How to define Customer Experience in Value based terms
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Transcript of How to define Customer Experience in Value based terms
Derek F Martin
All information and opinions expressed in this presentation are strictly personal and do not represent the opinions of my employer..
KnowledgeBridge™:
How to use Customer Lifetime Value To Win C-Suite Support
www.linkedin.com/in/derekfmartin
www.betterbusinessbanter.blogspot.com
@derekfmartin
AGENDA
1. Introductions
2. Why NPS is not enough
3. CLV Equation
a) Revenue/ Customer
b) Service Cost
c) Customer Tenure (Retention)
d) Acquisition Cost
4. Identifying CLV elements in your projects
5. Quantify the benefits
6. Winning the C-Suite
2. Why NPS is Not Enough
Scored:
Subjective: Brand vs Service Interaction
Subjunctive: “Would you Recommend”
Satisfaction Based: ≠
≠
3. Customer Lifetime Value Equation
AR: Ann. Revenue
AC: Ann. Service Cost
CLV = (AR – AC)
Margin
{ } 1+ i R
R
Retention Investment
- AQ
R = retention rate
i = discount rate
AQ: Acquisition
Cost
3. a Annual Revenue
Annual Revenue
Purchase amount: Pricing, Discounting
Purchase Frequency
Cross Sell & Upsell
Marketing Costs
3.b Annual Cost to Service
Cost To service: (Contact volume * cost/contact) + Returns
Contact Frequency
Product Quality
Service Quality: First Call Resolution
Communication Quality: Confusion Based Contacts
Contact Channel
Product & Process Complexity
Audience
Process Consistency
Set Expectations
Manage the volumes and SLA’s
Returns & Complaints
3.c Retention
Retention Statistics you should know and love
Cost of acquiring new customers is up to 5X cost to retain current customers
2% increase in customer retention = cutting costs by 10%
A 5% reduction in attrition rate can increase profits by 20-100%
The customer profitability rate tends to increase over the life of a retained customer
Competitive advantages – maintain market share, customer feedback, reduce “detractors”
3.d Cost of Acquisition
Acquisition Cost
Brand Awareness
Positive Reviews
Net Promoter
Member Get Member
Channel Cost
Inbound phone calls vs outbound phone calls
Email Deliverability increases with Engagement
4. Identifying CLV Components
CLV = (AR – AC)
Margin
{ } 1+ i R
R
Retention Investment
- AQ
CX Examples:
Improve Website Buying Journey
Call Center Agent Training
Allow for direct billing
NPS Tracking at the Agent level
Complaints Handling
5. Quantifying the Benefits
2. CX impact on Sales depends on business model**:
**Peter Kriss, The Value of Customer Experience Quantified, HBR
*Sunil Gupta, “Managing Customers as Investments,” Wharton 2005
CLV*
Retention Rate
1. Retention is one of the most significant value creation levers
5. Quantifying the Benefits: NPS
3. How much is a Net Promoter Worth? 2010AmEx study tracked Member spend and retention behavior of NPS Promoters vs Detractors:
20-25% increase spend
10-20% increase share of wallet
6x reduction in Attrition
10 % decrease in cost to service
PROMOTER =
6. Winning the C-Suite
Start with the primary benefit in mind: Margin, Retention or Acquisition
Measurable Metrics are essential Scorecard metrics Test & Control Pilot & Champion /Challenger
Partner with the metric owner to confirm the project benefits and agree on measurements: Margin: Sales & Operations Retention: Operations and Service Acquisition: Marketing & Sales
Build the project benefits in to the budget: Accountable
Give your Partners all the Credit
Questions?
www.linkedin.com/in/derekfmartin
www.betterbusinessbanter.blogspot.com
@derekfmartin