Six Ways to Show B2B CX Value

After more than 150 hours of interviewing CX leaders – and surveying 200+ more! – it’s clear that one thing separates the best from the rest:

The best CX programs start, end, and do everything in between, based on how their efforts will add value to the business.

Some companies start with their survey scores, then try to validate that the scores matter. Others never do that, and just hope improving survey scores will lead to higher loyalty.

The best – those we call “Change Makers” – start by understanding how the business generates value from an improved customer experience, then ensure that every activity is focused on achieving that outcome.

Based on our interviews, I’ve identified six categories that Change Makers use to show value. That’s not to say this is an exhaustive, all-inclusive list that addresses every industry. But it is a useful starting point as you focus your efforts.

Retention and Churn

This is the granddaddy of CX efforts, showing how an improved customer experience leads customers to stay with you longer.

It’s a solid place to start, though it does pose some challenges for certain industries. For example, when is a distributor’s customer no longer a real customer? When that customer goes a month without ordering? Six months?

Many industries don’t have a clear way to show that a customer has left, so you have to use assumptions. But it’s still important to measure and track.

In Software-as-a-Service (SaaS), for example, the churn rate is so low that you might not be able to show impact. If your average churn of 3% falls by half, the drop might be caused by a random deviation, making it hard to demonstrate your impact.

“One-and-done” customers are a special instance of churn issues. One client found that 55% of a particular channel of customers attrited after using them just once. For many B2B companies, the cost of sales is very high, requiring multiple sales (or multiple months of subscriptions) to cover those costs.

One-and-done customers are very expensive. Yet, most companies don’t track this. If you have a high percentage of them, this might well be the most important place for you to direct your efforts.

Share of Wallet

This is the metric of interest for many B2B companies. Yet, for most it’s very difficult to determine. If you’re a distributor, how would you know how many other distributors your customers use? Or how much they spend with each?

Few customers will open their books to provide you with those answers.

You can use a survey to ask, but the answers you receive are likely to be directional at best.

A second proxy is to look at categories ordered. Many manufacturers and distributors have one category where they’re very successful, and others where there’s more competition. A superior customer experience should lead your customers to expand their orders to include these discretionary categories.

Incorporating multiple important factors into one metric makes CLV a very popular choice in the most effective CX programs we interviewed.

And if you can show that by improving your onboarding journey, new customers increased their ordering from 3.3 to 3.6 categories, that’s a big win.

In other industries, such as SaaS, share of wallet may not be that relevant. But a cousin – upsells – is. If you can show that your CX efforts result in more companies adding on new products, there’s another source of value.

Innovation

Innovation is of interest to almost any company, but showing its value is done differently.

Product companies often receive more margin for newer products – frequently called “innovation products” – than for their older lines. Showing how an improved customer experience leads customers to buy more innovation products is a great outcome.

Other industries, from software to manufacturing, co-create products with customers. It takes an engaged customer and a high level of trust to participate in a co-creation project. Therefore, if you can show that your program leads more customers engaging in co-creation, that’s likely to grab the attention of your executives.

Referenceable Customers

Fast-growing companies may find that they run out of referenceable customers. In certain industries, being a reference may take hours of work, including site visits and multiple calls. You can’t ask customers to do this often, so it’s critical to have a variety to choose from.

An improved customer experience will lead to more customers being willing to do this for you.

A relative of this is actual referrals, though its importance varies substantially based on the business model. If your customer base numbers in the hundreds, you may land five customers a year through referrals. That makes it difficult to show that your CX efforts created those referrals.

However, if your customers number in the thousands, it’s easier to claim the credit – if you consistently track the source of the initial leads. (Which most companies don’t.)

Cost to Serve

This is often the quickest way to show impact, specifically by showing a reduction in calls to the contact center. Many companies have a specific cost per contact, so showing how your efforts reduce these calls can show immediate direct impact.

It also likely has an impact on loyalty, though that takes longer to prove.

But reduced call volume is just one area of improvement. Service issues in other industries have their own costs. We have found that in many industries, the costs to implement products are a major source of spending that can be improved through customer experience.

For example, we found that for a company installing systems into hospitals, a poor implementation experience lengthened the project, contributing to significantly higher costs. We’ve also seen this play out at multiple software companies.

Customer Lifetime Value

If I had to pick one metric randomly, CLV is where I would focus. CLV incorporates both retention and upsells/share of wallet into one metric.

That’s the good news.

The bad news is that there’s no consistent method to calculate it.

Many organizations use a simplistic method, which is just the average annual revenue per customer multiplied by the expected tenure. This works well, especially when you break it down by segment or market, allowing you to target interventions.

More complicated models include indirect revenue, such as referrals. Others incorporate variable costs, such as the cost to implement or service costs.

Incorporating multiple important factors into one metric makes CLV a very popular choice in the most effective CX programs we interviewed.

SaaS companies have their own version, ARR, or Annual Recurring Revenue, which removes the expected retention component. This makes sense, as few SaaS companies have enough of a track record to predict retention.

ARR is often paired with Net Retention, which shows this year’s revenue compared to last year’s. For example, if last year you had 100 customers each paying $1,000 a year, and this year you lost five, but those who remained were now paying $1,100 each a year, your Net Retention would be (95 companies * $1,100)/(100 companies * $1,000) = 104.5%.

Pick a Target

The right measurement varies by industry, so spend some time with Finance to learn what they use. Then capture these measurements in your  and target your efforts against them.

Doing so will ensure that your program captures that Holy Grail: A place among the 1 in 4 programs that can actually show value.

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