Forrester: Better Customer Experience Correlates with Higher Revenue Growth

Harley Manning wrote a blog post on Forrester. What is your opinion? Does better customer experience lead to higher revenue?

Better Customer Experience Correlates with Higher Revenue Growth In Most Industries

Does customer experience really matter to business success – or is CX just the latest flavor of hype? Recently Forrester completed a six month research effort aimed at answering that question by examining the relationship between superior customer experience and superior revenue growth.

Why did we pick revenue growth as the measure of business success? Because it’s the number one priority of global business leaders recently surveyed by Forrester.

So with that in mind, here’s what we did: Aided by some long-suffering research associates, some of our top industry experts and I picked pairs of competitors where one of each pair had significantly higher customer experience quality than the other (as rated by their own customers). We did this for five very different industries: cable, airlines, investments, retail, and health insurance. Then we built models that compared the compound annual growth rate in revenue of the CX leaders to the CX laggards between 2010 and 2014.

The results were intriguing. There was a clear correlation between superior customer experience and superior revenue growth for cable companies, airlines, full service investment firms, direct investment firms, and retailers.  However, the magnitude of the difference varied widely by industry, with cable coming out on top: 35.4% for the CX leader versus 5.7% for the CX laggard. Even more interesting, the results were a virtual draw for health insurers – superior CX didn’t seem to matter much when it came to revenue growth.

Why doesn’t customer experience always correlate with revenue growth? And why does the correlation differ by industry? Let’s start with the fact that CX drives revenue by driving customer loyalty, something Forrester determined with our CX Index research. But CX-fueled customer loyalty only matters when customers have the freedom to switch their business among competing companies and some of those companies provide superior experiences – so customers can switch and there’s a rational reason for them to switch.

Think of it this way: There are many investment firms out there eager to do business with high net worth customers and there is a big difference between the experience provided by the CX leaders (like Edward Jones and Charles Schwab) and the CX laggards. Therefore superior customer experience drives substantial revenue growth for investments firms.

In contrast, most Americans still get their health insurance from their employers, who subsidize 75% of their premiums. Sure, consumers with employer-sponsored health plans could abandon those plans, go to an exchange, and switch to a different provider. But that’s not happening today because consumers won’t willingly quadruple their costs, even for a significant improvement in CX quality. So right now CX does not drive revenue growth in that industry (though that will change over the next few years, and better CX can reduce cost of service even now).


You Need Great Employee Experiences To Create Great Customer Experiences (Forrester)

TJ Keitt writes a great blog on Customer Experiences. How are your employees engaging with your customers? Please leave a comment below.

You Need Great Employee Experiences To Create Great Customer Experiences

Posted by TJ Keitt on September 25, 2014

It’s easy to get swept up in the power of the digital age, where smart mobile devices and cloud services open the door for new and exciting ways to engage customers. We think a lot about how these technologies will create enticing customer experiences (CX), making these digital touchpoints the face of the brand. I admit, as a technology fan, I’m enamored with this idea. But I’m also someone who thinks a lot about technology and the workforce, so I was equally animated by a conversation I recently had with the head of a CX consultancy. He warned that businesses risk over rotating on technology, viewing their people as receding in importance in delivering satisfactory customer experiences. He went on to say that businesses that make this make do so at their own perilI agree.

More than three quarters of the information workforce — those using a computing device (e.g. PC, smartphone, tablet) at least one hour per day — interact with at least one customer as a routine part of their job. Over half of the workforce regularly interact with customers, partners, and customers. Are CX professionals thinking about the experiences these employees need as they think about customer needs? And — close to my heart as a tech guy — have they thought about what these neat digital tools can do for their employees, as they have about digital’s effect on customers?

