Customer Experience and ROI

Two Sides of the Same Coin

Customer experience and ROI.

Like communication and listening, it’s two sides of the same coin. They have separate definitions and usages, but you can’t have one without the other. Well, some say you can. Just ask any spouse who swears their partner isn’t listening. The stories I could tell. But I digress.

Let’s go back to customer experience and ROI.  How are they from the same coin?

Here are a few examples:

  • Let’s say you’ve bought a new jacket and love it. Unfortunately, after wearing it for a week, you discover the zipper has intermittent problems of staying closed.  You contact the store to let them know what’s happening with the idea of just exchanging it for a new one.

Once you contact them you find they have a policy of not accepting it back for whatever reason someone had.  You’re told very politely that they can’t do an exchange, but they would be happy to give you a 20% discount on your next purchase.

If you’re like me, you now go from wanting an exchange to demanding a refund.  You request to see the manager and after several minutes of arguing you get your refund, leaving the store, never to go back.  As a final gesture, you tell anyone who will listen about your bad experience and recommend they never use that store.

This is called a Lost Customer and the effect on ROI is fairly obvious.  The store has thus reduced its revenue today and in future days when you buy somewhere else.

Your customer experience has now affected the store’s ROI – and not for the better.

  • Using the previous example, when the existing customer left, the store is forced into replacing this customer with a new one at a significantly higher cost. How much does it cost the store to bring in a new customer?

Each industry has different metrics, but the process is typical.  There is marketing, advertising and usually discounts (sales) to entice new prospects to purchase the store’s merchandise. The Sales Department may make goal but it’s guaranteed that expenses have risen.  This is called Customer Churn and effects ROI, again still based upon the customer experience.

  • Here’s one more. Let’s say that your customer experience was the opposite of what happened in the first example.  You contacted the store and they seamlessly exchanged it with profound apologies.  While you wait for the paperwork to be done (isn’t there always paperwork?), the clerk notices you are looking at scarves and before you know it you are the proud owner of a new scarf to go with the jacket.

Each industry is different, but in a transaction based sale, statistics show that a store has a much higher probability to sell existing/return customers than a new prospect, at 60% to 70% versus 5% to 20%, respectively.

This is called Upselling and yes, it effects ROI.  It’s called increased revenue.

So, customer experience and ROI.  Two sides of the same coin.  Any organization that deals with customers – whether retail, service industries, online, phone or brick – your customer’s experience determines how strong your ROI is.

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