Market Research, Customer Experience, Employee Experience
In this blog article, the experts at QuestionPro will explain to you why it is extremely important to address the issue of return on investment and why this issue is so important for the success of your company. You will also receive tips on how to measure the return on investment from insights and experience management.
CONTENT
- 1 What is the return on investment – or ROI for short?
- 2 Why is return on investment (ROI) difficult to prove for market research, customer experience and employee experience?
- 3 The return on investment from insights and experience management
- 4 Tips for measuring the return on investment from insights and experience management
- 5 Conclusion
- 6 1:1 Live Online Presentation: Return on Investment: We will show you how to correctly calculate the return on investment
- 7 Try software for market research and experience management now for 10 days free of charge!
What is the return on investment – or ROI for short?
Simply put, return on investment shows how much money you made or lost on an investment after all costs are taken into account. To do this, the benefit (or return) of the investment is divided by the costs of the investment and expressed as a percentage. The aim is to be able to directly measure and evaluate the return on a specific investment - alone and in the context of other investments.
ROI = Return / Investment Cost = (Current Value of Investment – Investment Cost) / Investment Cost
Because it is easy to calculate and easy to compare with other return on investments, return on investment is a very popular metric. If the ROI is net positive, the investment itself is profitable; a negative return on investment should be avoided. In the context of other positive ROIs, it is very easy to identify the best options or eliminate the worst ones.
Why is return on investment (ROI) difficult to prove for market research, customer experience and employee experience?
Almost all companies today carry out market research projects and engage in in-depth data analytics to comprehensively understand their customers and employees and their needs and expectations. Ultimately with the aim of creating inspiring customer and employee experiences for your customers and employees and increasing sales. The focus is on increasing the company's value through effective customer and employee acquisition, retention and the development of relationships for future company profits.
The value of an investment in employee experience or customer experience is harder to quantify
With the usual product-centric focus, on which the concept of return on investment is based, the focus is on volume increases and cost savings as well as market shares - parameters that are usually easy to substantiate with financial and business data.
The value of an employee experience and/or customer experience investment is harder to quantify, as these require the company to focus more on its relationship expertise rather than product expertise. With these modern management approaches, customer and employee needs are the target at the beginning of the value chain.
Determining the success of relationship expertise and predicting future gains in CX and EX programs that incorporate insights from surveys and other data sources as “fuel” is therefore highly complex: How do you predict potential success in advance when launching CX and Ex programs quantitatively or how do you continuously measure and evaluate success so that corporate management and controlling are ready to make the necessary investments?
Unfortunately, it must be noted that there is no universal key to success because every company is different. All you have to do is look at different customer journey maps or employee journey maps to visualize this complexity.
As a result, a concrete business case is needed for every company that can quantify the return on investment in monetary terms by monetizing non-monetary factors. As a result, market research and experience management must Return – investments be clearly defined, with returns better than Benefits – investments is defined. The difficulty in both market research and customer or employee experience is defining the benefits and the associated investments.
The return on investment from insights and experience management
The calculation of the return on investment of Insights projects and CX programs or EX programs is complex and is ideally carried out in several steps, which can of course be done in parallel. It should be noted that the results of market research and data analytics are also reflected in the parameters for customer experience and employee experience. Only by understanding customers and employees can CX and EX programs be designed successfully. The most difficult task is certainly the calculation benefit in the ROI formula.
Calculation of the total benefit
In order to provide this evidence, quantitative and qualitative data from surveys and data analytics must be linked to different key performance indicators (KPIs) of the company, which can be most closely linked to the customer experience programs or employee experience programs:
sales growth
Sales growth compares the sum of all net revenue (sales) of a company, e.g. B. from the sale of its products within a certain period of time, e.g. E.g. last month, last quarter etc.
It is recognized in many sources that sales growth is suitable as evidence for both CX programs and EX programs. The specific value in euros then serves as a partial value for the benefit in calculating the return on investment.
CSAT, NPS, eNPS and CES
An increase in scores in these metrics usually have a direct impact on other KPIs. Even if there is currently no scientifically defined model to determine this, each company can develop an individual model that answers the following question: An increase in CSAT, (e)NPS and/or CES by one point means an increase another KPI, e.g. B. Up-selling by how many points? The result should be a driver-based model with profits/losses in euros that shows what effect e.g. B. the reduction of the detractors on the total sales. This increase or reduction can then be included as a partial value in the return on investment benefit formula.
→ Measure Customer Satisfaction Score (CSAT) correctly
Customer and employee loyalty
There is a demonstrable connection between customer loyalty and customer experience: customers switch when their expectations are not met or are loyal when they are exceeded, which leads to enthusiasm. But the influence of the employee experience on acquiring new customers, customer satisfaction and loyalty is also crucial. Only happy and motivated employees contribute to creating enthusiastic customer experiences. Also, the cost of hiring an employee through recruitment, onboarding, exit and lower productivity until onboarding is completed, etc. is between 30 and 300 percent of a senior employee's salary. These costs must be determined precisely and can be included as a benefit when calculating the ROI. In addition, future sales can be calculated from the current number of customers, current and future estimated retention rate and current sales per customer due to an increase or reduction in the retention rate and included as part of the RO benefit calculation.
