Report: ROI of Customer Experience, 2016

We published a Temkin Group report, ROI of Customer Experience, 2016. This research shows that CX is highly correlated to loyalty across 20 industries. Here’s the executive summary:

To understand the connection between customer experience (CX) and loyalty, we examined feedback from 10,000 U.S. consumers that describes both their experiences with and their loyalty to different companies. To examine the CX component, we used the 2016 Temkin Experience Ratings (TxR), which evaluated 294 companies. Our analysis shows that there’s a very large correlation between companies’ TxR and the willingness of customers to purchase more from them. This connection holds true for other areas of customer loyalty as well. We used this data to calculate the revenue impact of CX across 20 industries. We found that a moderate increase in CX generates an average revenue increase of $823 million over three years for a company with $1 billion in annual revenues. Rental car agencies have the most to gain from improving CX ($967 million), while utilities have the least to gain ($645 million). While all three components of customer experience¬—success, effort, and emotion—have a strong effect on loyalty, our research shows that emotion is the most important element. When compared with companies with very poor CX, companies with very good CX have a 16.7 percentage-point advantage in customers who are willing to purchase more from them, 16.7 percentage-point advantage in customers who trust them, 10.3 percentage-point advantage in customers willing to forgive them if they make a mistake, and 7.1 percentage-point advantage in customers who are willing to try their new products. Additionally, companies with very good CX ratings have an average Net Promoter Score that is 22 points higher than the scores of companies with poor CX. We recommend that you build your own CX ROI models, using our five-step approach for guidance.

Download report for $295

This is one of the figures in the report, and it shows the high correlation between Temkin Experience Ratings (customer experience) and purchase intentions for 294 companies across 20 industries:
Here’s an excerpt from the graphic showing the three year impact on revenues for a $1 billion company in 20 different industries:

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To see the customer experience levels of all 294 companies, download to the free 2016 Temkin Experience Ratings report.

P.S. Net Promoter Score, Net Promoter, and NPS are registered trademarks of Bain & Company, Satmetrix Systems, and Fred Reichheld.

ROI of Customer Experience (Infographic)

People always ask about the connection between customer experience and business results. Well, here’s some visual evidence of the linkage. In this infographic, we share data from the Temkin Group research report, ROI of Customer Experience 2015.

You can download (and print) this infographic in different forms:

• Infographic: infographic in pdf, infographic in png
• Poster (12″ x 24″): poster in pdf, poster in png

Report: ROI of Customer Experience, 2015

We published a Temkin Group report, ROI of Customer Experience, 2015. This research shows that CX is highly correlated to loyalty across 20 industries. Here’s the executive summary:

To understand the connection between customer experience (CX) and loyalty, we examined feedback from 10,000 U.S. consumers that describes both their experiences with and their loyalty to 293 companies across 20 industries. Our analysis shows a strong correlation between customer experience and loyalty factors such as repurchasing, trying new offerings, forgiving mistakes, and recommending the company to friends and colleagues. While all three components of customer experience—success, effort, and emotion—have a strong effect on loyalty, our research shows that emotion is the most important element. When we compared the consumers who gave companies a very good customer experience rating to those who gave companies a very bad customer experience rating, we found that at companies with high customer experience ratings, the percentage of customers who plan on purchasing more is 18 points higher, the percentage who will forgive the company if it makes a mistakes is 12 points higher, the percentage who will try a new offering is 10 points higher, and the percentage who trust the company is 19 points higher. Additionally, companies with very good CX ratings have an average Net Promoter® Score that is 24 points higher than the scores of companies with poor CX. We built a model to evaluate how, over a three-year period, customer experience impacts the revenue of a $1 billion business within each of the 20 industries. This model shows that CX has the largest impact on the revenue of hotels ($823 million) and rental cars ($755 million) over three years. This report also includes a five-step approach for building a model that estimates the value of CX for your organization.

