Creating an engaging digital experience is the key to pleasing customers. But digital transformation, to make such experiences happen, comes at a cost. Return on Experience (ROX) captures the value delivered by the digital transformation efforts, to determine if such costs make sense.
ROX entails
- Estimating direct and indirect investment to deliver an experience.
- Estimating the benefits of such investments.
- Calculating the cost-benefit ratio.
ROX is a much more comprehensive measurement than customer satisfaction scores. It overcomes the siloed approach in measuring customer satisfaction, co-opting all the elements and linkages that go into satisfying the customer.
How to Measure RoX
Measuring ROX is simple and straightforward when the input costs and the output value is clear.
ROX = Net value of benefits / Cost of investment x 100%
Add up realized gains or losses, and divide it by the total costs invested in bringing that experience to life. Multiply the figure by 100 to assign a percentage value to the ROX.
Consider the case of an HVAC maintenance firm. The firm develops a new omnichannel customer self-service experience portal. The portal routes customers to in-depth information on the services. Customers may generate quotes, order services, or change appointments without contacting customer service. The lower rates of expensive one-to-one customer interaction are the direct gain from the experience. The gain may also show as improved customer satisfaction rates, improved Net Promoter Scores and repeat business. The cost of experience is the sum of these gains minus the cost for setting up the new self-service experience portal.
A car dealership may provide dedicated on-call agents to potential customers. The new experience increases customer satisfaction manifold. But an increase in agent costs may be higher than the marginal increase in sales. Thus the ROX is negative and the new experience may hit the bottom line.
Cost of Investments
The denominator of the ROX equation is the costs incurred to deliver the experience. Consider the costs, both direct and indirect, for delivering the experience. Factor in the direct cost of the technology, cost of implementation, cost of training, and cost of ongoing maintenance. Also, consider indirect costs such as reduced productivity as employees undergo a learning curve.
When the experience draws into common resources, appropriate a relevant proportion of the cost. For instance, when using the services of an in-house illustrator for publishing a blog, estimate the number of hours worked by the illustrator on the project, and add the CTC of the illustrator for that many hours, to the cost of the experience.
Net Value of Benefits
The hard part of calculating ROX is identifying the net value of benefits.
Improvements in experience move many metrics. Successful ROX calculation depends on identifying the contexts and moments delivering high value and finding its correlation to the experience.
Here are the most common metrics that capture the key contexts and moments delivering high value for the experience.
Sales and Cost Metrics
Cost metrics identify savings to the enterprise, or increase in revenue, because of delivering a new experience. Sales metrics show changes in sales figures, which by extension also mean an increase in revenue.
The popular cost and sales metrttps://demo-en.itknowledgezone.comics include close rates, sales revenue, net profit margin, and cost of customer acquisition. These are direct and quantifiable.
Speed Metrics
Speed metrics measure the time taken for the completion of tasks related to key user experiences.
The most used speed metrics include:
- Customer Effort Score (CES): Effort required by customers to do a specific task, such as finding a product in the web store.
- First response time: The average time taken for a customer to get a response to their support issue.
- Average handling time: The average time to resolve a customer issue end-to-end.
- Time to market: Total time required to develop and launch a product or feature.
Consider a new algorithm that reduces the average time taken by the user of a streaming service to locate a video from 20 seconds to 10 seconds. If this reduces the churn rate by 10%, and the average revenue from a customer is $100, the COX is ($100 x number of customers that make up the 10% less churn rate) minus the total cost of developing the algorithm.
Sierra Wireless’s investment to improve developer experience enabled the creation of proofs of concept quickly. Customers could complete IoT projects in three to six months as opposed to nearly 18 months before. The increased revenues and customer satisfaction was much more than the investment to improve the developer experience.
Customer-Focused Metrics
Customer-focused metrics measure how customers react to experience or initiative.
The most common customer sentiment metrics are:
- Net Promoter Score (NPS): the percentage of customers who would recommend the company to their friends, family, or colleagues. Best Buy Canada saw a year-over-year increase in NPS of 9.5% by improving customer experience.
- Customer Satisfaction Scores (CSAT): The average satisfaction score, usually on a scale of 1 to 10, customers rate for a specific experience. For instance, customers may rate their interaction with customer support at 5.5 on average.
Engagement Metrics
Successful digital experiences engage an audience. Tracking the engagement rates before and after delivering the new experience offers a good indicator of the returns.
Southwest Airlines created a mark with its unique and magical in-flight security announcements. The security review is usually a drab rigmarole ignored by most passengers. The new experience improved ticket sales by $ 140 million. A spin-off benefit was better social media exposure, with some announcement videos gathering 25 million+ views. Compared to the gains, the cost of content creators and staff training was minimal.
There is no hard-and-fast rule on selecting relevant metrics. Decide which of these metrics has the greatest impact on the business or initiative. Measuring ROX from an IT perspective often requires a combination of metrics.
Quantifying the Metrics
Calculating ROX is straightforward when the metrics have a clear monetary value.
But delivering an experience moves many soft metrics such as customer sentiments. Quantifying the output value of such metrics is difficult, as these do not have a direct dollar peg.
To assign values to soft metrics:
- Calculate how improvements or declines in the metric have changed revenue, costs, or performance.
- Use the results to trace an estimated monetary value for the metric.
Measuring ROX positions digital transformation investments as value drivers for the business. The high stakes of keeping customers happy prompt enterprises to measure ROE before they calculate ROI.
