Digital CX: The Value Creation Powerhouse for PE
Prioritizing an exceptional Digital Customer Experience (Digital CX) is vital for businesses striving to foster loyalty and longevity among their customer base. This strategy, placing customer needs at its core has become a key pillar in the fast-paced private equity (PE) landscape, especially for growth and challenger brand portfolio companies. In our present economic context, digital CX is an essential value creation lever for growth-driven portfolio companies, regardless of sector or business model, to enhance customer retention and advocacy.
Digital CX explained…
Digital CX is the integration of brand and marketing, digital products, and operational efforts to best serve customer needs. This approach addresses the importance of every customer touch point in an increasingly digital-first world. A core component of Digital Transformation, digital CX emphasizes the use of customer intelligence to drive continuous iterative enhancements to meet the ever-evolving needs and expectations of consumers. Methods such as like Service Design facilitate the identification of oftentimes minor, yet meaningful adjustments that address major pain points across a customer journey.
The Surge in Digital-First Everything
Coming out of the COVID pandemic, global ecommerce sales skyrocketed to $4.28 trillion in 2021, up 27.6% from the previous year. For many brands this created the opportunity to build a digital “front door” and demonstrated the potential for considerable enterprise value creation by having a strong digital CX strategy. Furthermore, the escalating “consumer-ization” of B2B relationships characterized by the rise of self-service commerce, demonstrated the importance of digital CX across industries and business models. With B2B ecommerce in the US projected to reach $1.8 trillion in 2023, businesses need to provide consumer-like experiences even in traditionally laggard sectors.
The case for the Digital CX Operating Partner
As the technology landscape evolves, a new type of partner, a digital CX operating partner, is critical to help firms capitalize on this digital revolution's value creation potential. They differ from traditional partners in their proximity to the work product, awareness of emerging technology trends, and forward-thinking strategy.
Focus across the customer journey:
Drive CAC ↓ and CLTV ↑: With customer acquisition costs (CAC) reaching exorbitant highs (estimates as high as 222% increase in the last 8 years) many marketing leaders are shifting their focus to retention-focused strategies to drive Customer Lifetime Value (CLTV) up. A digital CX partner can orchestrate solutions alongside management teams that leverage the latest emerging tech (from AI to AR) to boost customer engagement, retention, and reduce acquisition costs that can then be applied across a portfolio.
Data-Driven Planning: McKinsey found that data-driven organizations are 23 times more likely to acquire and six times as likely to retain customers. A digital CX operating partner can help businesses better understand their customers' intent by leveraging first and third-party analytics, improving decision-making namely in product and service development roadmaps, operational efficiencies, and strategic bets.
Brand Loyalty and Advocacy: PWC reports that 73% of consumers view customer experience as a crucial factor in purchasing decisions. Investing in digital CX can build brand loyalty and ensure sustainable growth and long-term value creation.
The Path Forward through Partnership
Introducing an independent or dedicated operating partner that can help portfolio companies architect an exceptional digital customer experience can spur growth, boost operational efficiency, and serve as a primary value creation driver in growth-stage portfolio companies. Winter Sun has identified the critical engagement points across a hold lifecycle to focus on digital CX for PE-backed portfolio companies, to learn more contact our team directly here.