Testing CX Initiatives for Financial Benefits: Measurement Models for your Business Case

Measurement models Customer Experience

Widely used Customer Experience measures provide soft associations with benefits instead of hard numbers on financial investment results.


By Scott McCallister and Mohamed Latib


All Customer Experience gurus state that a connection of CX initiatives to the company bottom-line is important, but few discuss the hard details on how to do that. Past publications on this issue make a weak business case because they rely on analyses of correlations between satisfaction survey results and corporate or division-level revenues.

In this article, we will describe several types of tests that can be structured to determine whether CX initiatives have a positive effect on a company’s financial results. The types are:

  1. Actual results versus baseline expectations of a business segment
  2. Actual results of a test group versus a control group
  3. Comparing actual financial results of individuals and groups of customers with different CX exposures

Financial Results Using a Baseline

One test of CX financial benefit is to compare actual results to a baseline expectation.

Define the Segment

Identify a segment of the business that will be affected by a CX initiative. The segment should have its own regularly reported financial results and should not be expected to have any other significant changes to its business over the testing period.

The type of segment will depend on the industry or business. It may be a retail location, an MSA, a B-to-B sales territory, customers served by a customer service unit, or some other type of segment appropriate for the CX initiative planned.

The goal for selecting the segment is to have confidence in the baseline forecast, i.e. the segment’s financial forecast if no CX activities were initiated.

Establish Tracking Before Implementation

The time-period of the test should be chosen based upon the planned speed of the CX initiative roll-out and the normal customer purchasing cycles of that segment.

To implement the test, start the CX initiative and track all important bottom-line measures including revenue growth, revenue per customer (separating existing from new customers if possible), and profit contribution. The profit measure should be Gross Margin or a special measure that includes any expense items like special CX investments, customer service, or marketing expenses that will be different with the CX initiative.

Compare Baseline to Actual Results

After the testing period, compare the actual results to the baseline forecast. The degree of difference in results can be attributed to the CX activities.

The persuasiveness of this testing method will depend on the predictability of the baseline and the ability to adjust it credibly for any unanticipated events during the test. It is possible to do this analysis retroactively, but the segment must be chosen carefully and the baseline free of any taint of confirmation bias, i.e. that segment and baseline forecast were chosen because they confirm the business case.

Financial Results Using a Control Group

A second type of test is to compare actual results to a control group. This method is similar to the baseline test, but the comparison of actual test results is made to another business segment that will not be affected by the CX initiative over the test period (the control group).

Match Profiles of CX Test Group and Control Group

The profile of the control group segment needs to be as similar as possible to the CX test segment. The criterion should be relevant to the business being analyzed and may include:

  • Demographic profiles
  • Product purchasing mix
  • Macroeconomic environment
  • Major non-CX initiatives – marketing, new product rollout, etc.
  • Other relevant comparisons

Special effort may be required to ensure that the CX activities being tested do not affect the control group.

Compare Test and Control Groups

At the end of the test, the difference in financial performance between the tested segment and the control segment can be attributed to the CX initiative.

This testing method has the advantage of not needing a baseline forecast, which is always speculative. The key persuasive power of the result lies in the comparability of the testing and control segments. The method is best suited to an organization that is starting to consider a major commitment to CX initiatives. An organization that has already rolled-out CX activities broadly can only take this approach for additional types of CX activities.

Financial Results Using Ad-Hoc Test Groups

A third type of test is to analyze the actual financial contribution over time of ad-hoc test groups comprised of individuals or customer segments who have had different CX exposures.

Create the Customer-Level Database

This test requires capturing or allocating all relevant information into a customer-level business intelligence database. The content for every customer includes:

  • Financial information
  • Customer profile characteristics
  • Customer touchpoint activities & observations
  • Exposure to CX initiatives
  • VOC survey responses with customer names

Perform Wide Range of Ad-Hoc Testing

While this approach will probably be a significant business intelligence challenge, the potential benefits are great. Segments for analysis of actual results can be created on an ad-hoc basis for retroactive analysis rather than being structured in advance. All customers who have been affected by a certain CX activity (for example, special upgrades) can be grouped into a segment and compared to a group of customers who are similar but have not been touched by that activity. The sample sizes for such segments can be much larger and statistically significant than are generally practical with survey results.

Furthermore, individual customer buying patterns can be compared before and after a certain experience. Each company would start with the touch point and buying pattern data being captured in its Customer Relationship Management (CRM) and accounting systems, then start saving new data that will add insights to this CX analysis.

If such a customer-level database is created, then many important questions can be analyzed.

  • Do highly satisfied customers buy more products than average or how many dissatisfied customers stop buying?
  • How satisfied are first-time customers or infrequent purchasers?
  • Do customers who have been touched by CX initiatives have different NPS scores than those not affected?
  • Is the financial contribution of customers who have been touched by CX initiatives superior to similar customers who have not?

Analysis of individual customers over time can also be revealing. New customers can be tracked separately to try and understand why some become loyal and some disengage. A customer who receives special service accommodations or recovery incentives can be tracked for changes in buying level. For customers who have responded to surveys more than once, have their satisfaction scores changed over time?

Use Customer-Centric Database for Issues Beyond CX

A truly customer-centric database will allow all sorts of tactical and strategic issues to be analyzed retroactively. This includes analyses with strategic value beyond CX, such as who are the organization’s best customers and what happens to them over time? Which customers have a profile where they would be expected to buy a broader range of products and services, but do not?

Furthermore, artificial intelligence (AI) could be applied to this database which might reveal unexpected insights. The possibilities are exciting. Of course, such benefits are dependent on the quality of internal customer records, but that is a separate topic.

Choose Best Approach to Test CX Financial Benefits

CX initiatives should be tested for financial benefit to galvanize senior leadership support for future investments. This article has described three approaches for how to do that, and each type of business must determine which is appropriate for their situation. We believe that the ultimate solution is to connect most business activities and knowledge to individual customers to create a powerful customer intelligence capability. That may be too complex or expensive for many companies, but this future-state vision could guide improvements over time by integrating VOC, CRM, business intelligence and financial systems.

This article is co-written by Scott McCallister and Mohamed Latib.

Scott McCallister

Scott McCallister

Scott McCallister is a senior executive who excels at strategic management. He combines creativity and objective analysis to define winning market positions, identify growth opportunities and develop integrated business strategies. Scott is a hands-on leader who establishes strong financial and operating discipline to redefine processes, measure progress and guide profitable delivery of products and services. In addition to his role with CX University, Scott has worked with entrepreneurial companies as an executive or as a consultant through the firm he founded, McCallister Consulting. His experience includes companies in a range of technology industries including mobile shopping applications, bio-nanotechnology instruments, DNA sequencing systems, information security consulting, telecommunications services, and direct-to-consumer products. Scott also has deep experience with cross-functional problem solving for global organizations. He was a VP for strategy consulting at Cap Gemini Ernst & Young, a partner heading internal strategy at Ernst & Young US and a VP of strategy consulting for Strategic Planning Associates, Inc., a leading international management consulting firm that pioneered the application of advanced valuation techniques to business strategy. He holds an MBA in marketing from the Wharton School at the University of Pennsylvania and a B.A. in mathematics from Dartmouth College.

Leave a Reply