The New ROI: Return On Interaction

by D. Daniel Ziv, Jul 20, 2010, 8:36 AM

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Most companies have the ability to estimate expenses associated with customer interactions. The formula is fairly straightforward. Take the cost of a live customer interaction -- which is often measured by average handle time -- and then multiply it by the "per minute" cost associated with having a live agent on the phone, including any additional relevant overhead. These same organizations, however, don't always have an effective parallel process to measure the value created by the same customer interaction.

This unbalanced management style focuses more on cost and less on value, causing contact center and enterprise strategies to look more heavily at cost reduction and less on increasing the actual value created. This alone can be an expensive mistake. A recent Forrester study looked at interactions across 12 industries, and in doing so discovered that quality customer experiences can generate as much as $311 million per year.

A new ROI (Return on Interaction) model can be used to help measure the value created during a conversation with the customer. For example, let's say you have a very positive customer experience with a certain channel -- such as a live agent interaction. Many organizations tend to deflect customers to other channels with the intent to reduce costs, and this is where they may go wrong. For some interactions they should actually implement a strategy that increases live agent experiences, creating an opportunity to build customer relationships and loyalty.

The same Forrester study discovered a high correlation between the customer experience and a reluctance to switch, the likelihood to recommend and a willingness to buy more. That begs the question: how do you create that special combination or kind of value?

Creating customer interaction value can be achieved in several ways:

1) Generating direct revenue, including cross- and/or up-sell attempts,

2) Increasing the level of customer loyalty and retention for future revenue, and

3) Fostering positive word-of-mouth with "high value" influencers.

Direct Revenue Generation

Measuring the direct revenue created during an interaction is fairly straightforward, but securing up- and/or cross-selling opportunities is not always a simple task. Organizations that train agents to promote a specific product on every customer interaction may find low close rates and pushback from those that do not want to be "sold to" when they call in for service. Effective up-selling needs to be strongly correlated to the customers' reason for calling.

In my work with several financial organizations, certain agents figure this little trick out themselves -- while managing to creatively link the reason the customer calls to a very specific offer. In many cases, they accomplish this by actually straying from the original up-sell script that they were trained to follow. For example, a customer may contact his/her bank about a certificate of deposit (CD). An agent with access to the system can see that the customer doesn't have a savings or money market account, link the two pieces of information together, and then formulate the up-sell opportunity by offering additional financial flexibility to the customer.

Further, in contact center operations, businesses can learn from their best agents by leveraging tools such as speech analytics -- which can provide them the top and most recent reasons why customers call. The organization can then apply this data to determine creative links between these reasons and the company's various product and service offerings. From there, organizations can leverage solutions, such as real-time desktop analytics, to suggest specific products and even specific words and phrases that have been found to be more effective in cross- or up-sell situations.

Indirect and Future Revenue

Measuring loyalty and potential future revenue can be even more challenging. Many organizations seek customer feedback, but in doing so, they aren't asking the right questions -- those that would allow them to tie the information collected back to the value of the last interaction. Instead of asking customers generally whether they would recommend the company to a friend, they could go a step further and ask whether they are "more likely" or "less likely" to recommend them as a result of the last interaction. By diving down to this extra layer, organizations can quantify the impact of customer interactions and even track feedback between multiple calls to see if loyalty is increasing or decreasing based on specific actions.

Positive Word of Mouth

Today, many customer service organizations are trying to get their head around the impact of social media. Specific to these channels, companies should consider segmenting customers not only by their direct revenue, but also by their visibility to other potential customers. Some organizations have even started targeting individuals, who may be considered influencers based on the number of friends they have in social networks, or blogs to which they contribute. Although quantifying the actual dollar value associated with future revenue based on positive customer experiences is complex, not taking a customer's social influence into account at all may lead to sub optimal strategies and a skewed customer interaction balance sheet.

Everyone wants to get the best "bang for their buck" when it comes to the implementing a smart customer interaction strategy. But to do so, the acronym ROI needs to take on new meaning in today's organizations. Return on interaction isn't just about the combined cost of overhead and contact center agents. It's about understanding the true value of an interaction, and using that intelligence to feed data into the enterprise to yield relationships and revenue not just for today, but for years to come.

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0 comments on "The New ROI: Return On Interaction ".

1. Christie Adams from SaleSpider.com
   

   commented on: July 20, 2010 at 12:08 p.m.

   Thank you! Many of us have been saying this for years and I think we'll find that as social networks become easier to measure, we'll see a rise on the "return on interaction" approach.
   

2. Gregory Yankelovich from Amplified Analytics Inc
   

   commented on: July 22, 2010 at 1:25 p.m.

   Excellent article! Return on Investment model in CRM emphasized reduction of transactional cost at the expense of customer loyalty. It happen primarily because financial impact of loyalty and quality of customer relationship is very hard to measure while optimization of a single point (cost) parameter, i.e. cost saving, is very easy to do. We settle for quick answers to problems because we prefer the certainty of any answer to the uncertainty of waiting for a good one.
   

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