Customer-centricity is integral to culture, a precursor to strategy and essential for sustained customer growth and retention. However, companies don’t get to decide how customer-centric they are. That’s decided by their customers.
For companies to understand, manage and profit from customer-centricity, they must implement an objective scoring system, create a performance baseline, and report results to know when customer strategies are working or course corrections are needed.
Customer-centric goals are not sustainable without correlation to company objectives such as revenues, margins and profits. Therefore, the results of customer satisfaction measurement programs must be linked with business performance measures such as customer share, customer retention or similar factors that directly correlate with financial performance.
Because customer satisfaction is a leading indicator of purchase likelihood and loyalty, more advanced companies will design predictive analytics to model changes in customer programs and view the pro forma impact to company performance objectives.
There are several customer measurement programs, but two that stand out for their simplicity and effectiveness are CSAT and NPS.
Customer satisfaction (CSAT) measures affective and cognitive aspects of satisfaction, is generally scored on a Likert scale of 1 to 5 and is expressed as percentage of total customers whose experiences meet or exceed stated satisfaction goals.
Two reasons I like CSAT are that it is highly correlated with Personal Consumption Expenditure (PCE) growth and it provides a benchmark comparison with the American Customer Satisfaction Index (ACSI). ACSI scores provide industry and peer comparison, forecast word-of-mouth recommendations, purchase behavior and customer loyalty, and are linked to financial performance measures such as sales, long-term firm value, cash flow and consumer spending.
I have two cautions for CSAT. First, I’ve seen many first-time implementers create survey bias based on unstructured questions, skewed anchor questions and questions that are not directly correlated with financial performance measures. Second, this survey method often tends to focus more on a company’s products than the company itself. That makes the data less durable at products are replaced and retired. It also averts some important loyalty objectives. For example, a loyalty goal is to transfer affinity from products to the brand.
Net Promoter Score (NPS) asks the single question, “What is your likelihood to recommend our company to a friend or colleague?” The 0 to 10 response scale places customers into the below categories.
NPS took hold as it was shown (first by researcher Reichheld and then Bain & Co.) to be a predictor of customer loyalty and company growth. Other benefits include a method that is easy to calculate, easy to understand and earns high customer participation rates due to asking a single question.
NPS is the dominate customer loyalty measurement method. However, a caution to recognize is that the broadness of the score can mask needed actions for improvement. It’s been my experience that clients may struggle to determine what actions will most improve customer scores. As a consequence, many NPS adopters ask additional questions to drill down and uncover specific needs. However, asking additional questions negates some of the NPS value. Finding the right balance between the number of questions and answers that deliver actionable take-away is the key.
Evaluating Evaluation Methods
There’s no shortage of customer rating measurement systems. Additional methods include A.T. Kearney’s Customer Satisfaction Audit which compares the company against eight excellence dimensions, the Kano model which prioritizes product attributes important to customers, the RATER model which measures the gap between customer expectations and experience, and Customer Effort Score which is particularly well suited to measure customer service ease and completion.
Keys to success are to adopt a method that aligns customer satisfaction with company objectives, ties customer response to action, records customer ratings in the CRM customer profile record and is consistently used to demonstrate progress and trending.