Measuring Happiness - How to Calculate Return on Experience (ROX)

August 27, 2021

When you launched your startup, you probably spent a lot of time thinking about Return on Investment. After all, you expected that to come up in investor meetings and while crafting a detailed business plan. But how long did you spend thinking about Return on Experience, or ROX?

Success is no longer just measured by the traditional ROI metrics. Instead, today's small businesses need to maximize their ROX as well.

This article will explain what that is, how to calculate it, and how to improve on it.

What is Return on Experience?

Think about what ties you to a company or a brand. Sometimes, a product offers the lowest price or the best quality. But those factors don't always determine your preference.

The qualities that distinguish products and services from their competition are often hard to define. Consumers seek out the total package that appeals to them most.

Your challenge: to find a way to measure the value of this holistic experience. This can become challenging, since the small differences that separate varying brands don't always have clear dollar signs in front of them.

How does ROX compare to ROI?

Imagine a luxury brand, like Porsche or Armani. Or even think about Apple -- one of the biggest and most successful companies in the world. These firms hardly offer the lowest-priced selections in their respective sectors.

If you looked at these well-known players from a strict ROI standpoint, it might be difficult to explain their success. Customers can receive more value for their money by turning to choices like Ford or Dell.

After all, you can drive from Point A to Point B in a much more cost-efficient vehicle than a 911 Carrera. Similarly, you can find better values when choosing a suit or a laptop. But something still draws people to these high-end brands.

That dynamic defines the difference between ROX and ROI. In many ways, ROI describes decisions in terms of "money in, money out." ROX takes the same basic equation but measures more than a cash-to-cash comparison.

Why should you care about measuring ROX?

ROX looks to account for a qualitative experience. The goal is to understand the feeling stakeholders get from the company and to discover how much value that provides. That way, you can provide the most engaging experience as efficiently as possible.

ROX looks to account for a qualitative experience. The goal is to understand the feeling stakeholders get from the company and to discover how much value that provides.

Necessarily, this involves attributes that aren't easy to measure. But that doesn't mean they can’t fuel your financial results. The impact to revenue and profits from ROX makes it a crucial concern for any small business.

One example of why you should care about ROX comes from Southwest Airlines. Most air carriers offer a dry, technical safety speech at the start of each flight. Not Southwest. They pride themselves on their funny, irreverent take on the pre-takeoff safety lecture.

This approach to the otherwise dreary routine of air travel endears Southwest to its customers. But what's the value of this experience? As it turns out, Southwest has done the math. The company gets an extra $140 million in revenue because of this well-received value-adding experience.

What metrics do you need to track in order to calculate ROX?

If you want to turn ROX into an equation, you merely look at the amount it costs to create a particular experience compared to the ultimate value you provided from that experience.

The math looks like this:

(Value of Experience/Cost of Creating Experience) x 100 = the percentage ROX return achieved

However, this only hints at the difficulty of calculating ROX. How do you measure experience in the first place? That question creates complications.

Understand that ROX doesn't apply to a single facet of your business. After all, your venture has numerous stakeholders. You need to consider the experience of each.

You need to think about each of the following:

  • Customer Experience
  • Employee Experience
  • Investor Experience

Each segment will require different statistics. For instance, you can get a hint at employee ROX through figures like turnover rate. Meanwhile, for customers, you can focus on statistics like conversion rates and churn.

Meanwhile, you need to find ways to turn qualitative experience into quantitative data. Surveys and reviews let you make this leap. Utilize these measures to better calculate your ROX.

How to improve your ROX?

Once you figure out the best way to compute ROX in various situations, you can use those figures to improve your performance. But how can you drive ROX expansion?

Here are a few steps you can take to upgrade your ROX over time:

  1. Learn about Your Stakeholders: Learn as much as you can about the group you're trying to please. Then, you'll get better at anticipating how to provide the highest possible value.

  2. Create "Moments": People think narratively. Therefore, create discrete positive events for your stakeholders. (The Southwest safety lectures fall into this category.) This effort creates moments that people will remember and hopefully share with others.

  3. Improve Communication: Gather as much feedback as possible. At the same time, use outlets like your website and social media to share your perspective with the outside world.

  4. Deliver Value: Always look for efficient ways to upgrade an experience. Small improvements can lead to massive increases in ROX. Look for low-cost ways to enhance a situation.

Learning how to use ROX to improve your business

How well do you connect with the people who most influence your company's success? That's what ROX really measures.

How well do you connect with the people who most influence your company's success? That's what ROX really measures.

As you look to evaluate your performance, don't stop with the usual financial figures. Include experience metrics as well. This will give you a more complete picture of your business success.

Use the information provided here to determine not just how much return you're getting on your investments, but to see how well your company is doing in terms of customer and employee experiences as well. This will give you the insight you need to build stronger relationships and drive growth over time.