Quantifying the business impact of improving customer experience
Finding real examples of companies that have been successful in translating improvements in Net Promoter Score into increased revenue is difficult but not impossible.
Mark Newman, TM Forum24 Aug 2020
Quantifying the business impact of improving customer experience
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Many research firms have attempted to quantify the business impact of improving customer experience, but in most cases the numbers are based on theoretical models. Finding real examples of companies that been successful in translating improvements in Net Promoter Score (NPS) into increased revenue is difficult, although not impossible.
At the end of last year Forrester produced a piece of research entitled How customer experience drives business growth. It assessed 14 industries, each with its own model based on the “business impact of each customer’s (dis)loyalty.” In the case of automotive manufacturers, for example, Forrester estimated that improving customer experience by one point could translate into more than $1 billion in additional revenue.
Research from Gartner has found that companies soon will be valued by their information portfolios. One of its studies showed how companies demonstrating "information savvy" behavior like hiring a chief data officer, forming data science teams and setting up data governance can command market-to-book ratios well above the market average.
The reality for most communications service providers (CSPs), however, is that their boards – while fully embracing the drive for better customer experience – are unable to trace a direct impact on overall profitability. And when it comes to their use of data, most operators are only paying lip-service to leveraging data without really understanding what is needed or indeed possible.
We interviewed the CTO of a European telco who has held leadership roles in several operating companies about commitment at the board level to leveraging data as an asset “Most executives talk about how important data is, but when it comes to real commitment they are often lacking,” he says. “It took me five years to get the ball rolling in my current role – and that is only for the use of data in the network.”
Vodafone UK is an exception and the company’s success is precisely the type of case study that the telecoms industry needs to drive greater commitment to and investment in data-driven customer experience. Vodafone UK recorded quarter-on-quarter increases in revenue after leveraging TM Forum Open APIs to implement a new microservices-based digital experience layer. In 2018, Vodafone UK managed to improve its consumer Net Promotor Score (NPS) by 13 points from +9 to +22, which at the time was an all-time high. It has since risen to +33.
Vodafone UK’s NPS improvement resulted from implementation of the digital experience layer, which helps the operator’s IT group roll out more than 40 on-demand production releases a day. The team has achieved zero downtime while deploying microservices into production, and total cost of ownership has been reduced as a result of reuse, adoption of cloud applications and an automated continuous integration and delivery pipeline.
Many research firms have attempted to quantify the business impact of improving customer experience, but in most cases the numbers are based on theoretical models. Finding real examples of companies that been successful in translating improvements in Net Promoter Score (NPS) into increased revenue is difficult, although not impossible.
At the end of last year Forrester produced a piece of research entitled How customer experience drives business growth. It assessed 14 industries, each with its own model based on the “business impact of each customer’s (dis)loyalty.” In the case of automotive manufacturers, for example, Forrester estimated that improving customer experience by one point could translate into more than $1 billion in additional revenue.
Research from Gartner has found that companies soon will be valued by their information portfolios. One of its studies showed how companies demonstrating "information savvy" behavior like hiring a chief data officer, forming data science teams and setting up data governance can command market-to-book ratios well above the market average.
“Anyone properly valuing a business in today’s increasingly digital world must make note of its data and analytics capabilities, including the volume, variety and quality of its information assets,” Douglas Laney, VP and Distinguished Analyst, Gartner, said in a statement about the research.
The reality for most communications service providers (CSPs), however, is that their boards – while fully embracing the drive for better customer experience – are unable to trace a direct impact on overall profitability. And when it comes to their use of data, most operators are only paying lip-service to leveraging data without really understanding what is needed or indeed possible.
We interviewed the CTO of a European telco who has held leadership roles in several operating companies about commitment at the board level to leveraging data as an asset “Most executives talk about how important data is, but when it comes to real commitment they are often lacking,” he says. “It took me five years to get the ball rolling in my current role – and that is only for the use of data in the network.”
Real evidence
Vodafone UK is an exception and the company’s success is precisely the type of case study that the telecoms industry needs to drive greater commitment to and investment in data-driven customer experience. Vodafone UK recorded quarter-on-quarter increases in revenue after leveraging TM Forum Open APIs to implement a new microservices-based digital experience layer. In 2018, Vodafone UK managed to improve its consumer Net Promotor Score (NPS) by 13 points from +9 to +22, which at the time was an all-time high. It has since risen to +33.
Vodafone UK’s NPS improvement resulted from implementation of the digital experience layer, which helps the operator’s IT group roll out more than 40 on-demand production releases a day. The team has achieved zero downtime while deploying microservices into production, and total cost of ownership has been reduced as a result of reuse, adoption of cloud applications and an automated continuous integration and delivery pipeline.
Optimization of non-production environments has delivered an additional cost savings of £500,000 ($621,000) per year, and the Vodafone UK digital experience layer has become the one Vodafone now uses across its entire group of operating companies. Vodafone UK also has seen measurable improvement in terms of subscriber growth and increased revenue. In the second half of 2019, its customer base started growing again after stagnating during 2017 and 2018 (as of December 2019, the company had 19.4 million subscribers). Revenues have also started to grow again, but it is more difficult to see a clear trend in churn rates (see graphic below). This would be the biggest proof point for justifying greater investment in improving customer experience.
Reduction in churn is another way of demonstrating the benefits of improving customer experience. Hong Kong-based PCCW has seen a reduction in churn from 1.3% per month to 1.1% in the last few years, although its commitment to data goes back five or six years.
Reducing churn
Reduction in churn is another way of demonstrating the benefits of improving customer experience. Hong Kong-based PCCW has seen a reduction in churn from 1.3% per month to 1.1% in the last few years, although its commitment to data goes back five or six years.
Group CTO Paul Berriman says PCCW’s investment in data has always been driven by a desire to improve customer experience. One of the company’s initiatives has been to partner with an analytics vendor to create a “Customer Happiness Index”, which measures customer satisfaction by analyzing several types of data including customer, network, social media and call-center data. NPS only measures customer data.
