roi of customer experience

Temkin Group Insight Report

ROI of Customer Experience, 2014 CX Highly Correlates to Loyalty Across 19 Industries, Delivers Up To $460M Over 3 Years

By Bruce Temkin Customer Experience Transformist & Managing Partner Temkin Group September 2014

Temkin Group [email protected] (617) 916-‐2075 www.temkingroup.com

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Research report is provided courtesy of Qualtrics. Do not distribute.

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Temkin Group Insight Report www.temkingroup.com

Copyright ©2014 Temkin Group. All rights reserved.

Executive Summary

To understand how customer experience corresponds to loyalty, we examined feedback from 10,000 U.S. consumers describing their experiences with and their loyalty to 268 companies. Our analysis shows a strong correlation between customer experience and loyalty factors such as repurchasing, trying new offerings, forgiving mistakes, and recommending the company to friends and colleagues. We compared the consumers who gave companies a very good customer experience rating to those who gave companies a very bad customer experience rating, and we found that the percentage of customers who plan on repurchasing products is 18 percentage-‐points higher at organizations with excellent CX ratings. Additionally, the Net Promoter Scores of companies with very good CX ratings average 22 points higher than the scores of companies with poor CX. We built a model to evaluate how customer experience impacts a $1 billion business’s revenue over three years in each of the 19 industries, and this model shows that CX has the largest impact on hotels ($461 million), fast food chains ($437 million), and retailers ($428 million). This report also includes a five-‐step approach for building a model that estimates the value of CX for your organization.

Customer Experience Is Highly Correlated With Loyalty

In a recent Temkin Group study, nearly six out of ten large companies reported having the ambition to provide the best customer experience (CX) in their industry.1 Why do so many companies aspire to deliver first-‐class customer experience? Beyond simply being a “good” service to provide, many CEOs likely emphasize the importance of delivering excellent CX because they recognize the clear link between CX and loyalty. To determine how customer experience affects loyalty, we asked 10,000 U.S. consumers about their experiences with and their loyalty to 268 U.S. companies and then analyzed their responses2 The results show that CX:

! Correlates with repurchasing. We looked at how likely consumers are to repurchase products from each of the 268 U.S. companies and then compared those numbers to each firm’s 2014 Temkin Experience Ratings score. We found a strong connection between the two datasets, with a correlation coefficient of .83 (see Figure 1).3

! Affects many aspects of loyalty. We split the companies into quintiles based on where their Temkin Experience Ratings scores landed them in relation to their industry averages (see Figure 2). When we compared the companies with the highest CX rating to the

1 See the Temkin Group report The State of CX Management, 2014 (April 2014). 2 For the CX ratings we used the 2014 Temkin Experience Ratings, which evaluates three areas of experiences: functional, accessible, and emotional. We compared the Temkin Experience Ratings and loyalty data with industry averages for all of the companies. See the Temkin Group report Temkin Experience Ratings, 2014 (March 2014). 3 For the repurchase data, we looked at consumers’ responses to the question: How likely are you to consider purchasing more products or services from these companies in the future? We included the percentage of consumers who selected either 6 or 7 on a scale from 1 (extremely unlikely) to 7 (extremely likely).



companies with the lowest CX ratings, we found an 18.1 point difference in the percentage of consumers who are likely to repurchase, a 13.3 point difference in the percentage of consumers who are likely to forgive a company if it makes a mistake, and an 8.1 point difference in the percentage of consumers who are likely to immediately try a new offering from the company.

! Also links to word of mouth. We also found that CX strongly correlates to Net Promoter® Score (NPS®) (see Figure 3).4 The average NPS for companies with the highest CX ratings is 11 points above their industry NPS, while the average NPS for those with the poorest CX ratings falls 11.5 points below their industry average.

! Plays an important role across many industries. In addition to comparing general CX with general loyalty, we also broke both of these areas down into their component parts and examined how they correlated on a more specific level (see Figure 4). We evaluated the connection between the three elements of the Temkin Experience Ratings—functional, accessible, and emotional—and the two areas of loyalty—the likelihood to recommend and the likelihood to purchase more—for companies across the 19 industries. We found a strong correlation between every combination we examined for every industry.5 Intriguingly, the emotional element of experience has the highest correlation to loyalty in almost every industry.

