Today, businesses of all types have an obsession with benchmarking. Whether the focus is NPS score rankings, JD Power awards, or another competitive CX measuring stick, companies are hyper-focused on benchmarks. Why are businesses so obsessed with benchmarking, and what results does that obsession create?
Benchmarking can be very helpful to companies and their management. It can be used to improve the customer experience, to increase company revenue and profitability, and to help management set and achieve goals. It can also be used to earn bonuses or bragging rights.
With all these uses of benchmarking, most businesses carry an inherent assumption that if scores are moved, business results will move as well. In practice that assumption is generally true, but often companies pursue improved scores in ways that can be counterproductive.
Following are some tips on how to best use benchmarks – and how not to use them.
Don’t use benchmarks to….
Copy Strategies of Industry Leaders – In some rare cases, a company can learn from and improve on the practices of a business leader in such a way that the new model is better than the old. But this almost never happens between companies with similar business models. Having benchmarks can help you identify competitors’ strengths, as well as the white space in the industry. Rather than copying others, companies should be determining their own formulas for success. Kia and Hyundai are an example of this strategy in the automotive space. They have learned from brands like as Lexus and Infiniti, but have implemented some more luxurious features in the context of their own value proposition of affordable value.
Choose Scores as Targets Arbitrarily Based on Others in the Industry – Whether a company’s goal is to be the best in the industry in a certain metric or to raise its scores up to competitors’ level, arbitrary goal creation may be setting companies up for failure. It’s great to have a goal, but more important is a plan on how to get there or an assessment of what is achievable. Without these, teams may approach or reach the goal in the short term, but success will likely not be sustainable as the company works for numbers rather than trying to affect their causes.
Tie Bonus Incentives to Achieving an All-or-Nothing Score – When compensation is attached to an all-or-nothing number, managers and employees will do whatever it takes to achieve the goal, including cheating and gaming the system. Anyone ever had an auto salesperson tell you their children won’t eat if you don’t rate them a 10? At the very least, this type of incentive program causes managers to emphasize the score over the experience. This may get managers their bonus, but it doesn’t serve the customer, which in turn doesn’t serve the business.
Choose a Metric Based on What Everyone Else Uses – Having a target metric is critical to making the CX important to people across the organization. But the metric, its target level, and its incentivization all need to foster behaviors and activities that benefit customers, employees and the company alike.
This does not mean that a score such as NPS is not a good measuring stick, nor does it refute that outcome measures like NPS are tied to better customer and business outcomes. However, if the benchmarking approach or metric, leads the company to set goals, objectives and approaches that are suboptimal for its customers, employees or business, it will not be successful.
A few rules of thumb are useful to remember when setting targets and examining benchmarks:
- Avoid all or nothings
- Make sure it in the employees’ locus of control (or at least mostly in their control)
- Make sure it is agreed upon
- Make sure it is achievable
- Make sure it is specific
So how should benchmarks be used?
Do use benchmarks to….
Act Differently Based on Where You Stand vs. Competition – Is your company a differentiated leader, at or near the top of a competitive industry, in the middle of the pack, or a laggard? Laggard companies should focus on identifying the weaknesses that are hurting business the most and fix them. Companies in the middle of the pack need to find ways to further differentiate themselves and be excellent in some way. They should look to leaders to understand their strengths and identify potential strategies for differentiating in ways that are valuable to customers. Companies that are leaders in their industries should look to leaders in other industries to get ideas and watch for changes in technology that can enhance customer experience.
Set Goals and Adopt Metrics that Create Alignment between Customer Needs, Employee Needs, and Company Objectives – The ultimate measure of success of a CX program is whether or not it drives business results. NPS is a measure that is correlated with business results. It is not a causal measure like action on the part of employees (nor does it help to prescribe action). It does not drive change in customer behavior, or even propel word-of-mouth promotion that may drive or limit growth.
Measures other than NPS or overall satisfaction that might be considered as core metrics include
- Problem incidence
- Recovery effectiveness
- Actual recommendations, both positive and negative, including orally and through social media
- Consistency of performance
- How often expectations are exceeded or not met
- CX actions taken (from dashboard)
These measures get at something that is more important than the score ranking: momentum. After all, you are where you are; the question is, where will you be in the future?
One additional benchmarking option to consider is to initiate an proprietary competitive benchmark study looking at meaningful metrics beyond NPS or overall satisfaction, such as the ones mentioned above.
Companies should be obsessed with benchmarks, but they should ask themselves if they want to be the winner of a beauty contest or the one that maximizes business results. The former may be more attractive, but the latter is more sustainable and more profitable.