CX Annuities ROICX annuities is a phrase I coined to represent massive savings and impressive gains available through a different approach to management of customer, partner, and employee experience.

An annuity is a fund that generates ongoing value because the principle keeps growing while you benefit monthly from the interest earned.

CX Annuities are freed-up resources that generate ongoing value because you permanently stopped a prevalent issue that bothered customers.

Customer experience management typically revolves around touchpoints: service, personalized marketing, loyalty programs, voice of customer, design and digitalization of journey steps, and management of Detractors, Passives, and Promoters. This is true for customer experience, employee experience, and partner experience management.

All of these efforts are valuable: they minimize churn, differentiate the experience, and create value.

Even so, experience managers grapple with demonstrating ROI. Accordingly, in hard times, vast numbers of experience managers switch their career (involuntarily or voluntarily) to Digitalization, Customer Success, CRM, Sales, tech providers, entrepreneurship, and other fields. What’s the secret to these dilemmas?

CX ROI Challenge

The secret to the ROI and tenure dilemmas is CX Annuities.

1. Estimate Costs of Poor CX

First, your cost to serve customers may be astronomical when you step back and count it. I call these remedial CX costs: expenses to remedy things that went wrong.

  • Churn:
    • Lost revenue and relationships (not only for this period, but ongoing)
    • Lost ROI on customer acquisition cost
  • Preventing churn:
    • Customer Service + escalations + remedies + refunds + returns
    • Customer Success + Loyalty programs
  • Productivity:
    • Negative word of mouth dilutes the value of your Marketing messages
    • Escalations sidetrack managers from other pursuits
    • Troubleshooting derails engineers from designing new value
  • Complexity:
    • Extra Marketing and Sales staff and effort to make up for churn (in addition to monthly net new customers)
    • Poorly set expectations or poorly suited customers due to pressure to make up for churn
    • Operations’ difficulty meeting customer expectations due to wide array of customer types
    • Customer Experience programs to understand and support all of the above
    • Perpetuation of this vicious cycle (ongoing reciprocal cause and effect among all of the above)

Add that up and it’s certainly a daunting figure! Consider that your investment in all of the above is a sunk cost: there’s no end in sight. This figure will increase monthly as you add more customers. Similar calculations can be made for partner experience and employee experience. In fact, remedial costs for EX and PX have a multiplier effect on CX remedial costs.

This is why, in both bad and good times, experience management is pressured to generate revenue. For example, the contact center is asked to shift from a cost center to a profit center. And VoC aims to count (and even beg for) possible recommendations, instead of enriching your managers with deep insights for sustainable differentiation. Customer engagement and loyalty programs often accentuate immediate gains in lieu of building relationship strength. Ironically, this revenue emphasis reinforces distrust and higher costs.

CX annuities are the fruits of stopping the insanity described above.

2. Stop Root Causes

Second, when you stop the root cause of a key issue in the vicious cycle, you stop a sunk cost. Therefore, you regain the funds that would otherwise be dedicated forever to remedial costs. This means your advantage is those funds freed-up in perpetuity. This is the essence of a financial annuity.

3. Re-Allocate Regained Funds

Third, your regained funds can be re-allocated to higher value opportunities. These new investments will likely yield ongoing returns. This is another layer of growth in your CX annuity.

CX Cost Reduction

4. Gain 3X Higher Revenue

Fourth, when you remove the pebble from your customer’s shoe, they are free-up to do more, appreciate more of your high-end benefits, and expand your revenue.  This adds significantly to your CX annuity. Saving customers’ time, resources, worry, or embarrassment is marketing gold: these achievements differentiate your brand and magnetize new and returning customers. The Advocacy Drives Growth study by the London School of Economics revealed 300% higher revenue by reducing negative word of mouth by 1%, in contrast to increasing positive word of mouth by 1%.

CX annuities redirect executives’ focus.

A. Be a Facilitator

Position your experience managers as facilitators of CX+EX+PX performance ownership among your whole enterprise. Like the players on a team sport, anyone in your firm can cause poor experience. This means 50% or more of XM effort and budget should be focused on collaboration among non-customer-facing groups, rather than touchpoints.

B. Stop Recurrence

Reward managers in every work group for stopping recurrence of a key issue’s root cause. In a team sport, players focus first on their behaviors needed to maintain possession and advance the ball. By focusing on the needed behaviors, the win is inevitable. This means reviews and rewards of all kinds are focused on true leading indicators: what your teams control “before the train leaves the station”.

C. Emphasize Prevention

Elevate preventing occurrence of issues for customer, employee and partner experience as your firm’s ultimate goal. Sports teams thrill fans when they maximize their offensive (proactive) strategy and minimize the need for defensive (reactive) strategy. This means onboarding and development of all kinds are focused on crystal clear CX+EX+PX expectations as performance standards.

Conclusion

This CX annuities approach works wonders! We followed this approach when I led company-wide customer experience transformation during my 11 years at semiconductor equipment maker Applied Materials. We generated massive savings and impressive gains, such as 10X increase in customer productivity, 6X improvement in trouble-shooting cycle time, and $1M savings monthly to the customer. When CX annuities is the heart of your strategic planning, you will lengthen experience managers’ tenure and productivity, with sustainably spectacular ROI.

Note: ClearAction’s masterminds, masterclasses, and mentoring teach your team everything they need to know to bring CX Annuities to life in your organization. Each of these is designed as 5-minute to 90-minute resources. Super affordable: we believe every organization needs to adopt these practices for the new dynamics we all face today.