CX Improvement Results: Up to $461M In Revenue Over Three Years

To help translate the connection between CX and loyalty into tangible bottom line numbers, we built a model that identifies how a modest increase in CX will result in additional revenues for each of the 19 industries over a three-‐year period (see Figure 5).6 Our analysis evaluates how loyalty differs between the consumers who gave companies a “modest” CX rating and those who gave companies a “good” CX rating (see Figure 6). The results show that (see Figures 7 and 8):

! Revenues increase the most for hotels, the least for health pans. Hotels have the most to gain from improving CX ($460.7 million), while health plans gain the least ($271.8 million).

! Auto dealers have the most revenue to retain. Auto dealers retain the most business from existing customers ($183.5 million), whereas investment firms retain the least business ($93.7 million).

! Hotels have the most additional purchases to gain. The amount of new business from existing customers ranges from $193.5 million at the top for hotels down to $55.5 million at the bottom for health plans.

4 See the Temkin Group report Net Promoter Score Benchmark Study, 2013 (November 2013). Net Promoter Score, Net Promoter, and NPS are registered trademarks of Bain & Company, Satmetrix Systems, and Fred Reichheld. 5 Correlations are usually considered strong if they are above 0.5 and very strong if they are above 0.7. 6 In order to show a high-‐level analysis of revenue impact, we make many assumptions at an industry-‐level. We highly recommend that companies use the raw data to better understand how CX improvements will affect their specific business. The model assumes a company size of $1 billion and adds the additional revenue gains over three years.



! Word of mouth most affects supermarkets. Supermarkets see the highest impact of good and bad comments on their volume of business ($107.8 million), while comments affect auto dealers the least ($73.5 million).

CX and Loyalty Across 19 Industries

As part of our analysis, we examined the how loyal consumers felt to companies in 19 industries based on how they rated their experiences with those companies (see Figures 9 through 28). When we looked at the averages across all of the industries, we discovered that CX influences the customer’s:

! Likelihood to repurchase. While 92% of the consumers who gave a company a very good CX rating report being very likely to repurchase from that company, only 9% of those who gave a company a very poor CX rating say the same.

! Likelihood to recommend company. The percentage of consumers who are very likely to recommend a company to their friends or colleagues ranges from a high of 88% of consumers who rate a company’s CX as very good, down to a low of 4% of those who give a company a very poor CX rating.7

! Likelihood to forgive a company if it makes a mistake. Sixty-‐seven percent of consumers are very likely to forgive a company for a mistake if they think it has very good CX, whereas only 9% of consumers are very likely to forgive a company with very poor CX.8

! Likelihood to try a new offering right away. Of the consumers who gave a company a very good CX rating, 57% of them report being very likely to try that company’s new product or service immediately after it’s introduced. Meanwhile, only 6% of consumers who gave a company a very poor CX rating report the same.9

Build Your Own CX ROI Model

Remember, as with all industry-‐wide research, any single company’s results may vary considerably from these results. As such, we recommend that companies build their own models for tying loyalty (and revenues) to customer experience measures (see Figure 29). Here’s some advice to consider as you undertake this effort:

! Enlist your CFO. Even if you have the brightest business analysts in the world on your team, if you do not involve the CFO’s team, the finance leader will always question your financial models and assumptions.

7 We looked at consumers’ responses to the question: How likely are you to recommend the company to a friend or colleague? We included the percentage of consumers who selected either 9 or 10 on a scale from 0 (very unlikely) to 10 (very likely). 8 We looked at consumers’ responses to the question: How likely are forgive these companies if they deliver a bad experience? We included the percentage of consumers who selected either 6 or 7 on a scale from 1 (extremely unlikely) to 7 (extremely likely). 9 We looked at consumers’ responses to the question: If these companies announced a new product or service, how likely would you be try it right away? We included the percentage of consumers who selected either 6 or 7 on a scale from 1 (extremely unlikely) to 7 (extremely likely).



! Use existing metrics. Try to make your case based on the business metrics that your company already uses—it will make it easier for people to understand and will help you earn their buy-‐in.

! Be conservative. Resist the temptation to use the high end of estimates for potential benefits. While the results may seem more compelling, they will also be harder to defend.

