Business Value & ROI of
In order for cannabis companies to be successful and create a competitive advantage, brands need to build meaningful customer relationships that impact retention, referral, and reputation management.
Organizations of every size need to be gathering feedback and acting on the concerns of their most important constituents – their customers.
Brands need a comprehensive technology platform that captures, addresses, and responds to customer feedback in real-time; providing the quickest and easiest way to:
- Ensure customers are happy
- Allow brands to make better-informed decisions
- Increase loyalty
- Cut marketing waste.
But yet, the hardest challenge is gathering real feedback from customers in a way that is easy to manage, organize, and take action on.
We understand that disbursing money on customer experience is often difficult to justify when the financial perks are not apprehended well because of the uncertainty of return on investment and unquantifiable improvements. If improvements on customer satisfaction are made, how does that impact revenue, profit, market share?
Business leaders are well versed with these metrics but measuring customer experience is completely different and at times unpredictable because of consumer perception and actions taken by brands. This means that oftentimes customer dissonance will decrease customer satisfaction resulting in a loss of retention.
Keep in mind that 82% of customers say they stop buying from a business after just 1 bad customer experience and that it’s roughly 10x more costly to acquire a new customer than retain an existing one across all industries. In cannabis, it can be as high as 25 times more expensive.
Let’s dive deeper into the financial benefits of enhancing customer experience and how to understand the value of CX metrics.
CX: The Vanguard of Revenue and Growth
A 2019 Event Marketing Statistics, Trends, and Data study has demonstrated that profitability and retention are impacted by customer experience: 86% of buyers will pay more for a better experience, but, only 1% of customers feel vendors consistently meet their expectations.
This means that customers won’t do business with you unless you give them a reason to and connect on their level and that a lot of companies, even the biggest names in cannabis, don’t really understand their customers. Thus, gathering valuable and actionable feedback can eliminate guesswork and help create more consistent and meaningful experiences.
Loyalty: The Driver in Results
Improving customer retention is primarily a result of good customer experience leading to growth in revenue. Customers belong at the heart of your businesses and ensuring they feel listened to and understood can mean the difference between completely dominating the market, or barely hanging on by a thread.
According to a 2014 study by Harvard Business Review of 403 CEOS, 71% said Customer Experience increases profitability, revenue, growth, and customer retention, but only 1% feel that they’re actually getting it.
Bad customer experiences, unfortunately, happen constantly. As previously stated, 82% of customers will not return after one bad experience. With many new cannabis companies entering the market every day, consumers have more options than ever before.
Therefore, for companies to remain competitive, and keep customers from defecting to the competition, they need to pay very close attention to experiences their customers are having, or risk forever losing customers to companies who do.
It’s clear that Customer Experience and Retention are closely linked to a brand’s revenue growth, but what about its long term impact? The long-term impact is that the return on investment to shareholders with above-average customer experience was 4x higher than below-average companies over a ten year average in a study done by Mckinsey & Company. But how long will companies see results from improving customer experience?
Although this is a lengthy window, it requires patience to see the financial benefits from investing in customer experience.
Market share is another long term pay off when businesses invest in improving customer experience. However, even market leaders usually don’t have an average rate of customer satisfaction due to broad segmentation although they serve a diverse group of people. Niche businesses that focus on offering their services to a specific audience have the highest satisfaction.
This doesn’t mean that companies with less market share can lead to higher customer satisfaction and a positive trend towards retention because the correlation is much more complex despite how closely CX and market share are related. It also means that spending more on improving CX isn’t always the answer. When cannabis brands invest in a flexible payment program, this is answering one case, but often fails to meet customer expectations which negatively impacts retention and repurchasing.
The customer experience is the sum of every interaction a customer has with the brand throughout the relationship and journey. With a feedback management system, brands will not just be order takers, but really build relationships, where they can help people.
It’s not just collecting the feedback, but taking action that matters. By actively engaging, listening, and responding to customers, you gain their trust, loyalty and enthusiasm. And by taking into account their feedback and behaviors, your business is empowered to make more intelligent decisions that feed bottom-line results.
To put this into further detail, KPMG has divided customer experience drivers into three segments:
Must-haves: Basic principles of experiences that organizations must get right. Neglecting to meet these expectations will negatively impact customer satisfaction while exceeding these expectations will only have a neutral result.
Selectors: The elements of customer experience that influence a customer to choose one company over another. Exceeding this factor has potential for increasing satisfaction while failure to meet these expectations will have a negative result.
Delighters: Experiences that amazes the customer due to high level of service when the other factors are met.
How do you know what KPIs to look for? Looking at the competitive gaps should help determine what issues to tackle and drivers to attract customers in addition to asking your customers with NPS feedback is key indirectly finding what factors drive detraction and appeal.
Apart from NPS, it’s important to understand experience design and thinking about the customer journey from the customer’s perspective then creating products and services around that.
Although customers come first, employees must be included in this culture and are as passionate about the model to deliver to your customers. Now let’s see how this can be applied to your company.
The Financial Gain of CX:
Once you have collected customer feedback, understanding whether improving a certain driver financially makes sense is the beginning. Companies must understand the financial impact from how customer experience affects customer behavior.
- Measure the customer experience journey to know how your customers feel about you through a real-time feedback collection system with a metric such as NPS to provide indicators to take actions on.
- The next thing to do is to understand how the experience metric impacts behavioral metrics. Do this by building a hypothesis on how a better experience will lead to opportunities for upselling, referrals, fewer complaints, and etc then testing.
- Then calculate how these metrics impact the financials through an ROI model for improving CX.
- The fourth thing to do is to understand what drives the CX metric and the amount it will change.
- Finally, make a cost-benefit analysis to compare how much it costs to fix the issue with its benefits.
The Difficulty of Understanding ROI of CX:
Lack of historical data or budget is often the main factor in making difficult decisions due to no platform to correlate to your financial results. Another barrier to understanding ROI of customer experience may be due to data related issues such as companies just beginning to collect feedback resulting in the inability to compare behavioral and financial data.
If your brand is experiencing these, then it’s best to start by building a basic customer experience management program by identifying the top five drivers to focus on. This could be from changing the customer response rate to communicating developmental changes to your personnel to be more aware of customer criticisms and changing their behavior.
After observing how these actions start to impact customer experience then move towards the more costly challenges that need improvement. Unfortunately, the industry lacks many of these tools to understand and measure CX.
That’s why we’ve developed a customer experience and feedback management to help your brand collect, manage and respond to valuable feedback to keep your customers happy, make better-informed business decisions, increase loyalty and cut marketing waste!
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