For the past seven years, my friend Jon Picoult, Founder & Principal at Watermark Consulting, has demonstrated the connection between CX maturity (CX leaders and laggards) and stock performance. (A complete copy of the study’s results is available here.) I recently spent some time thinking about the implications of the data and finally wrote my thoughts on a piece of paper and arranged some time to talk with Jon. During the discussion, I received a lesson in Value Creation!
The connection between CX and share price
The first things to do are look at Watermark’s data and explain the methodology. Here is the 2014 chart with data from 2007 to 2013:
The data come from two sources; Forrester Research identified the CX leaders and laggards yearly, and the share price data is from the stock exchanges.
When Watermark started this process in 2012, they decided to look back to 2007 and move forward. They took the top 10 companies from the 2007 Forrester CX leaders list and the bottom ten from the laggards list. Watermark then made a hypothetical purchase of $10,000 worth of stock in each of the 20 companies and sold them on the last trading day of 2007 after reinvesting all dividends. They “invested” the leaders’ and laggards’ funds in the new Forrester names retroactive to the first trading day of 2008 and continue this process yearly. The data in the above chart is for CY 2013 since Forrester does not publish its list until later in the next year.
The results – CX leaders’ share price grows!
Over seven years, the CX leaders fund grew by 77% while the laggards fund declined by 2.5%. Over the same period, the S&P 500 index increased by 51.5%. The lesson learned is that being a CX leader is worth lots of money to shareholders! And being a laggard is not a fun place to be.
My thoughts
When I spoke with Jon, I asked if some factor other than CX might have been driving the share price. I suggested new products, acquisitions and divestment, operational excellence, or new markets. Jon’s answer helped me connect the dots around a subject I have been aware of for a long time.
Jon said, “All those items are part of the customer’s experience.”
For example, look at excellent inventory management (an area of operational excellence). We discussed it and agreed that eliminating late deliveries or backorders will improve the customer’s experience. Dropping unprofitable businesses will also enhance the experiences of the remaining customers since the company will not be pouring good money after bad and can concentrate efforts on the growing businesses.
And then the light bulb became brighter – businesses focus on removing silos because everyone is responsible for the customer’s experiences. Unless goals and metrics are aligned around that common area, there will always be dissatisfied customers who will leave or reduce their purchases. So, to live long and prosper, it is necessary to look at CX in its broadest sense and not as just the responsibility of the support or services department.
It’s “all hands on deck!”
About Middlesex Consulting and creating CX leaders
Middlesex Consulting is an experienced team of professionals with the primary goal of helping capital equipment companies create more value for their clients and stakeholders. Middlesex Consulting continues to provide superior solutions to meet the needs of its clients by focusing on our strengths in Services, Manufacturing, Customer Experience, and Engineering. If you want to learn more about how we can help your organization create delighted customers and make you a CX leader, please contact us or check out some of our free articles and white papers here.