Cross- and up-selling
If customers are satisfied or even enthusiastic about the company's products and services, cross-selling and up-selling potential can be achieved. When cross-selling, customers buy similar or complementary items; when upselling, they buy comparable but higher quality items. By determining the additional sales through upselling or cross-selling, you get another parameter for determining the benefit of the return on investment.
Operational costs for support, complaints, returns and other services
The benefit here lies in efficient and effective processes in the company. For example, if customers can answer customer service questions in self-service, the customer experience can usually be improved through the provision and customer service costs can be reduced. These cost savings are also included in the calculation of the return on investment.
Innovations
Another byproduct of consistent customer centricity and high employee engagement is the creation of better products and services as well as better solutions to internal and external challenges. A culture of openness to innovation emerges and enables companies to stay one step ahead of the competition. Here too, corresponding partial benefits can be taken into account in the return calculation, e.g. B. Increase sales through new products or reduce internal costs through greater process efficiency.
Awareness and recommendation
In both the customer and employee experience, high brand awareness and an intrinsically motivated willingness to recommend the company as a customer or employee help to reduce the costs of marketing or recruiting employees. These savings must be taken into account as parameters in the benefit calculation.
Employee engagement
On the one hand, it can be measured more easily than other parameters through surveys and, on the other hand, through increased productivity, and must be taken into account in the profitability calculation.
→ Measure employee retention and engagement
Opportunity costs
Some companies also include costs in their return on investment model that show what would happen if the investment were not made. A very exciting approach, but one that is fraught with a lot of uncertainty and ambiguity due to insufficient knowledge and a lack of information. Ultimately, scenario analysis can be used to determine monetary effects on lower sales, increasing internal costs, etc., which can be taken into account in ROI models.
The result is, for example, Overall benefit in Customer Experience Management as the sum of the monetized individual results for increasing the NPS, increasing customer satisfaction, increasing sales through cross-selling and reducing service costs. In employee experience management, the overall benefit is e.g. B. by increasing NPS and eNPS, employee engagement, sales increases, etc.
Calculation of total investments
Calculating the total investments of a CX or EX program as well as market research projects is simpler compared to calculating the benefits - the investments required to achieve each individual benefit parameter must be determined, for example:
Training of employees
Employees must internalize and live what customer and employee experience means for the company. Team individual and cross-company training by CX and Ex teams and managers ensure that customer and employee experiences are gradually improved - and silo mentality is also gradually reduced. The customer and the employee come to the fore. The costs for this, e.g. B. personnel, travel, food, materials, etc., are part of the investment costs.
New technology and tools
Modern, powerful technologies and tools are one of the basic requirements for CX and EX programs to scale. In addition to systems for collecting and analyzing customer and employee feedback, data management and reporting, costs for data security and data protection are also cost-intensive parameters.
Gaining insights
In addition to the software costs for collecting and analyzing insights for experience management and implementing the resulting measures, there are also personnel costs and costs for third-party service providers, e.g. B. Online panels, agencies and institutes, headhunters etc., parts of the investment costs.
Operating costs / operational costs
These costs vary greatly from company to company, but generally relate to costs for operating the hardware or internal and external websites, licensing costs, development costs for e.g. E.g. new apps etc. Reward programs as part of a change management program for committed employees are also included here and are part of the investment costs.
The total investment in a CX and EX program is therefore made up of the above parameters. The easiest way to make an estimate if this is not available is to obtain offers and cost estimates from your favorite providers or partners.
The return is then calculated by subtracting the total investments required for the benefit aspects from the total benefit of the individual benefit aspects. The return on investment is then determined using the formula mentioned above: return divided by total investments times one hundred.
Tips for measuring the return on investment from insights and experience management
To achieve demonstrable monetary success of market research, data analytics, customer experience and employee experience management, a step-by-step approach is recommended in which monetary and non-monetary variables are defined and included in the ROI model and ultimately the economic benefits can be demonstrated:
1) Monetary
Here, the return on investment calculation includes concrete, verifiable financial indicators, e.g. B. increased sales or increase in share price.
2) Non-monetary
All KPIs that measure the company's efforts, customer and employee experience, increase in customer base, employee turnover, etc.
Conclusion
Every company and every CX program or EX program is different. Proving the value of these programs and the associated insights gained through surveys and data analytics is influenced by many factors. Only by developing a company-specific measurement metric that is continuously reviewed and, if necessary, adapted to changing conditions can companies get a feel for the key figures and impact on sales - and give CX or EX teams the chance to forecast the value of their work or to prove. In order to determine the value of Insights determination and CX program or EX program, you should always be able to answer the following two questions:
- What increase in benefits can I achieve with my program?
- What costs are associated with this?
Based on the answers to these two questions and the concrete insights from the market or the company, a realistic target path for sustainable success measurement can be defined using the return on investment approach.
It is often difficult to prove an investment in these subject areas, especially at the beginning of a new market research, CX or EX project. If you need support or would like to find out more about the return on investment (ROI) of Insights, CX or EX programs, please contact us.
1:1 live online presentation:
Return on Investment: We will show you how to correctly calculate the return on investment
Our experts will be happy to provide you with a consultation on the subject of return on investment at an appointment of your choice. Arrange an individual appointment.
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