! Create a simple story. People tend to remember very simple story lines, so make sure that you organize your results in a way that is easy for people to understand.



-35.0

-25.0

-15.0

-5.0

5.0

15.0

25.0

-25.0 -20.0 -15.0 -10.0 -5.0 0.0 5.0 10.0 15.0

Temkin Experience Ratings Correlates To Future Purchase Intentions


268 Organizations Across 19 Industries

Base: 10,000 U.S. consumers Source: Temkin Group Q1 2014 Consumer Benchmark Study

Consumers who are very likely to repurchase minus

industry average (%-points)

2014 Temkin Experience Ratings

minus industry average

(%-points)

Pearson correlation coefficient (R) = .83

Figure 1



Companies With Higher Temkin Experience Ratings Have More Loyal Customers



-10.7

-6.4

-3.1 -3.8 -3.6

-2.2

-0.5 -0.1

0.5

2.2 1.6

0.8

7.4 6.9

5.0

Bottom Quintile 4th Quintile 3rd Quintile 2nd Quintile Top Quintile

Percentage of customers (above and below industry average) who are loyal in three areas (%-points). Companies are sorted based on how their 2014 Temkin

Experience Ratings score compares with their industry averages

Very likely to try a new product or service immediately after it

has been announced

Very likely to forgive company if it makes a mistake

Very likely to purchase more from company

2014 Temkin Experience Ratings of companies compared with their industry averages

Figure 2



-40.0

-30.0

-20.0

-10.0

0.0

10.0

20.0

30.0

40.0

-25.0 -20.0 -15.0 -10.0 -5.0 0.0 5.0 10.0 15.0

Temkin Experience Ratings Correlates To Net Promoter® Scores (NPS®)


268 Organizations Across 19 Industries


Company NPS minus industry average NPS

(%-points)

Pearson correlation coefficient (R) = .77

-11.5

-6.2

-0.2

3.3

11.0

Bottom Quintile 4th Quintile 3rd Quintile 2nd Quintile Top Quintile

Difference between company NPS and industry average NPS

2014 Temkin Experience Ratings minus industry

average (%-points)

NPS Versus Industry Average Based on Temkin Experience Ratings

2014 Temkin Experience Ratings compared with their industry averages

Figure 3



Correlations Between Loyalty and Three Components of Customer Experience for 19 Industries



Pearson correlations between loyalty and CX area

Loyalty: Likely to Recommend Likely to Buy More

CX area: Functional Accessible Emotional Functional Accessible Emotional

Airlines 0.58 0.64 0.72 0.59 0.64 0.65 Auto Dealers 0.60 0.64 0.71 0.57 0.60 0.65 Banks 0.56 0.61 0.69 0.54 0.59 0.62

Computers 0.58 0.64 0.68 0.55 0.60 0.63

Credit Card Issuers 0.52 0.56 0.67 0.50 0.54 0.61

Fast Food Chains 0.51 0.53 0.66 0.56 0.56 0.58

Grocery Chains 0.51 0.56 0.66 0.55 0.59 0.56

Health Plans 0.55 0.62 0.69 0.52 0.56 0.59

Hotel Chains 0.60 0.61 0.70 0.59 0.59 0.64 Insurance Carriers 0.60 0.63 0.69 0.58 0.59 0.63

Internet Service Providers 0.58 0.66 0.75 0.56 0.63 0.69

Investment Firms 0.60 0.63 0.70 0.58 0.61 0.63

Major Applicances 0.59 0.63 0.70 0.54 0.57 0.64

Parcel Delivey Services 0.55 0.60 0.70 0.57 0.58 0.61

Rental Car Agencies 0.59 0.68 0.76 0.61 0.66 0.71

Retailers 0.53 0.57 0.66 0.56 0.60 0.60

Software Firms 0.58 0.64 0.71 0.57 0.61 0.64

TV Service providers 0.60 0.67 0.75 0.58 0.63 0.67

Wireless Carriers 0.56 0.61 0.70 0.54 0.55 0.62

Average across all industries 0.57 0.62 0.70 0.56 0.60 0.63

Bold numbers are above cross-industry averages

Figure 4



Elements Used in Model to Derive Revenue Impact Based on Improvement in Customer Experience


Revenue Area Description

Retain existing business

The amount of existing business that customers will continue to do with company. Influenced industry-level data on consumers’ likelihood to repurchase.

