CX leaders are ramping up spending on AI and other technology, but experts say they're building on a shaky foundation.
“This is creating the risk of underfunding the capabilities that are required to turn those investments into impact,” said Senem Guler Biyikli, an analyst at Forrester.
The spending figures tell the story. Today, CX budgets remain evenly distributed across technology, data, initiatives and services, according to a Forrester report released in July. Forrester calls it a "spread the spend" approach that conceals investments that do little to move the needle.
But CX leaders are focusing spending increases on technology. Half of CX decision-makers plan to increase tech spending by 5% or more, compared with just 36% for personnel and services.
That pattern reflects a deeper problem with how CX leaders approach budget planning. Teams are funding tools and pilots without building the capabilities, including governance, cross-functional coordination and journey management, that turn those investments into business outcomes.
That in turn, produces “fragmented data, duplicated work and costly tech debt,” Forrester found.
Despite the temptation and pressure to move quickly, some of the most important CX investments, such as sound governance, create value over time rather than paying off immediately.
“CX leaders should resist the temptation to optimize for the next quarter at the expense of the next three years,” said Riccardo Pasto, a principal analyst at Forrester.
Where the money is going
The areas where most companies are investing are related to AI, including:
- Call centers using AI to deflect inbound calls or replace human agents with virtual ones.
- Digital experiences using AI to tailor online content based on past purchases and browsing behavior, with websites moving toward dynamically generated content.
- Conversational agents helping customers navigate offers and get advice, a trend known as agentic commerce.
Companies are also investing heavily in customer intelligence infrastructure to measure each step of the journey more precisely and its contribution to the overall experience and business impact.
But leaders are also becoming more selective.
“As budgets come under greater scrutiny, there is increasing pressure to show how CX investments contribute to business success,” Pasto said. “Leaders are paying closer attention to whether investments are helping the organization scale value or simply scale activity.”
Where it goes wrong
The most common budgeting mistake is confusing visibility with impact by funding initiatives that create activity but don't improve outcomes. That includes deploying AI before the necessary foundations are in place or putting funds toward surveys that fail to drive action.
Treating a technology purchase as a CX strategy is another pitfall.
“A real CX strategy forces trade-offs,” Pasto said. But a “technology-first budget often allows teams to postpone them. That can make the organization look more modern, but it doesn't necessarily make the customer experience better.”
Acting as if CX is a separate initiative rather than essential to running the business, and failing to hold CX investment to the same standard as other business investments “with no clear line of sight between CX spend and P&L outcomes,” are also common, said Richard Hatherall, advisory partner at Bain & Company.
Another frequent error is launching CX initiatives without a clear business case. “Quick wins” are necessary to show the organization that CX is delivering tangible impact and measurable returns, said Karen Lellouche Tordjman, managing director and senior partner at BCG.
And underinvesting in personnel and services could lead to problems down the line, since technology can’t solve every problem alone.
“Invest in AI, but don't forget to invest in humans,” Tordjman said. “While AI can help reduce costs, organizations should preserve the human touch where it matters most.”
How to fix it
Rather than asking what to buy, CX leaders should ask which capabilities they need to strengthen to achieve their desired outcomes, such as adoption or retention.
“In other words, consider the outcomes you want to achieve to determine where you spend your money,” Biyikli said.
Tordjman recommends analyzing CX investments using four criteria:
- How each step of the journey contributes to the overall experience.
- Where the biggest friction or pain points lie.
- Where the company lags behind competitors.
- Where differentiation opportunities exist beyond fixing pain points and closing gaps.
For each investment, leaders should weigh how many customers it will reach, how meaningfully it will shift their perception and how quickly it can be delivered. They should then evaluate whether they have the people, data, technology and change management capacity to “actually execute,” Hatherall said.
The CX team should run that analysis independently and present recommendations at a quarterly committee with the full C-suite.
But budgeting is still siloed in most organizations, with each team planning independently. The problem is compounded by the fact that the capabilities that most impact customer experience often sit outside the CX function.
“Product management, digital experience, customer service, operations and technology often have a greater impact on customer outcomes than the CX team itself,” Pasto said.
That’s why businesses should bring together cross-functional leaders to agree “on priorities, make trade-offs and coordinate investments,” Pasto said. “If CX spans functions, CX budgeting should too.”
CX budgeting should also run alongside the organization's strategic planning process, not sit outside it.
“Don't invest in tools or initiatives simply because you've always had them if they aren't delivering impact,” Biyikli said.
Too many organizations still spend significant resources collecting feedback and tracking metrics without a clear path to action. Instead, teams should examine “unsolicited” customer data like complaints or contact-center conversations to identify opportunities to create value, Pasto said.
But the most important question every CX leader should ask before signing off on a single line item is how it delivers financial ROI because those focused on the bottom line, like CFOs, “never develop real conviction that CX priorities” support the overall business, Hatherall said.
“Happier customers buy more, stay longer and refer more,” Hatherall said. “That's the business case.”
