Does CX Quality Affect Stock Performance? Yes, But…
For years, back-of-the-napkin analyses have claimed that CX quality correlates with better stock performance. We dug deeper and compared a portfolio of CX leaders in Forrester’s CX Index™ to a portfolio of CX laggards from October 3, 2016 to October 2, 2017. The results of our study were an unambiguous win for the CX leaders (see Figure 1). Our analysis found that:
- CX leaders outperformed CX laggards on both stock price growth and total returns. The price of the portfolio of top publicly-traded brands in the CX Index grew 32%, compared to 3% for the portfolio of lagging brands. During this same period, the S&P 500 Index grew a healthy 17%. When we looked at total returns over this same period, the findings were similar: 34% for our portfolio of CX leaders versus just 5% for our portfolio of CX laggards. Once again, the portfolio of CX leaders also outperformed the S&P 500 Index, which returned 20%.
These Findings Are More Important For Investors Than For CX Professionals
It’s a fact: If you’d invested all your money into a portfolio of our CX Index leaders during this 1-year period, you’d be 34% richer, spanking the S&P 500 and earning bragging rights among your fellow investors. But CX professionals shouldn’t bet their careers on these findings by using them as the sole justification for funding a CX transformation. That’s because many factors affect the price of an equity, from broad market conditions to the latest earnings report. A deeper dive into our data shows that:
- The brand-by-brand correlation between stock performance and CX is weak. We expanded the scope of our study to all 77 publicly-traded companies that correspond to a single brand in the CX Index and found a Pearson correlation of just under 0.4. That’s right on the border between a low and moderate correlation.
- The leader category contains different industries than the laggard category. Out of the nine industries represented in the leader category, only one industry also contained brands in the laggard category. This means that our categories, of necessity, track different sets of industries as well as different levels of CX quality.
- Within a single industry, leaders don’t always outperform laggards. Even though a portfolio of CX leaders from across industries beats a portfolio of laggards from across industries, individual CX leaders don’t always beat individual laggards within the same industry. Out of the 15 industries with more than one publicly-traded brand, seven had CX laggards that outperformed the CX leader on total returns.
That’s a complex situation for CX professionals to navigate. Be sure to give our report about how CX quality can affect stock performance a read below, as we offer advice on how CX pros should use these findings.