Save business after a very bad experience

Business that companies are able to save after delivering a bad experience. Influenced by industry-level data on percentage of consumers that experience a very bad experience, the willingness of consumers to forgive companies after a bad experience, and their change in spending after those experiences.

Sell additional products and services

Additional purchases that consumers will make above their basic relationships. Influenced by industry-level data on consumers’ likelihood to repurchase and estimate of how much add-on business is typical across industries.

Sell new offerings

Purchases that consumers make of new products and services offered by companies. Influenced by industry-level data on consumers’ likelihood to try new offerings from companies and estimate of how much business comes form new business that is typical across industries.

Word of mouth

Purchases that result from consumers telling other people about their experiences. Combines additional purchases from positive word of mouth along with lost purchases from negative word of mouth. Influenced by industry-level data on consumers’ likelihood to recommend and estimates of how many people they tell about the experience and the influence that those comments have on decisions of other consumers.

Basic assumptions in model: •  Companies have $1 billion in annual revenues •  Examines revenue impact over three years •  Revenue impact will differ across industries for each year based on factors

such as ease of switching providers •  Inputs to model include data from Temkin Group’s Q3 2013 and Q1 2014

Consumer Benchmark Studies (10,000 U.S. consumers in each) along with estimates based on Temkin Group's judgment

Areas of Revenue that Increase Due to Improvement in CX

Figure 5



Improvements in Customer Loyalty From Modest Improvements in Customer Experience



Industries Repurchase Recommend Forgive Try

Airlines 48 44 30 29

Auto Dealers 44 40 28 29

Banks 48 37 25 15

Computer Makers 45 46 32 27

Credit Card Issuers 43 39 27 21

Fast Food Chains 50 36 26 20

Grocery Chains 48 40 31 26

Health Plans 44 43 30 29

Hotel Chains 54 46 24 29

Insurance Carriers 48 46 29 27

Internet Service Providers 43 40 25 21

Investment Firms 51 50 32 28

Major Appliances 42 48 36 36

Parcel Delivery Services 46 42 24 15

Rental Car Agencies 47 43 36 31

Retailers 48 42 28 26

Software Companies 51 48 41 36

TV Service Providers 47 39 27 18

Wireless Carriers 48 44 30 29

Difference in loyalty between customers who rate a company as delivering “good” customer experience and those who rate a company

as delivering “mediocre” customer experience (%-points)

•  Repurchase: Customers who are likely to buy from company again in the future •  Recommend: Customers who are likely to recommend company to a friend or a

colleague •  Forgive: Customers who are likely to forgive company if it makes a mistake •  Try: Customers who are likely to try a new product or service from a company

immediately after it is announced

Highest loyalty difference

Figure 6



Revenue Increases From Moderate Improvement in CX for Companies With Annual Revenues of $1 Billion



$142.3

$140.1

$153.0

$112.5

$92.3

$183.5

$125.9

$100.7

$166.5

$148.3

$148.3

$142.9

$183.9

$147.2

$149.1

$143.3

$155.1

$160.6

$164.2

$55.5

$72.4

$68.2

$121.1

$147.0

$82.5

$142.8

$152.5

$106.9

$137.7

$125.4

$159.6

$111.5

$175.6

$177.5

$174.3

$171.9

$172.5

$193.5

$74.0

$76.0

$81.9

$79.1

$91.0

$73.5

$77.6

$103.2

$89.8

$83.3

$97.1

$87.7

$98.6

$97.5

$95.1

$107.8

$101.2

$104.4

$102.9

Health plans

Wireless carriers

Insurance carriers

Internet service providers

Investment firms

Auto dealers

TV service providers

Parcel delivery services

Major appliances

Banks

Credit card issuers

Computer makers

Software companies

Rental car agencies

Airlines

Supermarkets

Retailers

Fast food chains

Hotels

Retaining existing business Additional purchases New business from word of mouth

Additional revenues over 3 years ($ million)

Figure 7



Revenue Increases From Moderate Improvement in CX for Companies With Annual Revenues of $1 Billion