Previously, we established that information workers require three broad freedoms: freedom to access and use information; freedom to interact with others as necessary; freedom to move when needed. In our new reportHow To Build A Technology Plan That Sustains Employee Engagement, we examine how employee satisfaction with the technologies that underlie these freedoms relates to positive employee behaviors. What this analysis netted us is the interesting picture you see below:

Our data analysis shows satisfaction with technologies that support data access, interactions and movement correlates with:

  • Independent problem solving. Employees able to identify and address client issueson their own narrow the time to resolution. And this ensures nagging customer issues don’t metastsize into full-blown customer experience breakdowns.
  • Awareness of how employee actions relation to the business’s success. If employees feel that there is a purpose to their work, then they are more inclined to take it seriously. Furthermore, they’re more likely toinvest their energy in fixing issues as they arise.
  • Employee retention. Turnover kills customer experience. Holding on to workers ensures continuity in customer experienceand the opportunity to continue to build on improvements. It also ensures that the company can maintain relationships workers form with their customers, business partners, and colleagues.
  • Employees’ willingness to advocate for the organization. Workers can help draw in new customers through recommendationsto family and friends. They can also identify qualified prospective employees when they recommend the company as an employer to that same social circle.

All of these look like great qualities to have in your workforce, right? Well, they don’t happen if you don’t link employee intention (get data, work with people, change context) with enabling tools (PCs, smartphones, tablets, applications) in a set of journeys that results in each worker meeting their personal goals. This argues for customer experience techniques being brought into the technology management organization. And it means that CX leaders and their technologist counterparts need to work together not only on creating compelling customer experiences, but also productive employee experiences that ensure workers can meet customer expectations.

This is an ongoing conversation, so I’m interested in hearing your thoughts. What do you think?


Journey Mapping: What Is It Good For? Absolutely Anything! – Forrester

Are you using Journey Mapping in your lumberyard? Deanna’s blog post gives insight why you should map your customers’ experience.


Journey Mapping: What Is It Good For? Absolutely Anything!

Posted by Deanna Laufer

I recently had the pleasure of facilitating three customer journey mapping workshops for clients. For me, the most rewarding part of these workshops is when, all of a sudden, you see the light bulb go on for the participants. It can be the realization that their customer has to jump through an inordinate number of hoops to submit a simple service request or have to wait 5-10 days for repair. Or, when the workshop participants realize they have no idea what their customers are doing or thinking, but maybe they should.

Just as the light bulb moment can be different for each person, the insights they deem most valuable can vary, and include:

  • Ideas for designing future-state experiences. A group of participants from a retailer created a future-state journey map illustrating how customers could sign up for a credit card and rewards program while shopping in store. They identified scenarios for how store associates could approach customers with credit card offers without seeming intrusive, as well as appropriate opportunities to follow up with customers by email or mobile app if they chose not to enroll right away. These types of insights can then inform the design of the new credit card and rewards experience.
  • A sense of empathy for the customer. We ask workshop participants within the same organization to wear name tags because, not only do we not know them, but most of the time they don’t know each other. In one workshop, the organization was siloed, as most are, and each participant owned their own small functional part of the customer journey. But no one had insight into or ownership of the entire process. When brought together to analyze the health of the end-to-end journey, participants walked away with a shared understanding that what they were each doing individually wasn’t working for the customer as a whole.
  • A prioritization of initiatives that impact moments of truth.While plotting steps in the customer journey, groups surmised how they thought customers felt at each point – satisfied, frustrated, WTF (yes that’s an emotion often used). They also identified moments of truth – those points in the journey that were critical or decisive for the customer in some way. Then, after brainstorming ways to improve the customer’s experience, they “starred” those ideas that aligned to moments of truth, and singled them out as those that could have the biggest impact on how customers felt about that journey.


After attending all these workshops, I had my own aha moment, cheesy as it sounds, when I realized that part of the reason every participant comes away from the same workshop with a different perspective is because there are so many uses and applications for journey maps.

My colleague, Tony Costa, wrote about just this topic a few months ago in his popular report, Journey Mapping Best Practices, which details six core activities – from designing experiences, to prioritizing and measuring CX initiatives, to informing the broader business agenda – for which CX pros can use journey maps.


HT customer journey map
HT customer journey map


Read More:

Using Customer Journey Maps to Improve Customer Experience

You’re Doing Customer Experience Innovation Wrong

Do you believe customer experience innovation initiatives will drive differentiation and long-term value? Below is a blog post from the Harvard Business Review by Kerry Bodine.

New Research: You’re Doing Customer Experience Innovation Wrong 

“Innovation” has become a buzzword in the customer experience field.

