiatives.

Customer retention

Given that 65% of business comes through existing customers, it is vital that businesses focus on customer retention. Yet, most brands have an average retention rate below 20%.

So what is the impact of improving customer retention? According to multiple studies conducted by Bain and Harvard Business Review, a mere 5% increase in customer retention can result in a 95% increase in profit – pretty staggering! 

The way you are going to make these gains in customer retention is by delivering a world class experience to your customers.

Be sure to benchmark your current retention rates and measure improvements to your retention each quarter as you implement your CX initiatives. Multiply that by your average spend per customer and you will be able to demonstrate the value of CX as it relates to your retention. 

Customer acquisition

One of the many fallacies of customer experience is that it begins once someone becomes a customer. However, the truth is that CX begins long before anyone buys anything. 

Ensuring you remove the friction from the buying process is the beginning of CX and yet many companies overlook this pivotal point in the customer journey. To do this in the digital age in which we now live takes an investment, but it is one worth making.

While acquiring a new customer certainly costs more than expanding a current customer relationship, it should not be discounted.

Define your customer acquisition costs and measure against the average sales price of a new customer to get the ROI of CX on new customer’s acquisition. 

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Customer expansion 

It is one thing to retain a customer, but your business will clearly benefit more from expanding a customer relationship. Multiple studies show the increase in spend from happy customers so that is one simple way to measure CX, but the key here is how to ensure you have happy customers.

One frequent challenge I see with my clients is looking to sell into the customer base far too early in the relationship. I have seen many of my clients make a sale and that customer is instantly put into a nurture stream in an attempt to get them to buy more.

Rather than make this mistake, detail the various stages of the customer journey and implement an onboarding programme to ensure your customers get comfortable with the product or service they purchased and also with your brand. Additionally, depending on the purchase, implement an adoption programme that enables your customers to get the most value from their purchase. 

Once these are executed well, you can then begin the process of upselling and cross selling to your customer base. The relationship is now more mature and the experience is improved. 

The real ROI on customer experience

If you’re unable to quantify the business value of customer experience to your business leaders, the chances of making good on the promise of CX are slim. If you do not have the data internally to benchmark and make the case for investment, here are two stats you can use from Harvard Business Review that may help that demonstrate the value of CX for both transaction and subscription based companies:

Transaction-based: Customers with the best past experiences spend 140% more than those with the poorest past experiences.

Subscription-based: Customers with the best past experiences have a 74% chance of remaining a member for at least another year; customers with the worst experiences have a 43% chance of being a member one year later. In fact, those who gave the highest CX scores were likely to remain members for another six years.

Your customers are demanding a great experience and if not received, they will move on. If not already, your organisation will have a focus on CX and the need to measure the ROI will be part of that process. 

Expert advice on how to meet customer expectations, manage remote employees and set agents up for success.

Originally published Aug 18, 2021


Carlos Hidalgo is a 25-year business veteran. Over the span of the last two plus decades, Hidalgo has held corporate roles, started his own entrepreneurial ventures and served in non-profits.

In addition to his various roles and business pursuits, Hidalgo is the author of two books Driving Demand, one of the Top 5 Marketing Books of all time according to Book Authority which was published in 2015 and The UnAmerican Dream which was published in 2019.

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