Additional revenues over 3 years ($ million)

Industries Retain

existing business

Save business

after a very bad

experience

Sell additional products

and services

Sell new offerings

Word of mouth Total

Hotels $141.2 $23.0 $161.4 $32.2 $102.9 $460.7

Fast food chains $131.8 $28.8 $150.6 $22.0 $104.4 $437.5

Retailers $125.2 $29.9 $143.1 $28.8 $101.2 $428.1

Supermarkets $127.0 $16.3 $145.1 $29.1 $107.8 $425.5

Airlines $127.2 $22.0 $145.3 $32.2 $95.1 $421.8 Rental car agencies $122.9 $24.2 $140.5 $35.1 $97.5 $420.3

Software companies $152.9 $31.1 $49.7 $61.8 $98.6 $394.0

Computer makers $100.1 $42.7 $108.5 $51.1 $87.7 $390.1 Credit card issuers $97.7 $50.7 $105.8 $19.5 $97.1 $370.8

Banks $107.2 $41.0 $116.2 $21.5 $83.3 $369.2

Major appliances $150.4 $16.1 $50.1 $56.7 $89.8 $363.2 Parcel delivery services $85.9 $14.8 $137.5 $15.0 $103.2 $356.4

TV service providers $70.3 $55.6 $114.2 $28.6 $77.6 $346.3

Auto dealers $156.9 $26.7 $52.3 $30.3 $73.5 $339.6

Investment firms $76.8 $15.6 $124.7 $22.3 $91.0 $330.3 Internet service providers $64.5 $47.9 $104.8 $16.3 $79.1 $312.6

Insurance carriers $116.3 $36.7 $47.2 $20.9 $81.9 $303.0

Wireless carriers $101.6 $38.5 $41.3 $31.1 $76.0 $288.5

Health plans $119.5 $22.8 $21.6 $33.9 $74.0 $271.8

Figure 8



Consumers Are More Loyal To Companies That Provide a Better Customer Experience (Average Across 19 Industries)



6%

9%

4%

9%

8%

9%

6%

13%

16%

17%

12%

30%

29%

30%

27%

56%

40%

46%

54%

76%

57%

67%

86%

92%

Very likely to try a new product or service immediately after it's been

announced


Very likely to recommend company to a friend or colleague


Very good

Good

Okay

Mediocre

Poor

Very poor

Percentage of consumers who say they are very likely to demonstrate loyal behaviors towards an organization based on the Temkin

Experience Rating that they gave the organization

Temkin Experience

Ratings

Figure 9



Airlines: Consumer Loyalty Based on Level of Temkin Experience Ratings



9%

9%

3%

10%

11%

10%

7%

14%

20%

20%

12%

34%

37%

35%

32%

61%

49%

50%

56%

82%

65%

69%

88%

94%

Very likely to try a new product or service immediately after it's

been announced


Very likely to recommend company to a friend or

colleague


Very good

Good

Okay

Mediocre

Poor

Very poor



Temkin Experience

Ratings

Figure 10



Auto Dealers: Consumer Loyalty Based on Level of Temkin Experience Ratings



7%

11%

8%

9%

11%

10%

11%

16%

23%

23%

19%

33%

37%

35%

37%

59%

52%

51%

59%

76%

64%

72%

92%

94%


been announced



colleague


Very good

Good

Okay

Mediocre

Poor

Very poor



Temkin Experience

Ratings

Figure 11



Banks: Consumer Loyalty Based on Level of Temkin Experience Ratings



2%

6%

2%

5%

2%

6%

5%

8%

10%

14%

9%

21%

13%

20%

18%

44%

26%

39%

46%

68%

44%

66%

83%

88%


been announced



colleague


Very good

Good

Okay

Mediocre

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Very poor



Temkin Experience

Ratings

Figure 12



Computer Makers: Consumer Loyalty Based on Level of Temkin Experience Ratings



8%

12%

6%

11%

11%

13%

8%

14%

18%

19%

16%

34%

35%

33%

35%

61%

45%

51%

62%

79%

64%

71%

89%

92%


been announced



colleague


Very good

Good

Okay

Mediocre

Poor

Very poor



Temkin Experience

Ratings

Figure 13



Credit Card Issuers: Consumer Loyalty Based on Level of Temkin Experience Ratings



