Customer Experience Drives Revenue Growth, 2016

Harley Manning

In 2015, we explored whether customer experience really matters to business success or whether CX is just the latest hype. Our conclusion: superior CX drives superior revenue growth in industries where customers are free to switch business and competitors deliver a differentiated customer experience.

This year we repeated our study to see if the results held true across an additional year of data. To do that we compared five pairs of publicly traded companies where one company in each of the pairs had a significantly higher score than the other in Forrester’s Customer Experience Index during the period 2010 to 2015. Then we gathered financial data from company SEC filings like Forms 10-K and 10-Q.

The tough part was normalizing the results. We focused on isolating revenue that could be traced directly to consumer behavior; we also backed out revenue from mergers and acquisitions, revenue from sale of assets, and other windfalls.

Once we normalized the revenue data we used it to build models that calculated the compound annual growth rates (CAGR) for the ten companies from 2010 to 2015. We found that the CX leaders in all five pairs of companies outperformed their relative CX laggard counterparts.

In two industries, cable and retail, leaders outperformed laggards by 24 percentage and 26 percentage points, respectively. Even in the industry with the smallest spread, airlines, the CX leader enjoyed a healthy 5 percentage point advantage in global revenue.  And when we compared the total growth rate of all CX leaders to that of all CX laggards we saw that the leaders collectively had a 14 percentage point advantage.  

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Digital Labs Can Do More Harm Than Good

Oliwia Berdak

Exposed brick is replacing marble at many banks, insurers, and payment firms. Warehouses are deemed a better location for digital labs, digital centers of excellence, innovation labs, and innovation centers. But why are these spaces proliferating from Silicon Valley to Singapore?

A cynic could say it’s a marketing exercise aimed at making the respectable (if a little slow) financial institutions seem more innovative — and more attractive to both customers and developers. But it’s more than that. Frustration and ambition are pushing business executives out from their traditional locations.

Digital labs promise speed by unshackling product and software development from slow business, technology, and compliance processes. They embrace new approaches, such as design thinking, customer centricity, and Agile development. They can drastically cut the time it takes to develop a proof of concept (POC).

But that’s where the dream ends.While these separate digital units aim to be disruptive, they often deliver just front-end apps or proofs of concept that are impossible to integrate and scale. Why? Because software-driven innovation requires a connection to systems of record, rigorous testing, an understanding of security and compliance threats, an analysis of impact on business units and revenue, and someone with the resources to own, love, and keep developing the product — all the things that made digital innovation so slow in the first place. All that labs achieve is to postpone these reality checks.

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Facebook Offline Conversion and Site Metrics: Use With Caution

Tina Moffett

In collaboration with Jim Nail.

 

On Tuesday, Facebook announced new solutions for businesses to drive people to their stores and measure the amount of store visits and in-store sales following their Facebook mobile ad campaigns.  Before breaking out the bubbly, let’s break down Facebook’s new measurement capabilities, and evaluate what it means for marketers.

 

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The Data Digest: Putting The "Work" In Social Network

Anjali Lai

We’re all guilty of falling prey to the lure of social media and losing hours to it. But there’s little doubt that social networking also encourages collaboration, creativity, and productivity – especially if it’s used for work. When Microsoft made history this week by announcing its $26.2 billion acquisition of LinkedIn, Jeff Weiner argued that such a move will allow both companies to realize their “common mission to empower people and organizations.” And empowerment in the workplace is deeply attractive, particularly for the rising generation of employees: Millennials.

Forrester’s Business Technographics® survey data shows that younger employees leverage social networks at least daily because they believe this enhances productivity. At work, employees tune into social networks across devices, but most do so on tablets:

 

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Leadership In The Age Of The Customer

Victor Milligan

Leading through change requires that right mix of imagination, inspiration, and gritty execution. And we are in a world of change. Empowered customers and the constant and rapid wave of digital innovation are changing market fundamentals. Leaders are now challenged to respond.

I had the pleasure of hosting a discussion with James McQuivey, Carl Doty, and Sam Stern to talk leadership in the age of the customer. Our conversation covered a range of topics from having the wisdom to see the market for what it is versus how we would like the market to act to putting in motion strategic and operational change that is necessary, new, and risky. Here are the five takeaways:

  1. The customer is in motion. Customers rapidly adopt — and rapidly abandon — technologies, services, and brands. That is wonderful and scary thing. It creates new possibilities. But it also redefines the norms for churn where a decision to shift spend is made by a single experience — good or bad. This dynamic can represent a major threat to growth if companies need to absorb 10%+ churn. 
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Confronting The Stigma Surrounding Sales

Peter O'Neill

Never having been an analyst that thinks he knows it all, I periodically attend external conferences as a mere delegate (no speech) to learn something new and network. I was at last week’s conference of the Association of Professional Sales (APS) in London with over 400 other marketers, sales enablement professionals, sales training companies and even sales executives to discuss

“The New Era Of Differentiation”.  

What you sell is not enough but how you sell it is everything: What you say, what you do, what you offer and who you hire into sales.