Download report for $295

This is the first figure in the report, and it shows the high correlation between Temkin Experience Ratings (customer experience) and purchase intentions for 293 companies across 20 industries:

Here’s an excerpt from the graphic showing the three year impact on revenues for a $1 billion company in 20 different industries:

Download report for $295

To see the customer experience levels of all 293 companies, download to the free 2015 Temkin Experience Ratings report.

P.S. Net Promoter Score, Net Promoter, and NPS are registered trademarks of Bain & Company, Satmetrix Systems, and Fred Reichheld.

Report: ROI of Customer Experience, 2014

We just published a Temkin Group report, ROI of Customer Experience, 2014. The research shows the connection between customer experience, loyalty, and revenue growth for 19 industries. Here’s the executive summary:

To understand how customer experience corresponds to loyalty, we examined feedback from 10,000 U.S. consumers describing their experiences with and their loyalty to 268 companies. Our analysis shows a strong correlation between customer experience and loyalty factors such as repurchasing, trying new offerings, forgiving mistakes, and recommending the company to friends and colleagues. We compared the consumers who gave companies a very good customer experience rating to those who gave companies a very bad customer experience rating, and we found that the percentage of customers who plan on repurchasing products is 18 percentage-points higher at organizations with excellent CX ratings. Additionally, the Net Promoter Scores of companies with very good CX ratings average 22 points higher than the scores of companies with poor CX. We built a model to evaluate how customer experience impacts a $1 billion business’s revenue over three years in each of the 19 industries, and this model shows that CX has the largest impact on hotels ($461 million), fast food chains ($437 million), and retailers ($428 million). This report also includes a five-step approach for building a model that estimates the value of CX for your organization.

Download report for $395

The report has 29 charts, which includes specific details on the connection between customer experience, loyalty, and increased revenues for each of the 19 industries in the study: airlines, appliance makers, auto dealers, banks, car rental agencies, computer makers, credit card issuers, fast food chains, grocery chains, health plans, hotel chains, insurance carriers, Internet service providers, investment firms, parcel delivery services, retailers, software firms, TV service providers, and wireless carriers.

Here’s the first figure in the report:

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The bottom line: Customer experience is highly correlated with loyalty.

Why People Buy iPhones Versus Androids

Today, Apple announced its new line of iPhones: 5S and 5C. I’ll let the gadget guys discuss the differences and merits of those models, but I decided to take at why people buy iPhones versus Android phones. In our Q1 benchmark study, we asked U.S. consumers about their mobile phone purchases during the previous 90 days. It turns out that 261 had purchased iPhones and 394 had purchased Android phones.

I compared some of the reasons why consumers purchase these two smart phones. As you can see in the chart below:

• Androids are purchase more for their features and price
• iPhones are purchased more for their reputation and availability
• Android buyers are more frequently switching providers, especially because the other option was too expensive
• iPhone buyers are twice as likely to have switched providers because their current provider did not have the right products

The bottom line: Android wins on features and price, Apple wins on reputation

Looking at ROI of CX Through Eyes of Employees

We are always looking for ways to understand the connection between customer experience and loyalty. Here’s a new approach, analyzing employee perceptions.

We asked a random sample of more than 2,400 full-time U.S. employees to compare their company’s customer experience as well as its financial results to the organization’s competitors. As you can see in the figure below:

• 76% of CX pacesetters financially outperform their industry and 6% underperform
• 19% of CX laggards financially outperform their industry and 23% underperform

CX leaders are more than four times as likely to financially outperform their competitors.

The bottom line: Employees can see the value of customer experience

Report: The ROI of Customer Experience

We just published a new Temkin Group report, The ROI of Customer Experience. The report provides groundbreaking analysis of 10,000 US consumers and 3,000 UK consumers, identifying the financial benefit of improving customer experience. Here is the executive summary:

An analysis of US and UK consumers shows that customer experience is highly correlated to loyalty. Customer experience leaders have more than a 16 percentage point advantage over customer experience laggards in consumers’ willingness to buy more, their reluctance to switch business away, and their likelihood to recommend. A modest increase in customer experience can result in a gain over three years of up to $382 million for US companies and up to £263 million for UK firms, depending on the industry. While the case for loyalty is compelling, companies should determine the business impact that customer experience has on their specific business by following our five step process. To achieve these results, however, companies must create customer experience metrics programs that embed these measurments into how they run their business.