4%

8%

4%

3%

7%

7%

3%

9%

13%

13%

10%

24%

23%

27%

23%

49%

34%

40%

49%

68%

50%

63%

82%

87%


been announced



colleague


Very good

Good

Okay

Mediocre

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Very poor



Temkin Experience

Ratings

Figure 14



Fast Food Chains: Consumer Loyalty Based on Level of Temkin Experience Ratings



16%

16%

5%

18%

7%

8%

5%

14%

16%

14%

9%

29%

25%

25%

19%

58%

36%

39%

45%

79%

57%

64%

83%

95%


been announced



colleague


Very good

Good

Okay

Mediocre

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Very poor



Temkin Experience

Ratings

Figure 15



Grocery Chains: Consumer Loyalty Based on Level of Temkin Experience Ratings



10%

17%

0%

12%

8%

7%

6%

17%

12%

16%

11%

35%

25%

28%

22%

65%

38%

47%

51%

83%

60%

69%

86%

96%


been announced



colleague


Very good

Good

Okay

Mediocre

Poor

Very poor



Temkin Experience

Ratings

Figure 16



Health Plans: Consumer Loyalty Based on Level of Temkin Experience Ratings



7%

10%

3%

13%

6%

8%

6%

15%

14%

18%

13%

31%

28%

37%

30%

56%

43%

48%

56%

75%

58%

67%

85%

90%


been announced



colleague


Very good

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Okay

Mediocre

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Very poor



Temkin Experience

Ratings

Figure 17



Hotel Chains: Consumer Loyalty Based on Level of Temkin Experience Ratings



5%

8%

7%

18%

10%

11%

6%

14%

23%

27%

16%

27%

39%

32%

30%

57%

52%

51%

61%

81%

66%

68%

89%

95%


been announced



colleague


Very good

Good

Okay

Mediocre

Poor

Very poor



Temkin Experience

Ratings

Figure 18



Insurance Carriers: Consumer Loyalty Based on Level of Temkin Experience Ratings



8%

8%

2%

6%

7%

6%

6%

10%

11%

17%

11%

29%

29%

31%

29%

54%

37%

46%

57%

77%

55%

70%

89%

91%


been announced



colleague


Very good

Good

Okay

Mediocre

Poor

Very poor



Temkin Experience

Ratings

Figure 19



Internet Service Providers: Consumer Loyalty Based on Level of Temkin Experience Ratings



3%

6%

3%

6%

5%

7%

3%

6%

12%

13%

9%

24%

23%

26%

22%

46%

32%

38%

49%

67%

53%

63%

83%

88%


been announced



colleague


Very good

Good

Okay

Mediocre

Poor

Very poor



Temkin Experience

Ratings

Figure 20



Investment Firms: Consumer Loyalty Based on Level of Temkin Experience Ratings



3%

5%

2%

4%

8%

12%

4%

13%

17%

19%

12%

32%

34%

29%

30%

56%

45%

51%

62%

83%

56%

67%

89%

92%


been announced



colleague


Very good

Good

Okay

Mediocre

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Very poor



Temkin Experience

Ratings

Figure 21



Major Appliances: Consumer Loyalty Based on Level of Temkin Experience Ratings



12%

11%

7%

17%

12%

14%

8%

17%

23%

22%

17%

33%

44%

37%

35%

55%

59%

58%

65%

75%

74%

71%

91%

93%


been announced



colleague


Very good

Good

Okay

Mediocre

Poor

Very poor



Temkin Experience

Ratings

Figure 22



Parcel Delivery Services: Consumer Loyalty Based on Level of Temkin Experience Ratings



6%

13%

0%

8%

5%

9%

5%

17%

11%

17%

7%

32%

17%

25%

23%

60%

26%

41%

49%

78%

49%

68%

85%

93%


been announced



colleague


Very good

Good

Okay

Mediocre

Poor

Very poor



Temkin Experience

Ratings

Figure 23



Rental Car Agencies: Consumer Loyalty Based on Level of Temkin Experience Ratings



