Back to the Future?: It’s Still All About the ROI…

It was common in the mid 1980’s, which were the early days of customer experience research, to be asked for evidence that there was a positive ROI for a customer experience measurement (CEM) process — or as they were generally called at the time, “CSI programs”.  It was an understandable question; as such programs were often quite expensive relative to other market research investments.

Fortunately, the question was not terribly difficult to answer, due in large part to the original TARP (as CX Act was known at the time) research conducted for the White House that had quantified the costs of customer satisfaction and dissatisfaction. (“Increasing Customer Satisfaction”)

The question got easier to answer as the industry matured and more and more work was done that demonstrated the strong correlation between satisfaction and loyalty.  (One of my favorites was, and still is, the 1995 Harvard Business Review article by Jones and Sasser, Why Satisfied Customers Defect.)  In time, clients and potential clients stopped asking, presumably because the link became a well-accepted truth.

But, something changed about five years ago and I started hearing the question again.  I probably shouldn’t be, but I am always surprised when I get asked to prove something that seems so self-evident.  And, I know I am not the only one who gets asked, as I have noticed many industry blogs have dealt with this same topic of late.  Examples of this abound, but I got a kick out of “5 Facts to End the ROI Debate on Customer Experience”, both because it contained some good references and because I have little faith it will actually end the debate.

All of this got me wondering: why has the question re-emerged?  While there are probably a host of reasons, two related ones stand out for me: one is economic and the other represents a failure of our CX industry.

There have been three official U.S. recessions during my business career: July 1990-March 1991, March 2001-November 2001, and “The Great Recession” from December 2007-June 2009.  Each one had lasting effects on the way business was done, and in my experience, one of those effects was increasing the focus on the ROI of business investments.

Many speak of “The New Normal” after the last recession, but it always seemed to me the business climate permanently tightened up after each recession.  More so after the Great Recession, but that is only to be expected given the severity of that decline.  I stated in the beginning of this article that the ROI questions seemed to re-emerge “about five years ago”; I don’t think it is an accident that timeline roughly coincides with the end of the Great Recession.

A friend of mine, who is the CFO of a major corporation, told me shortly after the last recession he “wouldn’t trust any CEM effort that didn’t include an ROI story”, and I think he is pretty typical of his peers.  The recession-induced belt tightening encompassed all aspects of business, and expecting to see a measurable return on customer experience investments is perfectly understandable in the current environment.

Which brings me to the second reason: the failure of our industry to do a good enough job telling the story.  And, lest I be accused of calling the kettle black, I will use my own company as an example.

The ROI of customer experience was front and center when TARP was founded in 1971, and we were the first to demonstrate a positive return for encouraging customers to complain.  Many cite the ROI analysis in our 1979 study for the White House Office of Consumer Affairs as providing the data that led to the creation of the modern customer service call center.  In later years, we developed and published our Market Damage Model, which helped companies identify the improvement opportunities with the greatest potential ROI.  That model is still in use today, and underpins the ROI Calculator on CX Act’s website.

Helping clients understand the CX ROI has always been a part of our DNA, but over the years the story has faded more and more into the background.  I think we have probably taken it for granted, assuming everyone knows it.  Only, everyone doesn’t know that.  Or they don’t want to make decisions on what they think they know.  Or, they simply want to be sure the return justifies the investment, relative to all of the other things they want to invest in.

Whatever the reason, the fact that clients are asking for it and bloggers are writing about it, tells us that it is still important today.  And, it tells me that we had better put it back in the forefront of our story.

Time to dust off some of those old TARP studies…it looks like they still have value in The New Normal.