Download report for $195

I put together this infographic which captures some of the high-level findings from the report:

Download report for $195

The bottom line: Customer experience correlates to loyalty.

What If Customer Experience Has No ROI? (Part 3)

Here’s the 3rd (and final) installment of What If Customer Experience Has No ROI?

You can download a .pdf of the entire article.

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Tips For Making The Case With ROI

If you’re in a position where you have to make the case for customer experience based on business results and ROI, here are some recommendations to keep in mind.

• Enlist your CFO. You may have the brightest business analysts in the world on your team, but if the CFO’s team is not involved then they’ll always question your financial models and assumptions.
• Use existing metrics. Try to make your case based on the business metrics that the company already uses; it will make it easier for people to understand and will help you get their buy-in.
• Be conservative. Resist the temptation to use the high-end of estimates for potential benefits. While the results may seem more compelling, they will also be harder to defend.
• Create a simple story. People tend to remember very simple storylines, so make sure that you organize your results in a way that is very easy for people to understand.

Closing Thoughts On Customer Experience And ROI

I want to circle back around to the question that I posed in the title: What if customer experience has no ROI? If your customer experience improvements do not appear to have a positive ROI then you have three choices.

First of all, you can take a look at the model and assumptions that calculated the ROI and make sure you have fully captured the long-term benefits of increased customer loyalty. The next option is to refine your approach to customer experience; making sure that you are investing in the areas with the highest business impact. Finally, if you still can’t see any ROI, then don’t invest in customer experience initiatives.

Customer experience is not an altruistic endeavor; executive teams should focus on it because they believe that it will help their organization’s long-term business results.

The bottom line: Improving customer experience is (often) good business

What If Customer Experience Has No ROI? (Part 2)

Here’s the 2nd installment of What If Customer Experience Has No ROI? …

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Who cares about ROI anyway?

Most executives care about the ROI of just about everything they invest their time and/or money on. But they are only partially satisfied with the results of generic, industry-level research findings. They want to know about the specific ROI for their customer experience efforts.

If customer executive leaders don’t address the ROI needs of key stakeholders, then they will find it difficult to gain the full commitment of those executives. To understand the interplay between ROI and commitment, here’s a very simple model outlining five levels of executive commitment:

1. Opposers don’t believe in customer experience. These executives generally won’t support customer experience efforts no matter what ROI data they see, but can become passives when they see strong support from their peers.
2. Passives don’t really care about customer experience. These executives are willing to become toe-dippers if they see strong support from their peers.
3. Toe-dippers are willing to offer some time and resources for customer experience. These executives will increase their participation and can even become supporters if they see strong ROI.
4. Supporters are willing to give their resources to customer experience efforts and encourage their peers to do the same because they understand the ROI of these efforts. They use ROI results to strengthen their discussions across the company.
5. Advocates fight any battle to make sure that customer experience efforts are funded. They generally understand the impact that customer experience has to the long-term competitiveness of the company without any project-based ROI data.

What impact does ROI have on the journey?

Hopefully I’ve made the case that well-placed customer experience improvements drive loyalty and deliver a very positive ROI and that an understanding of this dynamic can increase executive commitment. All of this is just a preamble to what’s really important: how it affects your customer experience journey.

To look at this dynamic, I mapped the aggregate level of commitment of the executive team against the ambition of customer experience transformation efforts. This step identified three separate areas.

The best place to be is in an area I call the “Zone of Success” where the ambitions of the program are aligned with the level of commitment of the executive team. As long as customer experience programs stay in this range, they have a great opportunity to succeed.

In some cases, the level executive commitment can outstrip the pace of the customer experience program. This situation, called the “Land Of Executive Frustration,” can be a problem for customer experience leaders. The executive team wants to recognize all of the great ROI faster than it can be achieved. In these cases, it’s important to establish a multi-year roadmap that shows some incremental ROI results over time. It’s even possible to accelerate your efforts a bit to wind up in the “Zone of Success.”

