Retail Customer Experience: The Financial Discipline of Customer Experience
By Lior Arussy, president
of Strativity Group
Despite the growth in
commitment to customer experience within organizations, it is still managed
more like an art than a science. This results in the current mindset that
when tough times hit, customer experience is treated like a
"nice to have" and not as a mandatory, integral part of the value
I have noticed that there
are certain recommendations missing from the discussion about how to save
American industry. For example, no car company has suggested that in order
to achieve a more appealing price point for customers it will reduce costs
by shipping cars without tires — making tires an optional accessory.
Along the same line, no proposal was raised to eliminate windshields or
maybe seat belts. The reason is quite simple: A car is not a car without
The same logic applies
to customer experience. Your products and
services are not the same without delivering a proper customer experience.
If this is indeed the
case, you may wonder why customer experience programs are being cancelled
or reduced to a minimum today. The answer is simple. The car industry is
cognizant of the financial consequences of delivering cars without tires.
They, and others, do not know the financial impact of reducing or canceling
customer experience. The case for customer experience is still based on
general industry statistics and other generic substantiation.
Where did we go wrong?
We failed to build a data-driven financial decision-making platform to
guide management decisions. In every phase of the experience from promise
(done by sales and marketing) through delivery (customer service, finance,
operations, etc.) to loyalty and repeat business, there are unique customer
What is the result? We
are being given the message: "We are fully committed, but you need
to do it with no budget."
It is not too late. These
economic challenges should force us to rethink our programs and establish
the data-driven decision-making platform to substantiate the required investment.
When building the economics of customer experience you need to consider
the following components:
- Return on
Investment (ROI): What elements of customer
loyalty could be improved as a result of enhancing the customer experience?
To do this, examine the five Ps of customer experience – Preference,
Profit, Portion of budget, Permanence of relationship and Promotion
– to others.
- Return on
Nothing (RON): The impact on customer spending
and behavior in the absence of customer experience. Will customers
reduce their commitment to your organization and spread their purchasing
across your competitors?
cost units: How much does it cost to
handle an exceptions request or a dispute? All customer experience
costs units need to be identified with the full corresponding financial
It is time to move from
the "nice to have" column of the CFO to the
"must have" column.
Does the lack of financial measures around customer service often cause
those areas to be cut during difficult times? If so, what are the challenges
of putting a financial cost on customer experience efforts?