How to Measure ROI From Your DXP Investment

You’ll need to determine which KPIs best represent the value that the DXP brings to the organization, then translate those values into revenue numbers so you can calculate the ROI.

Digital experience platforms (DXPs) are quickly becoming a must-have for any organization looking to capitalize on customer’s digital experiences. Even so, organizations must be able to quantitatively justify their DXP investment.

But how can you measure the true return on investment for a DXP system? The answer lies in looking beyond the usual marketing metrics and examining factors such as business growth, customer retention and overall customer satisfaction.

The normal way to measure the return on investment (ROI) for a business purchase is to use a simple formula:

ROI = (Gain From Investment – Cost of the Investment) / Cost of the Investment

Imagine for example, that a business spent $1 million on a particular investment, and generated a gain of $1.5 million. Using the formula, the return on investment would be 50%, as illustrated below:

ROI = (1,500,000 – 1,000,000) / 1,000,000
ROI = 500,000 / 1,000,000
ROI = 0.5 or 50%

Although this formula works, the tricky part is figuring out the gain from the investment. After all, a DXP platform purchase is not like a buying a stock, where you can easily track exactly how much value the purchase has gained. Instead, you are going to have to find some way of using existing business metrics to determine the gain from your DXP investment. Only then can you calculate the ROI.

Unfortunately, there is no single, universally agreed-upon formula for figuring out the gain from your DXP investment. Even so, there are some ways that you can get the numbers that you need.

The first step in the process is to establish some clear and measurable goals for your DXP investment. In other words, what is it that you are hoping to accomplish by implementing a DXP system?

More importantly, how can you objectively determine whether those goals have been met? The solution to this challenge is to map your goals to key performance indicators (KPIs).

As an example, some common goals associated with a DXP purchase might include:

• Revenue gain
• Increasing customer engagement
• Improving your conversion rates
• Increasing customer satisfaction
• Reducing your operational costs

Once you have created a list of goals, the next step is to figure out which KPIs you can use to track those goals. Some of the metrics that you might consider monitoring include:

• Website traffic
• The amount of time that customers spend on your site
• Bounce rates
• Conversion rates
• Customer satisfaction scores
• Net promoter scores

Of course, these are just generic examples. It’s important to determine which KPIs are going to be most useful in assessing your own organization’s performance.

Now that you have established a list of KPIs to watch, the next step in the process is figuring out how to convert the KPI value into a gain from your investment. For some KPIs, this process is really straightforward. Take for example the goal of increasing revenues. If your normal monthly revenue is $1 million and then that number increases to $1.2 million after deploying a DXP platform, then you have increased revenues by $200,000 per month or $2.4 million per year. That is a number that can easily be plugged into the ROI formula.

Another stated goal within the example above was the reduction of operational costs. If, after deploying a DXP system, you find that the amount of time required for publishing new content decreases, then you can tie a dollar amount to the time savings based on your labor costs. That savings is a direct financial gain and can be factored into your ROI.

KPIs relating to things like conversion rates and customer satisfaction tend to be a lot trickier to translate into a return on investment, because they are not revenue figures (at least not by themselves). As such, you will need to find a way to acquire a revenue figure for these KPIs.

Let’s suppose for a moment that your organization initially has a 2% conversion rate, meaning that for every 1,000 leads, you can expect to get 20 customers. Before you will be able to assess the financial benefit associated with an increase in conversion rates, you need to know what your customers are worth. In other words, on average, how much does a new customer spend?

With that in mind, let’s suppose that after implementing a DXP system, your conversion rate increases to 2.5%. Let’s also assume that each new customer is worth about $500 and that you are generating 10,000 sales leads each month. That would mean that before acquiring the DXP platform, you would be getting about 200 new customers per month, accounting for $100,000 in revenue.

If the conversion rate has increased to 2.5%, then that would mean that you are now receiving 250 new customers per month, representing revenues of $125,000. This means a monthly revenue increase of $25,000. More importantly for our purposes, this revenue increase can be plugged into the ROI formula as a way of quantifying the return on your investment.

You can use a somewhat similar calculation to tie customer satisfaction numbers to revenue. To do so, there are a few things that you are going to need to know. First, you need to know the customer lifetime value (CLTV) for your customers. This value reflects how much your average customer will spend over their entire relationship with you.

Another thing that you will need to know is to what degree customer satisfaction scores are an indication of customer retention.

Finally, you need to know the average customer retention period.

So, suppose for a moment that your average customer retention period is five years and that, over that five years, the average customer will spend $50,000. That works out to $10,000 per customer per year.

With that in mind, imagine that you are able to determine that customers who have a satisfaction score that is 10% above your mean score tend to stick around for a year longer than everyone else. That would mean that over the lifetime of the customer relationship, those customers are worth an extra $10,000 each. Now, you have a revenue number that you can directly map to your customer satisfaction scores.

Ultimately, it can be challenging to determine the ROI that you have gained from your DXP platform purchase. The key to doing so is to determine which KPIs are most likely to be a reflection of the value that the DXP platform brings to the organization.

From there, you need only to come up with a way of translating the KPI values into revenue amounts that can be plugged into the ROI formula.