In a recent Forrester survey of 100 customer experience professionals, nearly half of respondents said that their executive team’s strategy for customer experience is market differentiation. And an ambitious 13% said that they’ll settle for nothing less than having the best customer experience across every industry — in other words, these companies want to be the next Apple, Disney, or Zappos.

They also believe that innovation will help them achieve these lofty goals — and they’re investing accordingly. Sixty-nine percent of these respondents report that their companies have dedicated personnel for customer experience innovation. Sixty-four percent have allocated time to innovation activities. And 55% have dedicated innovation budgets.

Are their investments paying off? A whopping 73% of interviewees say they plan to launch innovative customer experiences in the upcoming year — and two-thirds believe that they already have.

customer innovation

These numbers sound promising — but they just don’t add up.

If this much innovation work is really happening, then why don’t we see customer experiences that are actually innovative gushing forth from nearly every organization? Why haven’t we seen more and more companies earning excellent scores in Forrester’s Customer Experience Index ? In 2013, only 8% of the companies in this annual benchmarking survey received a top grade from their customers — and that’s a pathetically low number in comparison to the amount of professed innovation in the industry.

Here’s the problem: Everyone talks about customer experience innovation, but no one knows quite what it is or how to attain it. In fact, when we ask customer experience professionals how they’re driving their innovation efforts, we find several misguided approaches that actually thwart differentiation and waste massive amounts of time and money in the process.

Many companies simply try to keep up with the Joneses. Fifty-eight percent of our respondents said that their firms drive customer experience innovations by watching what their direct competitors are doing. A full 72% look to copy companies in other industries. For example, Citibank wanted to copy the Apple store so badly that it actually hired the same architects responsible for the Apple store concept to design its bank of the future. Not surprisingly, it wound up with a bank that looks like an Apple store. Imitation may be the highest form of flattery — but it’s not innovation. In fact, it’s the very definition of parity.

Other companies pray that technology can save them. Sixty-two percent of our panelists report that technology advancements drive their firms’ innovation activities. But technology for technology’s sake can end in disaster. Consider the multinational auto insurance company that invested in a new mobile app and expensive back-end integration to connect customers in an emergency with a call center agent. While it looked good on paper, the plan failed to account for the fact that drivers didn’t download the app in anticipation of getting into a car crash — and had more pressing things on their minds than browsing an app store once an accident occurred. Result? Another so-called innovation that failed to produce business results.

In order to change approaches like these, companies must first have a clear understanding of what it is they’re aiming for. Forrester defines customer experience innovation as: The creation of new customer experiences that drive differentiation and long-term value.

Customer experience innovation requires a structured approach that goes beyond traditional find-and-fix methods and helps firms identify and create experiences that really matter. To put their innovation efforts on the right track, customer experience professionals must do three things.

Reframe innovation opportunities. Companies need to start their innovation initiatives with an outside-in approach that frames their business challenges within the context of customers’ unmet needs. To identify new opportunities, for example, Philips Healthcare mapped out a typical day in the life of a radiologist, a key purchase influencer, regardless of whether those activities involved Philips. This approach enabled the team to identify a key pain point in radiologists’ daily work — an inability to compare one patient’s scan with those of others — that Philips already had the data for and capability to solve but hadn’t considered productizing.

Ground innovations in the business model. To sustain new types of interactions and ward off copycats, companies need to connect innovations to the mechanics of their underlying business model. Mobile operator giffgaff’s customers discover, evaluate, buy, and get support online and in social forums — the direct result of a cost structure that includes only a handful of employees. And Zipcar’s car-sharing business model drove a need for keycard (and then mobile phone) vehicle entry — new types of interactions that traditional rental companies never envisioned. Customer experience professionals should explicitly map out the mechanics of possible new business models — like resources, activities, and revenue structure — using a tool like the business model canvas . This visualization can help teams see how core business activities can fuel new types of customer interactions — and support them in the long run.

