This customer experience doesn’t have a significant return on investment? A new report from Forrester suggests you think again.

The ROI of a Customer Experience Index Score

The Business Impact Of Customer Experience, 2010 report examines the business value of a better customer experience management, or CEM. What it found will not only surprise those who don’t think that investing in customer loyalty pays dividends, it also highlights the key factors which influence improved customer experiences and revenue.

The report quantifies the correlation between a rise in the Customer Experience Index and a corresponding increase in three loyalty metrics:

  • intent to purchase
  • likelihood to switch business to a competitor,
  • and likelihood to recommend.

As it turns out the increases are quite dramatic -- with increases ranging from a low of US$ 40M for large retailers to a high of US$ 1.7B for other industries. The report also indicates how these three metrics affects individual industries, from wireless carriers to hotels. Broken down, revenue increases can be derived from 3 factors:

  1. The number of people who make additional purchase during the year because they had a better customer experience increases.
  2. The number of customers who would have purchased from a competitor had their customer experience not improved decreases.
  3. The number of new customers, who heard about the good experiences that friends had and went on to buy, increased.

Small Improvements Have a Big Pay Off

According to the study, wireless carriers have the most to gain from simply examining “the erosion of their extremely large customer bases.” Slight improvements in customer experience can result in small increases in retention, but can make a big impact to the bottom line.

For hotels, customer numbers were affected mostly by significant increases in loyalty, which result from customer experience improvements.

If your industry can fix what customers don’t like or improve an already good experience, more customers can be retained and new ones can be wooed. Improvements can be as simple as helpful customer service or mints left on a pillowcase.

Additionally, when companies improve customer experiences by increasing productivity, provide a value-added benefit that not only makes it a better customer experience but also creates interactions likely to lead to additional connections from current customers, new customers, and better customer retention.