In the future, companies measure Return on Experience before Return on Investment. Here is why.
This article was co-authored by Anders Martinsen
An ordinary hotel in Los Angeles knows that a red telephone at the pool is the reason for their huge success. Southwest Airlines knows that their silly, but entertaining, safety instructions on the plane result in an additional $ 140 million in revenue. They reap the benefit of that knowledge through the systematic use of “Return on Experience”. But do you know what experiences are crucial to your company’s success? If not, read through here and learn how to create “Return on Experience” — ROX.
What is ROX?
Where ROI (Return on Investment) measures the return on one’s investment (i.e. how much money we invest and how much money we get back in x number of years), ROX measures across the company to find correlations that have decisive influence on the customer and employee experience — and which can ultimately have a positive effect on the bottom line. ROX is not a model you can go out and buy and just implement. ROX is actually more next practice than it is best practice.
It is about experiences
We don’t sell products anymore, but experiences. Volvo does not sell cars, but safety, Patagonia does not sell outdoor clothing, but sustainability and IKEA is not selling cheap furniture, but “a better everyday life for the many people”.
These stories must ultimately manifest themselves in real experiences when we, customers and employees, interact with the brand.
Therefore, it is important for organizations to understand what experiences are crucial for their success, how the different experiences are correlated — and especially how employee experiences and customer experiences affect each other. Because it’s the people in the business who create the customer’s brand experience.
The five elements in ROX
ROX should be used to identify these contexts and spot the moments when a high value is delivered. And the possibility of finding correlations have improved as digitalization is generating a lot more data insights to work with.
In “The Consumer Insights Survey” from 2019, PwC made a bid for an overall model for ROX. Here, the connection between the five areas is pointed out:
How engaged are employees in the company’s purpose and strategy?
“We know that 3% of staff influence 85% of the organization. We also know how magnetic the 3% is in driving perceptions within the organizations. If they are positive then they drag the perceptions of everybody else upwards. If they are negative, we see the opposite.” Jeppe Vilstrup Hansgaard, CEO Innovisor
If we take the insights from Innovisor for granted, you have to know to what extent your influencers — or informal ambassadors — are engaged in delivering good customer experiences. Informal ambassadors have no title or rank. They are the people, who energize or demotivated their colleagues and thus have a big influence on the customer experience. Informal ambassadors can be identified by running an ONA (Organizational Network Analysis).
What is the key to business success? It is not a matter of being able to memorize seven values, but of uncovering the positive habits and actions defining your culture.
In which moments does the company deliver value to customers and employees? Often, a simple NPS, or ENPS score is used to identify how satisfied customers and employees are. However, that does not give you any clue about the magic moments that have a decisive impact on people’s or customer’s experience. Booking.com did a magnificent overview of the hotel experience once, showcasing which moments are impacting the guest experience. It showed, that employees have the biggest impact on the experience. Also, Peakon released a new report based on 11 million insights focusing on, what matters to people at different stages in their career.
What is the connection between behavior, experiences and the company’s performance? This is about finding out how the experience is impacting the bottom line. However, this is not always a simple calculation. You might find out, that the experiences you give result in higher loyalty (as it is the case with Southwest Airlines — see example later), employee retention or employee advocacy.
What is new and different about ROX?
Let us start by looking at what ROX is not. It is not a new Net Promoter Score or employee satisfaction survey. ROX tries to make the company aware of the experiences that lead to the result.
Many of the existing measurements often only come with a number, but without real input to what one can do better and/or must continue to do well. For instance, the Communication Dept. measures on the number of positive or negative reviews in the media, Marketing on the potential reach of their campaigns and sales on Net Promoter Score. These numbers give you very few clues about what you are doing good and what you need to improve.
At the same time, ROX is not the same as a “customer journey” or a “service journey”, but combines different insights to identify the connections between, for example, the “customer journey” and the “employee journey”.
It is both internal and external data insights that provide insight into which experiences are the decisive and which behavior gives the best results. With this knowledge, companies will be able to invest better in the areas that are crucial to the company’s success.
Improving ROX with nudging technology — “3”
The mobile company “3” has recently identified some of the connections between employee and customer experiences. This case from Actimo is a starting point, that I have interpreted a little further to create an understanding of how “3” can work with ROX.
“3” has a large network of stores in Denmark and therefore has many employees who help customers choose the right products. Here, good product knowledge is important in order to be able to deliver a good customer experience — and sell products. Good product knowledge can, however, be a challenge in an industry that constantly develops the technology, and where the store employees are often young people who quickly leave the company again.
For “3”, a simple ROX equation could look like this:
• The moment of truth is to provide good advice to customers as it leads to satisfied customers and ultimately more sales.
• In order to provide good advice, employees must know the products.
• The longer an employee is working for “3”, the greater the likelihood of good advice.