Infuse innovations with the brand. Ikea Systems’ cartoon furniture assembly instructions, Mini Cooper’s retro-inspired dashboard, and the cheerful chirp of a Zappos customer service rep — the qualities of these customer experiences create strong associations with their brands. And the more a new customer interaction looks, feels, smells, sounds, and tastes like a specific brand, the harder it will be for competitors to copy. That’s why design and innovation consultancy Continuum created mood boards when developing a new restaurant concept for Bertucci’s called 2ovens. A collage of carefully chosen photos depicted the desired 2ovens vibe; helped align internal Bertucci’s stakeholders; guided the design of touchpoints as diverse as the dining space, menu, and website; and even shaped the company’s hiring policies.

Customer experience innovation happens at the intersection of consumer needs, business model, and brand. Companies that neglect one or more pieces of this innovation puzzle will be forever relegated to customer experience mediocrity, on par with throngs of other companies desperate to fix their experience issues and retain customers. But by following the steps above, firms can increase the likelihood that their customer experience innovation initiatives will drive differentiation and long-term value.

The Power of Putting Customers at the Center of Your Business

Outside In: The Power of Putting Customers at the Center of Your Business is a must have addition to your library. The book helps you understand your customer experience ecosystem. Customer Experience EcosystemAlso, the authors explain how to master the six disciplines of customer experience:

  • Strategy
  • Customer Understanding
  • Design
  • Measurement
  • Governance
  • Culture

The book walks you through the process of developing a journey map. [Blog Post: Using Customer Journey Maps to Improve Customer Experience] A customer journey map is a diagram that illustrates the steps your customer(s) go through in engaging with your company.  They explain how to measure your success with Forrester which is their own CXi Score or Net Promoter Score [Blog Post: Profiting from the Golden Rule]. The Net Promoter system focuses the entire organization on generating promoters, who buy more, stay longer, refer friends and even provide useful feedback and ideas. The book includes critical disciplines that every company must incorporate into its DNA in order to become a customer-centric organization.

They offer a great workbook called “Customer Experience Maturity Assessment” which can be used to assess your company’s customers [Download: Outside In:Maturity Workbook].

Below is an excerpt from the book:Outside In:The Power of Putting Customers at the Center of Your Business

Customer Experience Correlates to Loyalty

Parrish Arturi proved that customer experience drives revenue from Fidelity customers. You can’t afford to ignore his example because this is the case for just about everyone’s customers. Unless you work for a true monopoly, it is certainly the case for your customers. There’s a simple reason why this is true: Customer experience correlates to loyalty. And that means that companies with higher CXi scores have more customers who will buy from them again, who won’t take their business elsewhere, and who will recommend them to a friend.

Here’s how we know this for a fact. When we field the CXi survey, we ask consumers to tell us three things: How willing they are to make another purchase from each company, how likely they are to switch business to a competitor, and how likely they are to recommend each company to a friend. Their answers let us calculate the relationships between customer experience and three of the most common loyalty metrics used in business today: purchase intent, churn, and word of mouth.

The relationships are impressively strong — about as strong as correlations get in the real world. For purchase intent and word of mouth they’re so high that nothing else you do is likely to have more impact on whether you’ll get another sale or a recommendation from your customers. And that makes intuitive sense, doesn’t it? Customers who’ve had bad experiences with your company won’t be eager for more. Nor will they send their friends your way — not any more than you’d send your friends to a restaurant that served you a bad meal, or to a retailer that sold you a defective product and wouldn’t take it back.

The correlation with likelihood to take business elsewhere is also significant. Once again it’s easy to see why. Giving your customers a bad experience — by not meeting their needs or just being rude — makes them wonder whether they wouldn’t be better off buying from some one who isn’t you. That’s great for your competitors. They won’t have to convince your customers to leave since you already did that for them. All they have to do is appear to be a credible alternative. For companies in industries where customer retention is a make-or-break issue — like wireless service providers — this can make the difference between profitability and failure.

Stimulate Your Customer’s Lizard Brain to Make a Sale

Are you struggling with the status quo?

Stimulate Your Customer’s Lizard Brain to Make a Sale

by Tim Riesterer 

Many marketers and salespeople believe they are in a selling war against their direct competition. However, a less anticipated and more dangerous enemy exists, called “no decision” — otherwise known as “the status quo.” According to sales consulting firm The Sales Benchmark Index, nearly 60% of qualified leads fall victim to the status quo.

