• Mikko Peltola

The Business Case of Customer Experience, Part 1

Intuitively we know that offering what customers like is good for business. And to get there, we need to understand our customers. There are two main ways to get to know customers better: One is to engage with them (interviews, questionnaires, conversations), and the other is via analytics. And the combination of the two provides the right mix of context and facts.

Being data-driven mandates that we dig deeper. After all, we need data and analytics to be brutally customer-focused. It often tells a different story than the intel gathered in customer interviews and questionnaires; What customers say they do, doesn’t always match what they think they do (intentional bias). And what they think they do, doesn’t always match what they actually do (unintentional bias).

So what is the business benefit of understanding your customers, their needs, motivations, and preferences? And how can we measure the value of turning complex technology into intuitive design? And why should you spend time and effort to reject features when you can include them all? Ultimately, what’s the RoI of Customer Experience (CX)? These are the questions we’re attempting to answer in this series.

CX consists of setting expectations (sales and marketing) and delivering on the promise (products, services, support.) Avalon CX’s expertise is in helping product teams focus on the delivery part of CX.

Let’s start with the big picture. Every year $1.6T (Accenture, 2016) is lost in the US alone because of poor customer service. That’s more than 10% of the Fortune 500 companies’ revenue. It’s almost the GDP of Texas or Canada.

But big numbers can be deceiving, so let’s drill down. Companies focusing on Customer Experience report a 5-10% increase in sales and a 15-25% cost reduction (McKinsey, 2017). For those measuring success with softer metrics, experience-driven businesses have 1.5x happier employees and 1.6x more satisfied customers and customer lifetime value (Forrester, 2018). Whichever way you choose to look at it, there’s enough evidence that the investment in CX pays back handsomely.

If the benefits are obvious, why isn’t everyone investing in CX?

In this CX business case series, Part 1 focuses on the meaning of great CX and the importance of building CX culture. Building a lasting CX culture takes persistence, and it’s a journey, not a problem solved with a quick fix.

Great CX means that the customer expectations are met or exceeded through all the touchpoints. Let’s look into this simple statement in detail.

  1. The ‘customer’ is the judge. What matters is their perception, not your self-image. Surprisingly many companies fail to acknowledge this simple principle. KPI’s are usually measuring the performance of an internal team. App rating measures how well the app works. A quick survey after a phone call asks how did the customer care team perform. You can get a perfect rating on all of these and still fail miserably in the parts of the customer journey that occur outside the measurement points. When companies tie bonuses to the KPIs, they get a system where employees measure the functions they perform well in.

  2. ‘All the touchpoints’ covers the journey from the first time a potential customer hears about the product or company, thought purchase, support, and usage or consumption. From a company perspective, this journey is delivered by sales, marketing, design, development, customer care, and more.

  3. ‘Expectations’ does not only mean each of the functions needs to perform well. It also means the units need to act in alignment with each other. You can’t sell Porsche with a Volvo’s marketing message.

  4. ‘Exceeds’ refers to the WOW moments that are the highlights of touchpoints along the customer journey. The moments that make an individual’s experience with your brand memorable and lead to advocacy and brand loyalty.

To fully achieve the improvements quoted above, it typically takes two to three years.

  1. Within each functional unit, it takes iteration to master the customer focus. You’ll plan, build, measure, and adjust. On good days you’ll drive the change and get it right. On bad days you’ll swing and miss and hopefully learn from it. And sometimes, the competition or, as we’ve recently experienced, mother nature changes the playing field for you.

  2. Once you get your unit in shape, the next challenge is alignment between different teams in your organization. A pessimist would say they can’t influence other teams, but an optimist would say any team can act as the catalyst for change and motivate others with demonstrable results. One proven methodology to encourage inter-department collaboration is Design Thinking

  3. Finally, why do we talk about the importance of Culture? The average tenure of tech company employees, who are prone to change, falls in the range of 2-3 years (Inc.com 2018. Likely, most of the team starting the 2-3 year CX transition have moved on before the end of it. To assure consistency, you can’t just lead with KPIs or targets. CX focus has to be built into an organization’s values and culture. CX takes time, but the good news is that it’s never too late to start the journey.

In the following parts of the series, we’ll look into the other aspects of the CX business case. For the financial considerations, we’ll dive deeper into the costs and opportunity costs. Finally, from a strategic perspective, we’ll study the real options of investing in CX and the competitive position that companies find themselves in without these options.

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