The APS was formed two years ago by enterprise sales executives at EMC, EY, SAP, Wipro, WorldPay, and Royal Mail, and now has well over 1000 members. Its objective is to raise awareness of sales as a profession (one speaker opined that hairdressers and butchers are more appreciated than salespeople) – by providing accreditations, training, certifications and codes of conduct.  The word “profession” is usually attributed to occupations like lawyers or doctors in the English language so these aspirations are high.

One of the sponsoring partners for this initiative is Corporate Visions Inc. – kudos to Tim Riesterer, their Chief Strategy Officer in recognizing the potential of the Association. Tim was a keynote speaker and, as usual, he presented eloquently about effective sales conversations.  Neil Rackham, most famous for the now 30-year old book “Spin Selling” is also involved in the APS and he spoke too; as did leaders from Royal Mail, IBM, EY, CPM, Wipro, SAP, EMC, Clarify, F5 Networks, and Ciena. The other sponsor of the event was LinkedIn Sales Navigator.

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Will Microsoft’s Big Bet On B2B Social Pay Off?

Carlton Doty

Okay, you’ve read countless opinion pieces on the blockbuster deal where Microsoft paid a notable (nearly 9x) premium for LinkedIn.  One could argue that it’s about time someone snatched up LinkedIn…that was my initial reaction, and perhaps yours too.  But why Microsoft, and why now?  Well, it should be obvious that this is a B2B play.  In fact, our own Melissa Parrish eloquently outlined the minimal relevance to B2C firms in her blog post yesterday.

However, this morning, Melissa and several other colleagues here at Forrester published our quick take on what this deal really means. It breaks down to 3 fundamental things:

  • Data. As today's marketing tech goes, Microsoft lags significantly in two areas: customer identity management and proprietary data assets. LinkedIn solves that problem by integrating 433 million LinkedIn profiles. Microsoft will get its hands on data about how those individuals use products like Office 365, email, and Skype.
     
  • CRM. Microsoft is clearly firing a shot across the bow of Salesforce. In the CRM space, Dynamics has some traction in the enterprise, but it has traditionally been an alternative for small and medium-size businesses requiring more accessible price points than Salesforce commands.
     
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Microsoft + LinkedIn = Everything But An Advertising Play

Melissa Parrish

The second the story broke about Microsoft’s $26.2 billion acquisition of LinkedIn, everybody you can think of who has any kind of an opinion about either company, social media, business productivity, enterprise software, the stock market, data and mergers & acquisitions in general has weighed in on the deal’s implications for their areas of expertise. Ordinarily this would inspire some serious eye-rolling in me, but in this case it’s warranted because Microsoft has its hands in so many businesses and enterprise applications, and LinkedIn has so much consumer activity and data that many people-- talking heads or otherwise-- have a relevant take. Speaking of which, Forrester clients should keep an eye on our website tomorrow morning for first-take analysis from all sides of our research org. Spoiler alert: The implication for social selling and business productivity are potentially massive.

 

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Hedgehogs, Foxes, And Third-Party Data: What Sellers Need From Marketers

Steven Wright

In Isaiah Berlin's most popular essay, “The Hedgehog and the Fox,” the famous Latvian-British social and political theorist quoted a fragment of ancient Greek: “The fox knows many things, but the hedgehog knows one big thing.” Since its publication in 1953, this concept has become an intellectual parlor game (something Berlin said himself) that those with a binary view of the universe have used to divide writers, politicians (Kennedy: fox; Nixon: hedgehog), and executives into two neat categories.

What’s forgotten is that Berlin used this ancient aphorism as a way to evaluate Leo Tolstoy. His conclusion? Tolstoy was actually a fox, despite many declarations that would indicate Tolstoy wanted to be a hedgehog. In short, Tolstoy was both — a fox by inclination, but a hedgehog by choice.

B2B marketers want sellers to know lots of things, and they use third-party data providers as part of that desire. At a recent Forrester event, I asked a marketer from a large financial services firm how may data providers they used; she casually replied: “77.” Seventy-seven separate data providers! If only a fraction of this data is provided to sellers, they must feel overwhelmed.

The consultative seller needs both the characteristics of the fox – knowing many things about the buyers, their companies, competition, and industry – and the hedgehog – knowing the one big thing (or maybe a few) that will lead to a sale.

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Hit Restart With Your Media Agency

Sarah Sikowitz

In collaboration with Susan Bidel, Richard Joyce and Jim Nail

Yesterday, the ANA released the findings from an eight month research study into the issue of transparency within the media agency industry.  The findings are damning, but not surprising for those who have been following this issue. The phrase in the report that caught my eye was this: “evidence of a fundamental disconnect in the advertising industry regarding the basic nature of the advertiser-agency relationship.” 

In other words, it’s the advertising-agency relationship that stinks.

Look past the rebates, the free cash disguised as “research and consulting” and the media mark ups and what you’ll see is the advertiser-agency relationship that has been under strain for years has finally completely collapsed.  Three factors have driven the industry to this point:

  • Agency success metrics tied to an outdated approach. Clients expect high impression levels, high click volume – all at a low cost. This doesn’t allow a lot of room for media agencies to show additional value beyond scale and efficiency. The result is that agencies continue to look for opportunities to drive more impressions and lower CPMs without any accountability for real business and revenue impact.
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