Here’s the root cause of the problem: most marketing and sales efforts focus on the wrong messaging and therefore do not stimulate the correct part of a prospect’s brain. This idea is supported by Forrester Research, which found that 65% of high-level decision makers give their business to the company that creates the “buying vision,” versus 35% who acknowledge putting candidates through a fair-and-square “bake-off.” In fact, as executives told us in our research for “Conversations That Win the Complex Sale,” they want companies to come in and tell them something they don’t already know about a problem or missed opportunity — but instead, most only talk about themselves.

The status quo problem is actually a sales messaging problem.

Breaking through the status quo is like breaking a habit. Your brain goes on auto-pilot when a habit is formed. To disrupt the status quo, you need to appeal to the part of the brain where decisions are actually made. That’s where brain science research comes in.

Your brain is divided into three parts. The neocortex is the brain’s analytical computer, which processes data. The limbic system is where all emotions reside. The brain stem and other brain structures are responsible for your survival. This part of the brain is also described by American psychologist Robert Ornstein as the “old brain” (or the “lizard brain” by Seth Godin, an American entrepreneur).

The old brain quickly assesses situations to determine if you are at risk or in danger. If it senses your well-being is in jeopardy, it forces you to react and move away from the potential threat. To break the status quo, you literally have to wake your prospects’ old brain by showing them how their current status quo is untenable, unsustainable, and even unsafe.

Context Creates Urgency

“Why change?” and “why now?” messaging starts with grabbing your prospects’ attention and creating a sense of urgency around your solution to stimulate a decision. One of the most effective ways to do this is to create the right context.

For example, let’s examine the tornado siren that goes off to test the warning system at noon every Saturday in my neighborhood in Wisconsin. When it’s sunny outside, everyone ignores it. But when the clouds are rolling in, it can clear our village park in minutes. The product — in this case, the tornado siren — doesn’t create the reaction. The change in our environment suddenly makes the product invaluable.

Your product or service differentiators aren’t the reason your prospects will change. It’s a clear, compelling sense that they won’t be able to hit their objectives by staying where they are that will prick the old brain’s survival instincts and cause it to start looking for an alternative to the status quo.

Contrast Creates Value

Once you’ve created context for the urgency to change, you must convince your prospects they can’t get what they need from where their status quo currently places them. That status quo is a formidable foe, and prospects will still seek the comfort of trying to “duct tape” their existing approach to overcome the threats you’ve exposed.

Your messaging needs to feed the old brain the thing it craves most to make a decision — contrast. This part of the brain relies exclusively on visual and emotional contrast to decide between what’s unsafe and safe. For your prospects, this means they need to see a clear distinction between what they’re already doing and what you’re proposing.

Contrast is best created in two ways: By using “before” and “after” stories, and by using visual tools.

Before and After Stories:For decades, Alcoholics Anonymous (AA) has been helping people overcome a problem they’re unwilling to admit having. People do not just accept you telling them they need a solution. AA instead helps alcoholics overcome their denial and ultimately seek help by telling or hearing others tell stories.

As they hear these tales, the new AA members are able to recognize themselves in other people and realize that they, too, have the same problem and need the same solution. Telling stories about your other customers in the same market who successfully overcame a similar challenge will help your prospects realize that they, too, need to change.

Visual Tools:Contrast can be best depicted in pictures — not big photos or metaphorical imagery, but images that make complex and abstract ideas more simple and concrete. A study cited in Dr. John Medina’s book “Brain Rules” found that people could remember only about 10% of information delivered via the spoken word 72 hours after hearing it — but that retention skyrocketed to 65% if a picture was added.

You must literally illustrate the current status quo as a messy situation fraught with peril, side-by-side with an alternative approach that addresses all of the issues and cleans up the mess. Therefore, visual storytelling that shows clear contrast is an essential messaging tool for waking the old brain and breaking the status quo.

Battling the status quo is a constant struggle for marketers and salespeople alike — but it doesn’t have to end in defeat. By applying the right, customer-focused messaging and appealing to the old brain through the techniques described above, it is possible to overcome the status quo barrier to help fuel your company’s success.