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Brandon Mills
Manager,
ZS Associates
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Jason Bell
Associate Principal,
ZS Associates
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John DeSarbo
Principal,
ZS Associates
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Kyle Heller
Associate Principal,
ZS Associates

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Why Customer Experience Matters to Your Bottom Line (Part Two)

Posted by Leon Wei on Fri, Apr 29, 2016

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Customer expectations continue to rise, and the power that a single customer’s experience can have on others makes it more important than ever to understand the value of improving customer experience. In a previous post, we talked about how frustrating a poor customer experience can be and how we can measure the value of a good or bad customer experience. In this post, we’ll dive a bit deeper into how and why it’s worth your while to develop actionable Net Promoter Score (NPS) insights.

While the primary goal of NPS is to measure customers’ likelihood to recommend a product or service, it can be a powerful tool for creating actionable improvements in the customer experience. An NPS financial impact study outlines the revenue impact of good and bad customer experiences. It builds upon our understanding of customer value by measuring the impact that a positive or negative shift in NPS has on spending behavior. When a customer’s likelihood to recommend increases over time, there is typically a corresponding increase in spending. While this outcome may not be true for every customer, clear spending patterns will emerge in the aggregate, usually linked to the direction and magnitude of the NPS shift. Armed with an understanding of the revenue impact from individual customers, we can easily extrapolate to the entire customer segment to understand the substantial benefit of improving overall NPS by just a few points.

While measuring financial impact is important, companies need to focus on understanding and improving the customer experience to drive loyalty, which is the ultimate goal of a voice-of-the-customer program. Toward that end, here are three ways to draw actionable insights from a financial impact study.

  1. Track the same customers over time. By doing so, you’ll help uncover what actually causes changes in customer loyalty. Did the overall NPS shift? If so, what caused the shift? A major announcement, a competitive action or a product launch, for example? Are there common themes for why customers are becoming promoters or detractors?

    Even if your overall NPS remained steady, take a look at how many customers have shifted between being promoters, passives and detractors. What you’ll notice is that while most customers are fairly consistent, there’s a sizeable opportunity every day to win back detractors, delight passives and prevent the loss of promoters due to poor customer experiences.

  1. Dig into customer stories. These stories can lead directly to actionable steps to improve NPS. When we look at a specific driver, it’s easy to see common themes, but it’s often difficult to determine how to improve. However, when we follow a specific customer, we can uncover specific actions that actually improve a customer’s loyalty. These insights can be used to improve policies or can simply be collected to create a playbook on how to improve customer loyalty and delight customers.

    For example, when working with a customer service organization that was getting mixed results in resolving a specific customer issue, we were able to quickly determine why based on customer feedback. As we dug into the specific issue, satisfaction varied widely: “immediate” (during the call) and “quick” (within 24 hours) follow-up created promoters, while less responsive follow-up or complete lack of follow-up increased detraction and churn. While the solution was straightforward, seeing the difference in potential impact—both positive and negative—on customer loyalty helped drive immediate updates to customer service policies.

  1. Segment your customers. This can help prioritize customer experience improvements. Remember to investigate NPS drivers at the segment level, as many customer issues are segment-specific. We’ve seen that even simple characteristics like customer tenure can be helpful in prioritizing high-impact customer experience efforts for a given customer segment. For example, a new customer often is more sensitive to hiccups in the buying process compared with an experienced customer and will require more guidance during that phase of the journey. Another example is customer reaction to a new website redesign. While you expected all customers to appreciate a new and improved layout, tenured customers who are accustomed to the old layout might need a few cues as to where their favorite features have been moved to prevent a lapse in engagement.


RELATED CONTENT

BLOG POST: Why Customer Experience Matters to Your Bottom Line

BLOG POST: You Won’t Believe What Your Customers Are Saying About You



Measuring the value of customer loyalty by linking NPS to revenue is a powerful tool in improving customer experience. The beauty of the NPS financial impact study is that the entire organization can clearly see the key customer issues and the associated financial impact. However, you should make sure that you’re also ready to share actionable insights and recommendations to get moving toward enhancing customer loyalty.

Take a minute to think about the three biggest customer issues facing your organization today and write them down. Can you confidently share a financial value and recommendation for solving each of these issues? If not, it’s time to get started on a plan to measure the financial impact of customer loyalty.

Topics: Leon Wei, customer loyalty, customer experience, customer insights, NPS, Measurement, CX, NPS financial impact study

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AUTHORS
Brandon_Mills-10924_headshot_small
Brandon Mills
Manager,
ZS Associates
Jason_Bell_11099_headshot.jpg
Jason Bell
Associate Principal,
ZS Associates
John_DeSarbo_thumbnail
John DeSarbo
Principal,
ZS Associates
Kyle_Heller_thumbnail-1
Kyle Heller
Associate Principal,
ZS Associates
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