• Therefore, a high staff turnover leads to poorer advice, as the knowledge of new employees is typically lower, and they, therefore, need to spend time being trained.
• At the same time, it is known that a good onboarding process considerably increases the likelihood of employees staying longer.
In order to deliver at the described crucial moment, “3” chose to use a mobile solution that made it possible to communicate directly with the new employees in the stores. Information and quizzes were continuously sent out to ensure a high level of knowledge about the products and the onboarding process.
The results were convincing; The store employees stayed longer with “3” and sales went up. More precisely, they increased the retention rate by 40 percent (i.e. employees stayed 40 percent longer in the company than before), while sales were increased by up to 25 percent in the stores where the solution was used.
The lesson here is that “3” found a connection between well-timed and relevant information, a good onboarding process and sales. This means that the future ROX indicators could be to look at the correlation between retention, information sent out via the app and opening rates and sales. This could enable leaders to make more proactive decisions in the future.
Measuring the value of funny onboarding announcements: Southwest Airlines
Southwest Airlines has created an almost magical, moment on its flights. The tedious security review that must be provided by the staff before departure is often picked up tremendously by their employees.
And when Southwest analyzed which moments made customers choose Southwest over their competitors, they found out that the announcements were one of the reasons — and that they increased ticket sales equalling $ 140 million — a year. Add to this exposure to social media where some of the videos have up to 25 million views.
Southwest has long realized that the relationship between customer experiences and employee experiences is crucial. You can read more about Southwest’s culture here.
Creating one powerful experience: The Magic Castle Hotel
The Magic Castle Hotel has great success with its red telephone at the pool. It gives the children staying at the hotel the opportunity to call and order ice cream — for free! And when the kids are happy, so are the parents. At the time of writing, The Magic Castle Hotel is the second-best hotel in Los Angeles, only surpassed by the Four Seasons — despite the fact that it is by no means a particularly exceptional hotel.
They have just created a powerful experience at a crucial moment. And they know what to answer if a white-collar (like me) asks what the ROI is by having a red phone that gives free ice cream. The answer is simple: It pays off!
Who should implement ROX?
ROX cannot be implemented in silos. You must, therefore, develop a common approach across the company. It also means slaughtering some sacred cows.
- HR must develop a customized approach that makes sure employees can grow as they go. That is the opposite of ensuring everyone has had their annual performance review. And instead of measuring if people have complied with their process, they should start measuring if people are actually acting in ways that are related to the key behaviors. For instance — why not use the compliant rate for approved vendor purchases as an indicator for if people act responsibly?
- The Marketing Dept. have to focus more on engaging employees before they launch the next campaign to make sure employees can act as ambassadors for it. And live up to the promises made in the ad!
- The Internal Communication Department should stop measuring how many articles they publish. Rather, they should consider how they could help the Sales Dept. to implement a good digital solution that would enable them to communicate effectively with their employees in the field and hereby increase sales.
Whether the examples make sense to you or not, I hope you get the point that organizations have to focus on the common good and stop creating goals in silos that are counterproductive — or just measuring things that have no value in itself. We have to walk the extra mile to identify how our efforts are interlinked and deliver value — and challenge our existing ways of working by doing so.
How to get started
Ask yourself these questions:
1) What should our customers feel and share in every moment that matter of the customer journey?
2) How do we create a frictionless and coherent experience across our channels?
3) How can we create the framework for our employees better serve our customers?
4) Is there anything we can stop doing if we choose to focus on specific moments? Will we be able to do something smarter and more efficient?
5) What experiences should we measure — and who should be responsible for them?
6) Who has the responsibility and the decision-making power to prioritize the efforts across the departments?
Return on Experience is measured across the business. The business has to work together and executives have to prioritize what is most important. Silo-thinking and sub-optimization are counterproductive to delivering great experiences.
What you need to stop and start doing
Here are some things you need to stop — and start doing:
- Let’s stop rewarding departments and people for achieving their own goals and instead reward the entire company for achieving ROX-related goals.
- Give people closest to the problem the power to decide. As a leader or CEO, you should create the right environment for people to make the right decisions at the right time — instead of deciding things yourself. Only by doing this, you will be able to enhance people to create great experiences — and at the same time, it will be much more rewarding and intrinsically motivating for people to see the result of their own decisions. TUI Nordic has recently started an experiment where they work as “tribes”, across departments — focused on solving challenges and not your rank or department.
- Stop thinking that the yearly performance interviews will do any good in terms of development. Have ongoing conversations instead. Give people the opportunity to grow on the go! And measuring how many have had a performance interview is not a goal in itself. Instead, walk the extra mile to find out if the approach you have chosen strengthens your key behaviors.
- And stop launching an ad campaign that promises world-class service, without being able to deliver it.
Let us use ROX as an approach for creating companies where people, both employees, and customers, love to show up!
Read more about the Future of Work at www.inversus.info