8%

7%

2%

8%

14%

12%

6%

13%

27%

20%

18%

32%

41%

40%

30%

49%

58%

56%

61%

79%

69%

70%

90%

95%


been announced



colleague


Very good

Good

Okay

Mediocre

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Very poor



Temkin Experience

Ratings

Figure 24



Retailers: Consumer Loyalty Based on Level of Temkin Experience Ratings



9%

14%

7%

15%

7%

10%

7%

18%

17%

18%

12%

34%

29%

31%

28%

61%

42%

47%

54%

82%

58%

69%

87%

95%


been announced



colleague


Very good

Good

Okay

Mediocre

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Very poor



Temkin Experience

Ratings

Figure 25



Software Companies: Consumer Loyalty Based on Level of Temkin Experience Ratings



14%

16%

10%

16%

10%

10%

8%

14%

20%

15%

14%

28%

38%

38%

32%

56%

56%

56%

62%

79%

72%

72%

90%

93%


been announced



colleague


Very good

Good

Okay

Mediocre

Poor

Very poor



Temkin Experience

Ratings

Figure 26



TV Service Providers: Consumer Loyalty Based on Level of Temkin Experience Ratings



2%

6%

1%

4%

6%

6%

3%

9%

11%

12%

9%

20%

22%

26%

24%

46%

30%

39%

48%

67%

51%

62%

83%

87%


been announced



colleague


Very good

Good

Okay

Mediocre

Poor

Very poor



Temkin Experience

Ratings

Figure 27



Wireless Carriers: Consumer Loyalty Based on Level of Temkin Experience Ratings



6%

8%

4%

9%

8%

12%

6%

15%

12%

11%

11%

29%

23%

26%

25%

52%

32%

39%

50%

71%

53%

64%

84%

89%


been announced



colleague


Very good

Good

Okay

Mediocre

Poor

Very poor

Temkin Experience

Ratings



Figure 28



Steps for Calculating the Value Of Customer Experience

•  Agree on one or more metrics (which can be single metrics like Net Promoter Score or satisfaction or a blended index) that is representative of customer experience

•  Make sure you can measure it by customer

Establish core customer

experience (CX) metric(s)

1"

•  Agree on the things that represent loyal behavior and have a financial impact on your business. For example: Additional purchases, churn rate, share of wallet, making recommendations to friends, etc.

•  Make sure you can measure it by customer

Establish loyalty

objectives 2"

•  Establish groupings, from low to high, of customers based on their CX scores.

•  Separate results for key customer segments.

Group customers

based on their CX metrics

3"

•  Calculate average loyalty levels for each CX level. •  This will show how much increased loyalty you can get from each

group if you move their CX ratings

Analyze relationship between CX and loyalty (option 1)

4a"

•  Run regression analysis to see how the CX metric correlates to the loyalty metrics.

•  Use results to decide on the CX metric you want to use and to see the impact that the CX metrics has on loyalty metrics

Analyze relationship between CX and loyalty (option 2)

4b"

•  For each customer segment, translate a 1% increase in CX metric to some resulting change in the loyalty metric(s)

•  Calculate the dollar value for a 1% change in CX metrics by translating the change in loyalty metrics into a dollar value

Calculate value of

loyalty change 5"


You should be able to communicate something like this: “A “W%” change in <CX Metric> for this customer group will result in a “X%” change in <Loyalty Metric>, which

will drive an increase of “$Y” in revenues and/or a reduction of “$Z” in costs.”

Figure 29



About the Author, Bruce Temkin

Bruce Temkin is a Customer Experience Transformist & the Managing Partner of Temkin Group. He is also the co-‐founder and Chair of the Customer Experience Professionals Association (cxpa.org).

Bruce is widely viewed as a leading expert in how organizations can distinguish themselves by providing outstanding customer experience. He has honed this expertise by working with hundreds of large organizations on the strategies, operational processes, organizational structures, leadership qualities, and culture environment required to sustain superior customer relationships.

Bruce’s research focuses on identifying current and emerging best practices. He has published several seminal reports, including The ROI of Customer Experience, The Future of Customer Experience, and The Four Customer Experience Core Competencies. He uses insights from his pioneering research to advise companies on their customer experience journeys, identifying opportunities for a sustainable breakthrough performance.

