This blog was written by Harald Fanderl (Principal, European Marketing & Sales, McKinsey) and Jesko Perrey (Director, global Brand & Marketing Spend Effectiveness group, McKinsey)

If you believe that high customer satisfaction requires spending more, you’re not alone.

But you are mistaken.

Through experience with dozens of companies, we’ve seen that there are huge opportunities to both cut costs and grow if you invest wisely in customer experience.

That’s especially the case when it comes to delivering a great customer journey – those series of interactions a customer has with a brand to get something done. If it sounds too good to be true, the data say otherwise. We know that brands that improve the customer journey experience see revenues increase as much as 10 – 15 percent while also lowering the cost to serve 15 – 20 percent.

How is that possible? The reality is that there are significant inefficiencies over the typical customer journey, which often cover multiple touchpoints managed by different parts of an organisation (website, sales, call centre, etc). In many cases we see that procedures are duplicated. Poor standardisation creates confusion and slows down the overall process, and ingrained habits make change virtually impossible.  Eliminating those issues reduces costs and createsa better experience for the customer as well.  

Four steps

1. Get your teams together

Since different parts of the organisation own different parts of the journey, most employees have no idea what the complete customer journey looks like outside of their own narrow point of interaction with the customer.

For example, management at one leading car rental company wanted to improve the pick-up journey at airports. They pulled together a team that represented all the phases of the journey, among them counter staff, car cleaners, exit gate personnel and bus drivers. By the end of the pilot, customer service scores had doubled, revenues from upselling had climbed 5%, and the cost of serving customers had dropped 10%.

2. Don’t just solve problems; root them out

Customer complaints can be expensive but also valuable. If you figure out  why a problem arose and then solve it, the number of complaints will drop. So will your costs.

One European energy company examined complaints from customers who were moving house and discovered that there were 18 steps required to set up the utility in their new home. The company was able to cut the steps for relocation to just 5, and also thereby reduced costs by 40-50%. The number of complaints also dropped, and with it the number of people handling them: from 109 to 20.

3. Understand when it pays to improve the experience, and when it doesn’t

When speaking with your CFO about investments in customer experience, it’s important to have good data on hand. In our experience, one of the most critical piece of data is what’s called “break-point analysis,” which shows at what point it is no longer profitable to improve a particular customer experience.

For example, a car rental company’s breakpoint analysis found that customers didn’t care much whether they waited in line for 3 minutes or 5 minutes. Cutting waiting times from 5 minutes to 3 minutes would be expensive so the company decided it wasn’t worth it. That’s the kind of analytical rigour a CFO wants to see.

4. Keep your metrics focused on what matters

Figure out which key performance indicators (KPIs) really move the needle, and focus on these. One energy provider had 150 KPIs and could not agree about which were the important ones. Then it drilled down to the 8 most important KPIs, concentrating on a manageable set of core metrics, to drive the business.

When it comes to customer experience, companies are too often rooted in an “either/or” mentality. The fact is that companies need to have a broader view of the benefits of providing excellent customer journeys to deliver growth and savings.