Unfortunately, many efforts wind up in the “Field Of Impossible Dreams.” In these situations, there’s not enough executive commitment to support the desired change. If you’re leading a customer experience effort that has ambitions in this area, then you need to raise the commitment level of the executives with a solid ROI model; or go look for another job.

The bottom line: Find a path to your zone of success.

What If Customer Experience Has No ROI?

I wrote an article for the 1to1 Journal called “What If Customer Experience Has No ROI?” Rather than just drop a long article into my blog, I will publish pieces in different posts. Here’s the first installment…

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I’m often asked the question: “What’s the ROI of customer experience?” To some degree, that’s a silly question. It’s like asking what’s the ROI of technology for Google, products for Best Buy, movies for NetFlix, or cars for Hertz. Customer experience is an integral component of every organization that has customers. Think of it this way, what would happen to the financial health of your company if you just stopped interacting with your customers?

That doesn’t mean that the ROI question is a bad one. It just needs to be framed correctly. The question that should be asked is: “what’s the ROI of improving customer experience?” That’s not only a good question, but it’s an essential one for any company that is serious about customer experience.

Yes, Everyone, Customer Experience Improvements Drive Loyalty

At an aggregate level, my research at Forrester Research showed that improvements in customer experience are highly correlated to higher loyalty in consumer markets. In a report called “Customer Experience Leaders Garner More Loyalty,” for instance, we found that customer experience leaders have more loyal customers than customer experience laggards. The loyalty gap with consumers was 15% to 17% in three areas: willingness to buy more products, reluctance to switch, and likelihood to recommend.

Customer experience has a positive ROI as long as you don’t spend more than the value of the loyal customers you create. And since the value of adding 15% more loyal customers represents far more than what most companies spend on their customer experience efforts, there’s almost always a positive ROI.

Recognizing that customer experience improvements have good ROI is not the end of the story. In some regards, it’s just a prerequisite for getting to some of the more practical issues in customer experience efforts. I’ll take a look at three key questions: Do all customer experience efforts have the same ROI?; Who cares about ROI anyway?; And what impact does ROI have on the journey?

Do All Customer Experience Efforts Have The Same ROI?

If all customer experience efforts had the same ROI then life would be easy — you could invest in any customer experience project that came your way. Clearly there are enormous differences in ROI based on the size and value of the specific customer segment that you want to address with your efforts. I often hear the question: “What if we don’t have any clear customer segments?” If that’s the case, then don’t go ahead with the effort. Not only can’t you figure out the ROI, but you’re unlikely to satisfy the needs of customers if you don’t have a clear picture of who they are.

In addition to understanding the target customers, you need to look at ROI in terms of the type of value you are creating for customers. I always like to think of things in terms of the Kano Model, which identified five different types of value that customer perceive:

• Must-Be value: Customers gets no value from some things you do unless your efforts meet a minimal threshold. Think of the value of an airplane ride if the pilots aren’t fully trained or a call center that doesn’t answer the phone in 10 rings.
• One-Dimensional value: In some areas, the more you do of something; the more value clients get from it. Think of the value that customers get when a car salesman adds additional years to a warrantee or a busy apparel retailer adds new changing rooms.
• Attractive value: If the basics are in place, you can create enormous positive impact on customers with some unexpectedly nice touches. Think of the value that customers have when an electronics retailer throws in some required cables for free when the customer picks up her new monitor or when a hotel employee brings an unordered chicken soup to a guest who he knows is sick.
• Indifferent value: Some things that you do may have no perceived value like lowering the price on a hotel room to a business traveler on an expense account.
• Reverse value: Some things that you do may have negative perceived value like lowering the usability of your Website after a redesign where you’ve added a lot of new features.

Using these Kano descriptors, you get the most ROI from customer experience efforts when you invest whatever is required in “must-be” items, fund a good mix of “one-dimensional” items, add a few “attractive” items in areas where you already have some consistency, and stay away from investing in anything that creates “indifferent” or “reverse “value.

