CX Leaders Must Prepare for Exponential Efficiency

Customer experience leaders face economic realities that align with this year’s focus on exponential efficiency. In conversations with hundreds of CX professionals, one of the top issues emerging is managing the costs of CX systems. CX leaders must drive down cost of ownership and improve value in every part of the CX journey, from campaign to lead, lead to order, order to cash, incident to resolution, and first experience to loyalty.

Unfortunately, Constellation Research’s surveys show that between 41 percent and 79 percent of CX projects have failed, leaving a cluttered landscape of vendors and a byzantine collection of integrations tied to a fractured view of the customer. In fact, the average Global 2000 company has acquired hundreds of systems among the more than 11,000 vendors and solutions available.

And in almost every CX survey, usage of purchased licenses hovers in the low 70s. Despite the move to the cloud, most organizations have made the mistakes of the past by over-purchasing licenses.

The bottom line: A lot of money is being wasted on technology that is not being deployed or failing to drive results. Consequently, the CFO is now involved in more technology purchasing conversations than ever at a lower budget threshold, in some cases as low as $50,000. Why? Tech spending represents anywhere from 5.2 percent to 9.3 percent of the overall percentage of revenue.

CX IS STILL KEY, BUT AUTOMATION IS NOT ENOUGH

Despite the costs and failures to date, CX remains critical to acquiring new customers, and delivering on business outcomes. In Constellation’s research, organizations that fail to stand out on CX often see 17 percent lower margins, 31 percent higher customer acquisition costs, 11 percent lower brand perception, and 27 percent lower customer satisfaction.

Consequently, a lot of CX still relies on human labor. Over $2 trillion is spent on CX labor costs. But adding additional human resources remains difficult in today’s challenging labor market. To achieve scale, drive down costs, improve quality, and meet regulatory compliance, organizations will make more investments in automation. By 2030, companies will reduce labor spending by 30 percent through automation, Constellation research indicates. Yet automation alone will not be enough to achieve scale.

RESET CX TECHNOLOGY LANDSCAPES (AND KEEP CFOS HAPPY)

CX leaders face a plethora of competing priorities challenging their budgets and mindshare. They must rethink their overall technology landscape and reset their cost structure to pay for future investments. Based on thousands of contract renegotiations, Constellation suggests the following five “ABCDE” strategies to get the most out of existing CX investments:

Assess existing usage and future requirements. Begin by understanding the overall landscape of vendors. Identify what technologies are being used to support end-to-end processes centered on the customer. Map these business processes to how people work. Identify opportunities for automation, augmentation, and human touch. Determine how much software is actually being used rather than simply purchased.

Begin a contract review and benchmarking. Initiate an overall contract review of all vendors. Identify average costs per user and average unit costs on delivery of service or production of a product. Scrutinize every contract and understand total spend with each vendor. Work with experts to determine market-based pricing and benchmarks.

Consolidate vendors and identify winning best-of-breed solutions. Create an overall technology road map. Identify which core vendors can deliver on a majority percentage of the overall technology road map. Use this opportunity to find consolidation opportunities. Determine cost-benefit tradeoffs with best-of-breed solutions. Calculate the cost of integration and maintaining integration. Determine which of best of breeds can augment gaps among core vendors.

Develop a contract negotiations strategy. Set expectations early at the beginning of the vendor fiscal year that spending will be reset. Include the business stakeholders, IT, legal, procurement, and finance. Inform the executive sponsors of the reset so that sales quotas will be reset. Start the renegotiation process at least six months prior to renewal dates. In all future contracts ensure the ability to flex up usage as well as flex down on usage. Build pricing ladders to ensure that volume discounts are documented. Set up provisions to avoid cloud vendor lock-in.

Engage with third parties such as independent technology analysts and service provider partners. Use outside partners to establish a process, provide benchmarking information, and share best practices insight. External perspectives will bolster the credibility during negotiations with additional data points that show technology vendors’ inconsistencies with pricing and policies.

Using these five strategies, CX leaders will be in a better position to reset costs and identify cost savings for new investments. 

R “Ray” Wang is the author of the new book Everybody Wants to Rule the World: Surviving and Thriving in a World of Digital Giants (HarperCollins Leadership) and founder of Constellation Research.

Related Articles

Achieving Trust in the Age of AI

Companies will learn that without enough precision data, mistrust of AI will persist.