Selecting the “Right” Core Customer Metric

Selecting the “right” core customer metric is one of the most critical challenges organizations face as they attempt build an effective VoC program. Whether they choose to track overall customer satisfaction, customer-perceived value, overall brand health, a Net Promoter Score (NPS®), a Customer Effort Score (CES), a Secure Customer Index (SCI®), or some other measure, most organizations are trying to accomplish three common objectives:

1. They are looking for a measure that furnishes a clear overall indication of how customers evaluate their experiences with the brand or firm.
2. They would like that measure to be a “leading indicator” of financial or other key business results.
3. Building on the preceding two objectives, they want to understand and improve their ability to manage the elements of the customer experience that “drive” this metric in order to increase the odds of achieving desired business results.

Results of the Voice of the Customer Challenges and Practices Survey, recently conducted by MaritzCX, clearly demonstrate that selecting the right core customer metric is a key to VoC program effectiveness. As the exhibit below illustrates, eighty-nine (89) percent of firms having very successful VoC programs have implemented a core customer metric that enables them to achieve the three objectives listed above. In other organizations, this number is only forty-nine (49) percent. In fact, nearly one-half of all “Blue Chip” companies we surveyed are still trying to identify the right core customer metric, and 15% of these say that this is the “most important challenge we must be able to address within the next 12 months.”

So, how do organizations go about selecting the right core customer metric?

Managers and executives often are tempted to pick an “off-the-shelf” measure, such as the Net Promoter Score (NPS®). This is understandable. After all, the NPS® has been billed as the “ultimate” measure of customer loyalty and advocacy. It is one of the most widely-used of all core customer metrics. NPS is relatively easy to capture and calculate, and it has an intuitive appeal that some managers and executives find irresistible. Most importantly, adopting the Net Promoter Score has enabled many organizations to achieve the three common objectives listed above.

There’s just one problem…

The Net Promoter Score, like any one-size-fits-all measure, may not be the right core customer metric for your organization. I am not the first person to make this assertion. In fact, Fred Reichheld – the creator of the NPS® — says so himself:

“Though the “would recommend” question is far and away the best single-question predictor of customer behavior across a range of industries, it’s not the best for every industry…So, companies need to do their homework. They need to validate the empirical link between survey answers and subsequent customer behavior for their own business.” ¹

My own research shows that, in some markets and industries, other measures out-perform NPS® as predictors of business results, and with respect to identifying the elements of customer experience that drive those results.² Other studies have produced similar findings.³ Sometimes, the best measure is customer satisfaction. Other times it is a measure of customer-perceived value or preference. In many cases, the best metric is actually a combination of several individual measures (e.g., satisfaction, willingness to recommend, and intent to repurchase). What works best for one company frequently does not work best for another. More often than not, the right core customer metric varies by industry, market characteristics, type of customer, and/or product consumption/usage cycles.

So what should your organization do?

The specific approach may vary from one organization to the next, but here is a general strategy I frequently recommend to clients and prospects:

1. Define the critical business result(s) of interest, such as growing market share, retaining existing customers, and/or increasing the number and types of products sold to each customer.
2. Identify “candidate” measures from which your core customer metric ultimately will be selected and constructed.
3. Gather baseline survey data on these candidate measures from a sample of buyers/users.
4. Monitor the buying and usage behavior of these customers over time.
5. Conduct analyses to determine the degree to which candidate measures (individually or in combination) are linked with – and can be used to predict – the customer behavior that ultimately drives the critical business result(s) of interest.
6. Use the results to determine which measure or measures are best for your organization.

This approach takes a little more time and effort than simply choosing an off-the-shelf measure. However, it is the most effective way to ensure that your organization implements the right core customer metric.

¹ Reichheld, Fred, with Rob Markey (2011). The Ultimate Question 2.0. Boston: Harvard Business Review Press; pp.50-51. ↵

² Brandt, D. R. (2007). “For Good Measure.” Marketing Management. January/February; pp.21-25. ↵

³ For example, see Morgan, N.A. and Rego, L.L. (2006). “The Value of Different Customer Satisfaction and Loyalty Metrics in Predicting Business Performance.” Marketing Science. 25(5); pp.426-439. ↵