The color of money : how experience and insights teams prove ROI
“Our new owners make us document the commercial impact of every project we do.”
As organizations invest more in Experience and Insights solutions, there is increasing scrutiny on the ROI and commercial impact of these expenses.
The teams responsible need to manage resources and costs effectively (inputs); and they need to prove their commercial value to their organizations (outputs).
But it’s hard to create a clear P&L for Experience and Insights: there are too many intangible factors; ‘revenue’ is hard to attribute; and many of these investments are long term, with benefits that only transpire after multiple accounting periods.
As the saying nearly goes, you may know that half your insights budget is wasted; but knowing which half is the tricky part.
Imagine that Voice of Customer research helps to green light an investment in a new product. In the first 12 months post launch, the product generates $10 million in sales. How much of that revenue should you attribute to the original research? Whatever number you choose will be arbitrary – but the costs of the research will be easier to identify in dollars and cents.
Where advertising may in some circumstances[i] be accounted as a balance sheet asset – an investment with clear returns over several years – Experience and Insights costs can only ever be treated as expenses. They are overheads with perpetual headcount and budget pressures.
So what can leaders of Experience and Insights teams do about this?
One of the most effective strategies is to develop a ‘P&L like’ framework that demonstrates value in the language of CFOs and finance teams[ii]. By documenting both the tangible and intangible inputs and outputs in dollar terms, you can show the commercial impact of your efforts.
This is the easiest place to start, and usually the focus of most scrutiny from finance. It includes headcount, agencies and – increasingly – technology costs.
But as the use of software grows, this line item is more and more under the microscope – and harder to manage. Many suppliers have pricing models and license tiers that are weighted heavily in their favor. Finding vendors with Value-Based Pricing[iii] approaches can help to redress this balance with a more equitable sharing of risk and reward – and more predictable costs for your virtual P&L.
Intangible Inputs are those factors that drive value without a clear cost. This might include the organizational knowledge and expertise within an Experience and Insights team; the ‘stored value’ of a long-term partnership with vendors; or the effective ‘intellectual property’ of methods and tools that have been developed specifically within the team.
These are hard to value without making major assumptions, but the ‘replacement cost’ is a good place to start. How much time and money would it take to switch to a new partner, replace an expert team member with someone new or re-build tools from scratch?
Despite the challenges in attributing impact to specific research projects, there are now better ways to track tangible factors that transform insights into actions on the front line: closed-loop reporting, red-flagging of serious issues, ensuring store-level or agent-level performance meets the expected standard. This can in turn drive referrals and recommendations, reduce churn and stimulate account growth.
A measurable dollar value can be attached to these outcomes; but software systems need to be highly configurable to ensure this can be implemented and measured across complex organizations and hierarchies.
Intangible factors also contribute to positive ROI for Experience and Insights teams, but the commercial value needs to be estimated.
This can be done by gathering feedback from stakeholders to determine the role played by Insights and Experience teams in influencing decisions. Clear and timely reporting through mobile apps, storytelling and data visualization can all help improve commercial impact with stakeholders.
These can also be awarded financial values for the virtual ‘Experience and Insights P&L’.
At Forsta, we’re privileged to work with nearly 1,000 agencies around the world, from boutique specialists to the largest international networks. Nearly two million Customer Insights & Experience professionals use our technology.
Download our white paper to find out how your organization can reap the rewards of better-connected data: free up time, get more from your budget and improve the experience of your customers.
Find out how Forsta’s Experience and Insights technology can help you better manage software costs and demonstrate ROI for your organization.
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