Whenever I talk about the business impact of customer experience, there’s one thing that always grabs people’s attention. It’s an analysis done by Jon Picoult of Watermark Consulting, who took five years of data from Forrester’s Customer Experience Index and constructed two model portfolios. One is a portfolio of the top ten publicly traded companies in the index (customer experience leaders) and one is a portfolio of the bottom ten publicly traded companies in the index (customer experience laggards).

You can read details of how Jon conducted his analysis in our new book, Outside In, and in this post on Jon’s blog. The results are striking. Over the course of the five-year period, the customer experience leaders spanked the laggards in stock performance. The leader portfolio had a cumulative total return of +22.5%, compared to a -1.3% decline for the S&P 500 market index, and a -46.3% decline for the laggard portfolio.

5-year Stock performance of Customer Experience Index (CXi) Leaders vs. Laggards vs. S&P 500 (2007 – 2011)

What follows is an interview I recently conducted with Jon to get his thoughts on why making a compelling business case for customer experience is so challenging – and so important.

Harley: What drove you to do your analysis of the impact of customer experience on stock performance?

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