14 November 2014
Peter Bogaards
Peter Bogaards

The most-frequently asked question from business answered

As design thinking in general and experience design in particular become more relevant in business circles, designers frequently are asked the question: What is the ROI of (customer) experience design? Here’s an answer in five-parts.

Whereas business mostly sees the world in quantitative terms (revenue, profit, bottom line), designers tend to see it in terms of quality (ideas, value or relations).

In his keynote speech “Redefining Value, to Business and to Society” at the SDN Global Conference 2014, experience design pioneer Nathan Shedroff presented the total value of products and services as the metaphorical iceberg. What business professionals see are financial and functional values – visible above the waterline. But the biggest part of value is ‘underwater’. Emotional, meaningful and identity values are inherently intangible and therefore hard to quantify.

Although Nathan Shedroff made a strong case for both the quantitative and qualitative aspects of value, that doesn’t mean the question of the ROI of customer experience (design) will disappear.

In his attempt to answer this frequently-asked question, Zhecho Dobrev (a.k.a. @ZhechoDobrev) wrote a post in which he listed five data points.

1. “Customers of transaction-based business who had the best past experiences spend 140% more compared to those who had the poorest past experience. Customers of subscription-based businesses having the poorest experience have only a 43% chance of being a member a year later. Customers who give one of the top two experience scores have a 74% chance of remaining a customer for at least another year.

2. Customer satisfaction results in a higher share price.
A cumulative return of a $100 investment in the American Customer Satisfaction Index Fund from April 2000 to April 2012 was $490, a gain of 390 percent. By comparison, the S&P 500 returned only $93, a 7-percent loss. In the United Kingdom, the National Customer Satisfaction Index portfolio earned a return of 59 percent from April 2007 to June 2011, and the FTSE 100 had a negative return of 6 percent.

3. Keeping customers results in a high increase in value.
The key to keep customers is improving the customer experience because 68% of the customers that leave do so because they are upset with the customer service they received.

4. The amount of customers that leave does not represent small amount of business.
For example, according to their 2014 US Insurance Shopping study, JD Power and Associates found that 28% of the customers who switched auto insurance providers did so because of poor experience.

5. Existing customers are far easier to upsell.
According to Marketing Metrics, there is a much higher probability to sell to existing customers than to a new prospect, at 60 to 70% versus 5 to 20%, respectively. (…) And to make the cross sell and upsell case more clear,  the majority of customers’ buying decisions are tied to how they feel about the experience.”

Zhecho Dobrev thinks the time for the ROI debate has passed and that it’s time to focus on improving and creating memorable, excellent and enjoyable customer experiences. So do we.

Source: 5 facts to end the ROI debate on customer experience (Zhecho Dobrev, Beyond Philosophy)

About the author

Peter Bogaards (a.k.a. @BogieZero) is the editor-in-chief of our blog BiRDS. Peter also works as a curator and coach at Informaat experience design. He has been an online content curator avant-la-lettre in various UX-related fields for almost three decades, choosing what he thinks is interesting, relevant or remarkable to share.

Customer experience (67)