• In lesson #1, we discussed the steps that are necessary to develop a compelling customer experience strategy that can deliver meaningful and lasting results.

• In lesson #2, we showed you how to translate those ideas into an action plan.

• In lesson #3, we taught you how to look for customer experience opportunities in your business.

• In this lesson, we’ll show you how to develop that all important customer experience business case.

If you are reading this, then you know that customer experience is important: Good experiences can increase customer loyalty, profitability, and share of the wallet. However, many companies find that quantifying the customer experience business case can be difficult. As a result, their customer experience projects can fail to get funded, be unpredictable, or fail to realize adequate results.

We recommend that you develop a formal customer experience business case that links the project activities to specific value drivers. Then, use the business case as a management tool, not as another pretty document that collects dust on the shelf.

Step 1: Identify Your Value Levers

Before you begin your customer experience project, establish a clear path for how you plan to improve your customer value. Then, align all related stakeholders and other projects to achieving this common goal. By doing so, you can get your organization moving in the same direction.

A clear understanding of customer value can be a powerful motivator and can spur people to contribute to the goal – even if it may not be in their own best short-term interest. In the end, aligning your customer experience project to tangible customer value metrics can help you find your way to customer experience domination.

Finding your customer value involves identifying which direction that you want to take and what results you want to achieve. Sometimes choosing the right direction can be difficult. The tool that we’ve found to be very helpful in connecting the dots between customer experience strategies and business returns is the ClearBrick Customer Value Compass. This tool provides a clear representation of the customer centric revenue-generating and cost-reduction levers that can contribute to total business returns.

Although we’ll cover the basics here, you can get the complete step-by-step explanation of ClearBrick Customer Value Compass in our report called ‘How to Find Your Customer Value’, which you can get here.

Here’s how the value compass can help you to identify your customer value levers. At the center of any customer experience project should be total returns, which represents the net benefit that is realized by your customer experience project. How you achieve those results is accomplished by pulling (or pushing) on one or more of your customer value levers.

Value levers can represent multiple dimension of business value, but for simplicity purposes we have defined two categories of value levers; revenue-generating levers, and cost-reduction levers. For this lesson, we’ll focus on the revenue-generating levers.

For example, there are three major customer value levers that can influence top-line revenue in your business:

1. Increase DEPTH of Relationships: Increasing the depth of your customer relationships equates to increasing your share of the customer’s wallet. That means that the customer will visit you more often, avoid competitive offers, and go out of their way to work with your company. Establishing deeper relationships with your company can be accomplished by improving customer loyalty and by working more closely with your customer to better serve their needs.
2. Increase BREADTH of Relationships: Increasing the breadth of the customer relationship means expanding your customer base or expanding the portfolio of products or services that you sell to your current customers.
3. Increase DURATION of Relationships: Increasing the duration of the customer relationship equates to retaining your existing customers for a longer period of time, resulting in an increase of total transactions over the lifetime of the customer relationship. This can be accomplished by either enhancing customer care or improving overall retention factors.

Clearly identifying your customer value levers and choosing which ones to target is an important step for any customer experience project. Too often, companies miss the mark with their customer experience projects because their customer value goals aren’t clearly defined, well understood, or aligned with other business initiatives. You can avoid this common pitfall by clearly identifying the value levers that will form the foundation of your customer experience project.

Identify which value drivers make the most sense for your business and take one step closer to customer experience domination.

Step 2: Assemble the Business Case

You should now begin to assemble your customer experience business case. The business case is a cash flow model that reflects the project costs and benefits over time. The business case is often used as a litmus test to determine if the project’s return on investment (ROI) is acceptable in light of the potential risks.

The business case should include both tangible and intangible costs and benefits to be achieved by the project. Remember the value levers that we identified in step 1 – they will be used to create the foundation of your business case.

Often, the more details that you can incorporate into the business case, the more accurate the model will be. Value levers can get you started. Value levers can be defined in more detail by outlining the value ‘drivers’ that influence each lever. Value drivers can also be defined in more detail by identifying value activities, and so on, until you get to the lowest level metric that contributes to customer value. Also consider creating business case scenarios such as best case, expected case, and worst case to model potential variances in both cost and benefit factors.

To learn more, get our complete report titled ‘How to Build Your Customer Experience Business Case’ now.

As you develop your business case, take into consideration the core factors that will impact the overall value potential for your project:

• Time & Approach: Your project approach will often determine the pace at which resources and funding are consumed. For example, a more aggressive approach may require more resources and funding.
• Resources: Executing projects require resources to get the job done. The primary and most critical resource is often people, but resources may also include the utilization and availability of property, equipment, and systems. Often, but not always, the more resources deployed on the project, the quicker that it can be completed. More resources, however, also equates to more funding.
• Funding: Funding is a key to the other factors of the business case. Funding can determine how many resources can be utilized on the project.

Establishing your business case typically means finding an acceptable balance between time, resources, funding, and scope. It is important to identify up front which of these factors can be flexed, if necessary, once the project is underway. For example, a project that has a hard and fixed timeline must be willing to flex funding and resources to get the job done. Conversely, a project with fixed funding will most likely need to flex the timeline and resources to fit within the budget.

The business case should identify the specific costs and benefits associated with your customer experience project. All estimated costs and benefits should be updated with actual amounts once they are realized. As such, the business case should become a living model that is updated throughout the project.

The purpose of the business case is to weigh the project costs against the anticipated project benefits. Ideally, you want the cumulative project benefits to exceed the costs. Obviously, your goal should be to deliver a profitable project.

A simple and proven method for evaluating the value of your project is to model the cost and benefit cash flows over time. Then calculate the net present value of the net cash flows to determine the Net Present Value (NPV). A higher NPV represents a more profitable project. If the NPV is close to zero, or negative, then you should go back to step 1 to identify additional value levers that could potentially yield better benefits.

Step 3: Use the Business Case as a Management Tool

Many companies realize that the business case is a critical tool to help identify, model, and measure the results of any project. However, many companies fall into a fatal trap; they develop the business case only for project approval – then set it on the shelf to collect dust during the project. Along the way, they may make management decisions that are inconsistent with the business case – and the results are either not measured, or vary significantly from what was planned.

ClearBrick recommends that companies use the business case as a management tool. Keep the business case up to date and review the status of costs and benefits at every project status meeting. By doing so, you can review and gauge your progress against the business case and make the proper adjustments along the way. After all, achieving the results of your business case is a clear way to measure whether or not you’ve reached your goal.

Using the business case as a management tool should be a common practice for all customer experience projects. Companies can use the business case as a management tool by following a few simple tips:

• Align your stakeholders to a common measurable goal. Without a common goal, seemingly unrelated efforts can dilute the potential results of your efforts. Make sure that everyone is aligned to achieving the same goal.
• Modify or expand on the customer value drivers provided. Use the list of customer value drivers provided in the Customer Value Compass to get started. Then expand or customize them to fit your own company’s unique needs and opportunities.
• Create a detailed business case that incorporates tangible customer value benefits. Use the customer value drivers as the foundation of a detailed business case, then measure progress against your business case as a key management tool.

As simple as it sounds, too often customer experience projects miss the mark on improving customer value. If customer value goals either aren’t clearly defined, well understood, or aligned with other business initiatives, customer experience projects can get off track and fail to fully realize their intended results. Improve your results by establishing a clear and common understanding of how you plan to improve your customer value.

That wraps up Lesson #4. To recap our lesson, the three steps that we covered included:

1. Identify Your Value Levers
2. Assemble the Business Case
3. Use the Business Case as a Management Tool

Stay tuned for Lesson #5, where we’ll cover the basics of effective customer experience project management.