Bruce is the author of the popular blog Customer Experience Matters®, where he regularly shares his insights on topics like customer experience, branding, leadership, and employee engagement. His eBook—Six Laws of Customer Experience—has been downloaded by tens of thousands of people around the world and is available for free on his blog.10

Prior to forming Temkin Group, Bruce served as Vice President & Principal Analyst at Forrester Research. During his 12 years with Forrester, he led the company's business-‐to-‐business, financial services, e-‐business, and customer experience practices. Bruce was Forrester’s most-‐read analyst for 13 consecutive quarters and remains one of the most respected analysts in the industry.

Bruce authored several of Forrester’s most popular research reports, including Experience-Based Differentiation, The Customer Experience Journey, and Voice Of The Customer: The Next Generation. Additionally, he created Forrester’s Customer Experience Index and Voice of the Customer Award, and he spearheaded the creation and expansion of many of Forrester’s experience evaluation methodologies and training workshops.

Before joining Forrester, Bruce co-‐founded and led several Internet start-‐ups. He also held management positions with GE, Stratus Computers, and Fidelity Investments.

Bruce has been widely quoted in the press, including such esteemed media outlets as The New York Times, Wall Street Journal, and Business Week.

Bruce is also a highly in-‐demand public speaker, combining his deep area expertise with an engaging, entertaining style. He has delivered keynote speeches at hundreds of industry and corporate events and often attains recognition as one of the top speakers.

Bruce holds a master’s degree from the MIT Sloan School of Management, where he concentrated in business strategy and operations. He also holds an undergraduate degree in mechanical engineering from Union College.

10 Customer Experience Matters is a registered trademark of Temkin Group.

T E M K I N G R O U P O V E R V I E W

TEMKIN GROUP IS BASED ON FOUR CORE BELIEFS:

CX drives loyalty. Our research and work with clients demonstrates that interactions with customers influence both how much business they’ll do with you in the future and how often they recommend you to others.

CX is a journey, not a project. Building the capabilities to consistently delight customersdoesn’t happen overnight. Companies need to plan for a multi-year change program.

Improvement requires systemic change. Companies can improve isolated customer interactions, but they can’t gain a competitive advantage until customer experience is embeddedinto their operational processes and culture.

We can help you make a difference. Transformation isn’t easy, but becoming more customer-centric is worth the effort. We help our clients accelerate their results and avoid many of the stumbling blocks along the way.

HOW WE ARE DIFFERENT:

Temkin Group combines thought leadership and benchmark data with a deep understanding ofthe dynamics of organizations, which enables us to accelerate customer experience results andhelp companies build the four competencies that are required to sustain long-term success.

HOW WE CAN HELP:

Temkin Group provides a number of different services including:

Research and Advisory Subscriptions. Access to all of our research on trends, best practices, andbenchmark data as well as the option to ask questions or seek feedback on your efforts.

CX Planning and Innovating. We’ll examine your organization’s goals and make sure that you have the right plans and priorities for CX, whether you’re just starting the journey or lookingto take your CX efforts to a much higher level.

Engaging Workshops and Training. We deliver interactive workshops to help your organizationunderstand the importance of CX and what it takes to achieve long-term success. We run workshopsfor executive teams, extended leadership groups, CX organizations, and broader sets of employees.

Compelling Speeches. If you’re planning a meeting or an offsite event, we’ll infuse compellingCX content into the event. We can engage your audience on a wide range of topics related to customer experience, focusing on elements of our four customer experience competencies.

48 White Oak Road Waban, MA 02468

617/916-2075 tel617/663-6124 fax

www.temkingroup.com

Temkin Group is a leading customer experience (CX) research and consulting firm.We help many of the world’slargest brands lead theirtransformational journeystowards customer-centricityand build loyalty by engag-ing the hearts and minds oftheir customers, employees,and partners.

CX CORE COMPETENCIES

Purposeful Leadership Do your leaders consistently

operate with a clear, well-articulated set of values?

Compelling Brand Values Are your brand attributes

driving decisions about how you treat customers

and other stakeholders?

Customer Connectedness

Is customer feedback and insight deeply integratedthroughout your internal

processes?

Employee Engagement Are employees fully

committed to the goals of your organization?

roi of customer experience

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