Good Customer Service Pays, and I Can Prove It

I have spent many years in product management and product marketing, selling cool technology to contact centers. Through the years I've always known that a good customer experience builds loyalty, which increases spend and many other great things. I knew this, felt it in my bones. I had presentations that included one or two data points to bring home the fact that good customer experiences increased loyalty and bad experiences sent customers away in droves. I loved talking about that stuff; people in the room would all nod; we all felt it was true.

Now I work for Forrester Research, and I have learned that when you are a contact center manager pitching for funding for your team, dropping one quick statistic on customer loyalty and knowing that something is true rarely gets you the funding you need. It's hard to build a business case around increasing revenue from good customer experiences in customer service. Every chief financial officer I've ever met will tell you the connection is indirect and soft, hard to spend money on. I have met some contact center managers who were able to make the connection between customer service and revenue in a way that led to hard dollars coming to the contact center, but it doesn't happen often.

Enter the Customer Experience Index.

Here at Forrester, we have something we call the Customer Experience Index. Every year we interview 8,000 to 10,000 consumers about their experience with companies and ask them to rate their experiences and their feelings toward them. The index is based on these interviews, and the insights it provides are powerful.

The index is simple. The premise is that consumers need three things from any customer experience:

  • Effective: I was able to do what I needed to do or get my question answered.
  • Easy: The effort required to get something done was reasonable, possibly less than expected.
  • Emotion: I felt good about the interaction, and I was respected or appreciated. (we cover a series of relevant emotions, both positive and negative, in the survey)

When companies meet these three needs, they are rewarded in three ways:

  • Retention: Customers stay with them.
  • Enrichment: Customers spend more with them.
  • Advocacy: Customers become promoters of the brand.

We have done these surveys for years, which has allowed us to amass a huge database of input that we use to score companies. We score on the perceived quality of the experiences and how customers feel about them. Then we map that to changes in loyalty and spend from customers. The resulting index makes for an interesting read, and there are a lot of ways that these insights can be used.

With the CX Index we track verticals and geographies, and even specific brands, to see how they score. From that we can watch for changes to their scores over time and then compare that to revenue to get a sense of how customer experiences impact the bottom line for companies.

Christina McAllister, my friend and peer here at Forrester, took data from the CX Index and drilled down into things that happen in customer service. She was able to document what we know with some striking results.

For example, the CX Index tracks first-contact resolution. This allowed Christina to understand the impact of first-contact resolution on scores. She then mapped the change in the index score to the revenue changes that the company experienced. I'm not going to break down all the math here, but based on the number of customers each company has and the incremental revenue that an increase in its CX Index score would represent, she was able to document the real increase in revenue that vendors in different vertical market spaces could expect when their first-contact resolution rates improved:

  • For a luxury automobile manufacturer, the revenue gain would be $147 million dollars.
  • For an airline, the revenue gain would be $705 million dollars.
  • For an auto/home insurer, the gain about be 1.078 billion dollars.

I know better than to think this data will open the checkbooks of the C-suite. I do hope that these insights can help open a discussion on the importance of customer service and why it's a cost-effective place for companies to invest.

Max Ball is a principal analyst at Forrester Research.