The bottom line: Look for the customer experience ROI

Report: The Four Customer Experience Core Competencies (Free)

If you are only going to read only one thing about customer experience, then this report is it. It’s the blueprint for building a customer-centric organization… and it’s free.

We just published a Temkin Group report, The Four CX Core Competencies. This blueprint to building a customer-centric organization is an update to our groundbreaking research that was originally published in 2010 and updated in 2013.

Temkin Group has conducted multiple large-scale studies demonstrating that customer experience (CX) is highly correlated with loyalty across many different industries, in both business-to-consumer and business-to-business environments. When customers have a good experience with a company, they are more likely to repurchase from the company, try its new offerings, and recommend it to others.

While many companies try to improve their CX by making superficial changes, Temkin Group has found that the only path to lasting differentiation and increased loyalty is to build a customer-centric culture. Temkin Group has studied hundreds of companies to uncover the difference between CX leaders and their less successful peers, and has identified four CX competencies that companies must master if they wish to build and sustain CX differentiation:

1. Purposeful Leadership: Operate consistently with a clear set of values. (see video)
2. Compelling Brand Values: Deliver on your brand promises to customers. (see video)
3. Employee Engagement: Align employees with the goals of the organization. (see video)
4. Customer Connectedness: Infuse customer insight across the organization. (see video)

Download report for FREE

This whiteboard video describes the Four CX Core Competencies:

Here are the best practices described in the report:

Download report for FREE

Customer Experience Leads to Recommendations (Charts For 20 Industries)

If you want customers to recommend your company, make sure they have a good experience. In this post, I share data and analysis showing how customer experience correlates to customer recommendations across 20 industries. At the bottom of this post we’ve assembled a number of industry-specific data charts that you can download and use.

In the report, ROI of Customer Experience, 2016, we provide a lot of data on how customer experience affects a number of different aspects of loyalty for 20 industries. Here’s a summary of some of the data showing the average connection between customer experience and loyalty across all industries.

Here’s how we calculate this data:

• We ask 10,000 U.S. consumers to identify the companies that they’ve interacted with during the previous 90 days
• We have those consumers rate their experiences and segment the respondents into five buckets based on their Temkin Experience Ratings feedback
• For each of the five buckets of consumers, we calculate the average loyalty of the group across different dimensions using the calculations below…

(Note: See Temkin Loyalty Index for data on specific companies)

CX and Recommendations Charts for 20 Industries

If you’re looking for good data for your industry, we’ve put together these 20 industry charts that show the relationship between customer experience and customers making recommendations. Feel free to use them within your presentations in accordance with our citation policy.

Here’s a way to share the data internally…

At [Your Company’s Name], we work hard to improve our Customer Experience, and this industry chart from Temkin Group shows why it’s important and meaningful. As our Customer Experience improves, research shows that consumers are more likely to recommend us, which is one of the many ways in which our customers show their increased loyalty. 

Top 25 Customer Experience Matters Posts in 2016

It’s always interesting to see what people are reading, so I periodically share a list of our most popular posts. Below is a word cloud made from the titles of the 25 most-read posts from Customer Experience Matters in 2016. As you can see, there was a lot of interest in Net Promoter Score, infographics, and emotion.

Here are the 25 most-read posts:

1	Report: Net Promoter Score Benchmark Study, 2015 (note: there is an updated version)
2	ROI of Customer Experience (Infographic)
3	11 Customer Experience Trends for 2016 (The Year of Emotion)
4	Report: 2016 Temkin Experience Ratings
5	Seven Steps for Developing Customer Journey Maps
6	Emotion: The Missing Link in Customer Experience (Video)
7	CX for Smarties, A Beginner’s Guide to Customer Experience
8	Intensify Emotion: Positive Feelings Create Loyal Customers
9	Customer Experience: The Path From Fluff to Tough (Infographic)
10	Net Promoter Score and Market Share For 60 Tech Vendors
11	15 Customer Experience Factoids From 2015 (Infographic)
12	What Is The Perfect Customer Experience?
13	Five Questions That Drive Customer Journey Thinking
14	Report: ROI of Customer Experience, 2015
15	Don’t Confuse Customer Service With Customer Experience
16	Customer Experience Needs More Emotion (Infographic)
17	With Customer Service, CARES Beats ACES
18	The Ultimate Customer Experience Infographic, 2015
19	Free eBook: The 6 Laws Of Customer Experience
20	Report: The Four Customer Experience Core Competencies
21	2015 Customer Experience Excellence Awards
22	Report: Net Promoter Score Benchmark Study, 2016
23	9 Recommendations For Net Promoter Score (NPS)
24	My Latest 9 Recommendations For NPS
25	Report: Economics of Net Promoter Score, 2016

The bottom line: I hope you enjoyed our 2016 posts, and find even more value in 2017!

CX & Loyalty: Customer Experience Correlates To Buying (Charts For 20 Industries)

People are always asking us about the correlation between customer experience and business results. While we recommend that companies examine this relationship for their specific company, we’ve done extensive industrywide analyses on the topic. At the bottom of this post we’ve assembled a number of industry-specific charts that you can download and use.

In the report, ROI of Customer Experience, 2016, we provide a lot of data on how customer experience affects a number of different aspects of loyalty for 20 industries. Here’s a summary of some of the data showing the average connection between customer experience and loyalty across all industries.

Here’s how we calculate this data:

• We ask 10,000 U.S. consumers to identify the companies that they’ve interacted with during the previous 90 days
• We have those consumers rate their experiences and segment the respondents into five buckets based on their Temkin Experience Ratings feedback
• For each of the five buckets of consumers, we calculate the average loyalty of the group across different dimensions using the calculations below…

(Note: See Temkin Loyalty Index for data on specific companies)

CX and Purchase Intention Charts for 20 Industries

If you’re looking for good data for your industry, we’ve put together these 20 industry charts that show the relationship between customer experience and future purchase intention. Feel free to use them within your presentations in accordance with our citation policy.

For example, here’s some draft copy you might use, together with your industry’s chart, in your company’s internal or external blog:

At [Your Company’s Name], we work hard to improve our Customer Experience, and this industry chart from Temkin Group shows why it’s important and meaningful. As our Customer Experience improves, research shows that consumers are more likely to increase their spending with us, which is one of the many ways in which our customers show their increased loyalty. 

Off Topic: Clinton Supporters Are More Financially Secure

Don’t worry, we’re not turning into pollsters…

In Temkin Group’s latest consumer benchmark study of 10,000 U.S. consumers that was just fielded in August, we asked consumers about their plans for the upcoming presidential election. Clinton and Trump supporters are identified as the people who are currently planning to vote for each candidate.

Given all of the other questions that we ask, we now have a fairly comprehensive profile on the presidential candidates’ supporters. But we’re not going to use the data to drive any projections or provide it to political analysts. We’re just going to look for some interesting elements to share.

Temkin Well-Being Index of Candidate Supporters

We publish the Temkin Well-Being Index (TWBi) annually as a gauge of the overall welfare of the U.S. population, examining how happy, healthy, and financially secure they feel. So I thought it would be fun to examine the TWBi of the candidates’ supporters and compare it to our Q1 2016 U.S. results. As you can see in the chart below:

• TWBi is high for both candidates. Both candidates’ supporters have a higher TWBi than what we found across the U.S. in our Q1 report. Clinton supporters, however, have a 2-point higher TWBi than do Trump supporters.
• The largest gap is in financial security. Clinton supporters have a 4-point gap with Trump supporters, who are 5-points above the overall Q1 U.S. score.
• Clinton supporters are healthier. Clinton supporters are 2.5-points healthier than Trump supporters, who are 3-points healthier than the overall Q1 U.S. score.
• Both groups are happier. Trump supporters are slightly happier than Clinton supporters, but they are both about 3-points higher than the overall Q1 U.S. score.

Other Interesting Tidbits

Here are some additional findings: