5 Critical Math Mistakes That Could Ruin Your Customer Experience Career

At some point in our customer experience careers, we all need to look in the mirror and ask ourselves the question, “does what I do make a difference”. If the answer is yes, then how?  There are several important reasons for doing so.  Knowing that our customer experience actions make a positive impact not only on the customer but also on the organization motivates the entire company.  It is a step forward to gaining customer experience traction.  

As a customer experience professional who came up through the marketing ranks, I am used to having P&L responsibilities.  That P&L lens gives me a different perspective than other customer experience leaders who had other functional backgrounds.  When I am asked what I do for a living, my answer is typically a 2 part answer. “I am in the customer happiness business to deliver a financial gain for the organization”.  Making customer happy without any financial gains for the organization is not a sustainable long-term strategy.   

Most customer experience professionals understand the importance of customer experience ROI but mistakes are made in conducting the analysis that it could set back your customer experience efforts.  

The 5 Critical Math Mistakes Made by Customer Experience Professionals

1.      You Avoid Doing the Math Altogether

It is amazing to me how many customer experience professionals especially those in the B2B industries avoid trying to answer the most basic question – what financial gains are yield by their customer experience efforts. 

I have heard all the excuses. “My business is too complex”.  “We have intermediaries”.  “It does not apply to the utility business”.  “I am in the government sector”.

Without some critical answers to customer experience financial impact, you are at risk every time there is a corporate budget cut.   You will also be challenged to mobilize the entire organization.

2.      Approaching Financial Impact as a Science Rather than an Art Form

When customer experience professionals take steps to figure out how their actions make positive financial contributions to the organization, their first approach is to seek a playbook or a magic formula to simply plug in their numbers.  And voila – out comes the answer.  The truth of the matter is that running customer experience math is an art form.  The approach differs by industry, by company and by the types of data available.

Here is an example to illustrate that running customer experience math is an art and not a science.  A popular notion is that happier customers have a higher willingness to buy more.  That is quite logical, and it is true across many industries whether it is B2B or B2C. However, you must pause and think about how it applies to your own business.

A happier customer will return to the same restaurant more often.   How about if you are in the wireless network operator business?  Happier customers will likely stay with you longer and not switch providers, but will they buy more? You must balance willingness to buy more with opportunity to buy more.  They may be willing to buy more but if there is no opportunity to buy more beyond a monthly subscription, then you will not find data to support incremental purchases by happy customers.  Figuring out the right financial approach to your business is an art form.  

3.      Model Net Promoter Point Gains into Revenue Generation with Precision

Another popular exercise for customer experience professionals with a net promoter score program is to calculate the monetary value of a point gain in net promoter score. How much is a net promoter point gain worth is often asked by senior executives.  While this sounds like a reasonable approach, those of us who have done it, realize that the method is full of flaws.

To understand the flaws, you need to go back and see how the net promoter score is calculated.  As a reminder, it is the percentage of promoters minus percentage of detractors.  The problem is that there is an infinite possible combination of detractors moving to promoters, and detractors moving to passives to yield a one-point gain in net promoter score.  Adding to the complexity is that, promoters tend to generate more revenue than passives and passives generate more revenue than detractors.  Depending on what assumptions you use, you end up with different values or answers.  It becomes one hot mess. 

Some smart customer experience professionals will try to come up with a range.  A one-point gain is worth from $X to $Y.  Again, when you pressure test how this is calculated, it is based on assumptions on top assumptions.  The numbers become so “squishy” that it is almost meaningless.  There are better approaches to use than the revenue generated from a single net promoter point increase.

4.      Not Soliciting Help from Other Functional Areas in Your Analysis

We have already established that financial payback calculation from customer experience is an art and not a science.  Once you do come up with a creative approach, you must get feedback from others within your company.  You are not alone and must not act alone.

Not only can your cross functional team help to pressure test your logic, they may also have the missing data in your modelling.  I recall working on a payback model where the logic is that happier customers recommend more which then translates into more new sales or revenue.  I had the answer to the first part of the equation from market research.  Promoters recommend our products 3 times higher than detractors.  What I did not know was how many recommendations turn into a sale.  Nevertheless, I socialized my model internally as a working draft and I was honest in terms of what I had and what data was missing.  One day, a brilliant product manager told me that he had the missing piece of data.  From his new customer research, he knew how many customers purchased due to a recommendation.  I was thrilled to learn that! We were able to work together, reverse engineered the data and ended up with an accurate model that was logically sound.

If I did not take the opportunity to socialize my work in progress model, I would never be able get valuable data from the product marketing team to complete the exercise.

5.      Not Targeting Calculations to a Specific Audience

Another common mistake in calculating financial payback for customer experience activities is not coming up with meaningful numbers for your target audience. This should not be a one size fits all approach. Know what your audience values. Then try to tie your financial calculations to something meaningful for them.

Incremental revenue may be relevant to the executive team and to the sales team, but customer service will care more about call volumes.  If you can demonstrate that a customer experience improvement activity can reduce call volume, that will cause a customer service leader to pay attention.  A customer service leader will have cost per call data for you to use in your model to derive dollar savings from your customer experience efforts. That is team work! 

The above are five common mistakes that customer experience leaders make when attempting to calculate financial benefits of their activities.  Avoid making those mistakes and to continue to advance your customer experience practice forward.

Photo by Crissy Jarvis on Unsplash