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Medallia Experience Cloud is a customer feedback management (CFM) solution that
consolidates real-time data into a single platform that can be customized and scaled for each unique business unit. To better understand the benefits, costs, and risk associated with Medallia Experience Cloud, Forrester Consulting conducted a Total Economic Impact™ (TEI) study based on interviews with six customers with experience using Medallia Experience Cloud as their customer feedback management platform. This summary is based on a full TEI study, which can be downloaded here.
Based on the TEI analysis, a representative organization deploying Medallia Experience Cloud has experienced a quick payback period with the following three-year financial impact: $35.6 million in benefits and $5.1 million in costs, a net present value (NPV) of $30.4 million and an ROI of 591%. Readers can use this representative organization to understand the economic impact of deploying Medallia Experience Cloud and apply or adapt it to their own situation and experience.
Quantified Benefits
The following risk-adjusted quantified benefits are representative of those experienced by the companies interviewed:
› Improved customer experience leading to an increase in net income of $20.1 million. Organizations were able to meet the needs of today’s customers by making product and channel improvements informed by real-time customer feedback data from the Medallia Experience Cloud. These improvements drove growth through an increase in both customer retention and average basket size.
› Operational efficiencies resulting in a savings of $13.8 million. Organizations were able to improve organizational operations by aligning business and strategic initiatives with the insights gained from the Medallia Experience Cloud. Additionally, call volume to service desks was significantly reduced due to its enabling of organizations to systematically identify and reduce customer pain points.
› Cost avoidance of the previous solution. Organizations avoided the cost of running and maintaining legacy solutions by moving to Medallia’s cloud-based platform.
Unquantified Benefits
Examples of additional benefits that the interviewed organizations mentioned as significant but were not quantified for this study:
› Faster closed loop cycle. Organizations were able to more quickly close the loop with customers through preferred channels and recognized a positive impact on both customer churn and employee morale. › A shift in overall organizational culture towards CX. Employee access to real-time customer feedback information brings the customer experience to life and helps keep the entire organization focused on meeting customer needs and expectations
Key Investment Drivers And Results
S. Ernest Paul
Organizations shared the following challenges prior to Medallia Experience Cloud:
› Inability to provide meaningful CX insights. Surveys and other solutions provide data points but do not facilitate the insights or analytics necessary to understand and meet the needs of today’s customers.
› Inability to effectively handle organizational scale. Legacy vendors and solutions could not reliably process the necessary volume of data quickly or effectively, preventing organizations from moving quickly to reduce pain points and incorporating customer feedback into strategic initiatives.
Organizations achieved key results with Medallia Experience Cloud:
S. Ernest Paul
› Develop actionable insights to improve CX and drive product improvements. A VP of customer insights in the telecommunications industry stated: “We were able to reduce the number of calls to our service desk, because we’ve addressed and eliminated many of the reasons, the root causes, of why people were calling us: technical reliability, product functionality, billing issues. This has categorically changed the game for us.”
› Effective scaling and flexibility. Medallia’s experience with global deployments and large enterprises made the implementation and scaling an easy, collaborative process.
› Drive a shift in organizational culture. The ability for a single platform to collect all CFM data, its accessibility to anyone in the organization, and the direct connection to actions for closed loop feedback drives a shift in organizational culture towards meeting and exceeding customer expectations.
Composite Organization
Based on the interviews, Forrester constructed a TEI framework, a composite company, and an ROI analysis that illustrates the areas financially affected, covered in greater detail in the full study. The composite organization has the following characteristics:
Description of composite. The composite is a global conglomerate with $9 billion in annual revenue, growing at a rate of 2% year-over-year (YOY), prior to its investment in Medallia. Its main revenue streams include membership fees and 750 retail stores, along with other B2B and B2C lines of business (LOBs). It has 2 million total customers and 18,000 employees, which includes 750 key accounts with 150 account managers, along with 4,500 contact center agents.
Deployment characteristics. The global conglomerate composite organization has deployed the Medallia Experience Cloud for transactional and relationship surveys, both internally-facing (employees) and externally-facing (customers). The composite organization initially rolled out Medallia’s Best Practices Package for Retail to its 750 stores. For Years 2 and 3, the program expanded to cover the full enterprise, including the 4,500 contact center agents and 150 key accounts.
Economic Impact
› Increased income due to improved customer experience. Using customer feedback obtained through the Medallia platform, organizations were able to make product improvements leading to additional sales, and website improvements to remove pain points and barriers to purchases. Organizations were able to improve overall NPS, realized an increase in customer retention rate as well as increased average basket size per customer leading to an increase in income of $20.1 million.
› Operational efficiencies represent $13.8 million in savings. Unification of data across the organization and throughout the customer lifecycle allowed organizations to better define strategic initiatives, better focus resources on those initiatives and reduce overall service desk tickets by analyzing customer feedback to reduce pain points.
› Cost avoidance of previous solution. Organizations noted a total of $1.7 million in cost savings related to licensing and management of previous CFM solution.
Unquantified benefits. These are some of the benefits not quantified in the financial analysis but were mentioned as significant.
› Faster closed loop cycle. A senior director of customer insights in the retail industry told Forrester: “Medallia’s closed loop feedback mechanism has proven to be effective, along with the simplicity of the dashboards.”
› A shift in organizational culture towards CX. Exposing employees to real-time customer feedback promotes a deeper understanding of customer needs and expectations, and enables organizations to introduce solutions that have a meaningful impact on Customer Experience.
Medallia does not come cheap
S. Ernest Paul
Costs
The composite organization experienced two cost categories associated with the Medallia Experience Cloud investment. Over three years, the composite organization expects risk adjusted total costs to have a PV of $5.1 million.
› Medallia Costs of $2.6 million. The organization paid Medallia for an annual software subscription, ongoing managed services, and implementation services for initial and Year 1 costs.
› Internal costs of $2.6 million. These include day-to-day management, implementation costs, and training associated with the new platform
The costs could go up id the add-ons are utilized
The value of flexibility is clearly unique to each customer, and the measure of its value varies from organization to organization. There are multiple scenarios in which a customer might choose to implement Medallia Experience Cloud and later realize additional uses and business opportunities, for example:
› Ability to adapt the CFM solution to fit evolving needs. Medallia is willing to work with clients to find solutions or benchmarks to unique business challenges.
› A/B testing. The Medallia Experience Cloud allows customers to quickly A/B test customer experience solutions or pilot business process changes before rollout.
› Text analytics search. Changes in customer sentiment can occur quickly, and the text analytics feature allows organizations to identify and adapt to unexpected developments.
Financial Summary
| Flexibility, as defined by TEI, represents an investment in additional capacity or capability that could be turned into business benefit for a future additional investment. This provides an organization with the “right” or the ability to engage in future initiatives but not the obligation to do so. |
The financial results calculated in the Benefits and Costs sections can be used to determine the ROI, NPV, and payback period for the composite organization’s investment in Medallia Experience Cloud. Forrester assumes a yearly discount rate of 10% for this analysis.
COURTESY: FORRESTER
