By Brian Strauss, Director of Sales Engineering —
Here's the latest installment in my ongoing series on the importance of Business Impact Analysis—the holy grail of Customer Experience Management. Last week, we took a look at how business impact analysis is performed in Tealeaf. We gave an example of how to move from discovering an interesting anecdote to building the business case for prioritizing a fix. Remember, the key is understanding how many transactions aren't completed as a result of that obstacle. To do that, we compared conversion rates of visitors who experienced the obstacle against those who did not.
Step 3: Determine the Opportunity Cost
In our example from last week, the issue we were exploring was causing a 5 percent decrease in conversion rate, so we knew we were onto something. However, at this point it still might not be clear that this is a tremendous business problem. After all, 1,449 affected sessions doesn't seem like a lot in the context of 27,135 purchases. And this is precisely where frequency reports fail us. On a chart of issues organized by frequency, something that happens 1,449 times a week will never seem like a top priority. Instead, it will get lost in a sea of 404 errors, slow performance events, and other errors—and that's if we are even monitoring the rate at which form field validation messages are displayed.
You see, a frequency chart doesn't consider the fact that this struggle is happening at one of the most critical points of the transaction process, and it doesn't aggregate the impact that this seemingly infrequent issue can have at that point in our funnel. To see that cost, we need determine how many transactions this obstacle actually stopped during the time period and then look at the cost of doing nothing about it.
Let's get back to our control and study groups. To calculate the opportunity cost of this email validation obstacle, we're going to use a basic assumption: that if the affected population had not experienced the design flaw they would have converted at the control rate of 97.84%. That means that 1,417 should have purchased instead of just 1,347. Let's use a chart for the last mile here to put this in the proper perspective:
| Opportunity Cost of the Email Validation Obstacle | |
| Number of struggle sessions that should have transacted per week | 1,417 |
| Number of struggle sessions that transacted anyway (per week) | 1,347 |
| Net number of sessions blocked by this obstacle per week | 70 |
| Average cart value | $150 |
| Weekly opportunity cost of this obstacle | $10,500 |
| Annualized opportunity cost | $546,000 |
Certainly, when you look at this “little” obstacle from an annualized revenue obstructed perspective, it takes on new importance. That's because when you take something that flies under the radar because it only happens a few times per day it can still add up to a large amount of revenue lost or put severely at risk. “Death by 1000 cuts,” right? Makes you wonder what other yet-to-be-analyzed obstacles are costing, doesn't it?
True, this analysis doesn't take into consideration whether the people who encountered this obstacle came back that evening after work and figured it out. It doesn't take into consideration whether they called the call center and transacted that way (albeit through a much more expensive channel). It also doesn't take into consideration the brand damage if they got onto Facebook or Twitter and let the world know that they had a terrible experience.
However, the hard cost isn't the point. The real value in this analysis is in understanding where our most efficient channel is failing here and now. In short, struggle is bad for business. And with Tealeaf CX, for the first time we have the ability to quickly prioritize what we fix by how often a given obstacle, error, performance issue, or design flaw is preventing customers from giving you money, diverting them to a more expensive channel, or taking their business elsewhere.
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