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Your CX Scorecard is Probably Measuring the Wrong Thing

Jim Tincher | Sep 24, 2017 211 views 5 Comments

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“The purpose of a business is to create and keep a customer.” – Peter Drucker

I love that quote. In one short sentence, Drucker summarizes what a business – and customer experience (CX) – is all about. But despite that wisdom, companies continue to focus primarily on creating customers, often forgetting that keeping them is the way to organic growth. And when they do focus on keeping customers, the focus is all too often on trying to trap them – requiring a phone call to cancel (I’m looking at you, TiVo and Comcast), or requiring contracts that assess fees to leave (Comcast, you again).

Jeannie Bliss has been beating this drum for years. We need to listen to her. What matters is new customers minus attrition, plus how much those customers spend with you. Everything else is just window dressing.

I get all kinds of calls from companies proud of their Net Promoter Scores (NPS). Yes, all things considered, it’s better to have a high NPS score than a low one.



But you know who’s not impressed with your high NPS? Your customers. While you’re navel-gazing, they’re trying to figure out your website.

We all know the stories of companies whose customer scores go up while their business tanks. So, let’s focus on what really matters – getting and keeping customers.

The top of your scorecard should have three simple metrics – new customers, lost customers, and revenue per customer. Imagine how your executives will respond when they see this. They’ll probably ask you a whole bunch of tough questions! But these are the questions that matter.

I met with a CX leader whose scores were going up while his business was declining. We walked through what they knew, and he was excited because he just finished doing a driver analysis for what drove customer satisfaction. (A driver analysis is a statistical methodology for determining what factors most drive the dependent variable – in this case, customer satisfaction. For example, speed of service, taste of food, cleanliness of locker rooms, etc. It obviously varies both by industry and brand, but it shows you what to focus on.)

That’s where he messed up – and you likely are, too. Who cares if your customers say they’re satisfied on a survey? Between low response rates, gaming the system, etc., surveys are becoming less predictive of actual business outcomes. What we care about is getting and keeping customers. Rather than falling into the trap of measuring what’s easy, look at what matters. Don’t report satisfaction – instead, use your surveys to see what most drives repeat visits. If you can’t track which customers are new and who has left, then track total number of customers and how that changes over time.

Only by reporting on what the business cares about – getting and keeping customers – and driving action against that – can we earn a seat at the executive table. And that’s when we start driving impact.

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5 Responses to Your CX Scorecard is Probably Measuring the Wrong Thing

  1. Dennis Gershowitz September 25, 2017 at 6:37 am (7 comments) #

    Jim…I like your reminder, especially on the keeping customer portion. I still visit with too many clients that do not have a formalized retention management program and no clue as to why they are losing customers. I favor having a set of actionable metrics targeted on what is of value to your customer. This along with a strategy to win and keep customers is a winning game plan.

  2. Michael Lowenstein September 25, 2017 at 9:33 am (1310 comments) #

    About 20 years ago, my first book, Customer Retention, dealt entirely with getting customers, keeping them, and stabilizing them if at risk. Still true, of course; but, the world of customer behavior and CX has become far more multi-layered and complex in the past two decades.

    Macro customer satisfaction or NPS scores are not nearly granular enough to drive and sustain change, although they do offer some guidance on a 30,000 foot basis. And, your statement, “all things considered, it’s better to have a high NPS score than a low one” is certainly true. Also, as you stated, customers really don’t care about these scores – what they care about are the brand perception, experience, and personalized value which drive downstream behavior. This is why, for over a decade, I have been using advocacy,as a core CX metric. It’s been found to be a true barometer of customer perception and marketplace behavior. More to the point for every organization, as a metric advocacy monetizes at a high and consistent level, industry to industry around the world.

  3. Andrew Rudin September 25, 2017 at 10:03 am (231 comments) #

    Hi Jim: I agree that it’s often worthwhile to examine scorecards and customer metrics to make sure that things are getting measured that are consequential to customers and that the business acts the right way based on what’s learned.

    I’ve read much about the importance of customer retention as the key to [fill in important outcome here]. I’ve listened as people have weighed in – loudly, at times – that retention should be prioritized over acquisition. I’ve repeatedly read stats like “it costs five times as much money to acquire a customer as it does to retain one.” (Actually, the range I got online just now is 5 to 25 times). Few bother to provide sources or financials that shed light on how that conclusion was developed. And the “cost” argument fails to consider anything else, such as the strategic goal of the business. I’m supposed to base my customer strategy on retention because it costs less? That seems lame to me.

    Today, nobody wants to prove why retention is ‘better’ – they just want to say it. Or, if they do offer cost ratios, they never describe how the calculations are made, or how departmental costs are parsed between acquisition and retention. I know from personal experience: I can use the figures in General Ledger accounts to prove anything I want. Anything. I just have to know how to calculate a ratio.

    It’s as if these objectives (retention/acquisition) are in opposition to one another, and that satisfying one goal jeopardizes or diminishes the other. That seems odd to me. Why not both? It’s possible.

    But to the advocates of retention over acquisition, I recommend this: before you advocate, examine the business model, product life cycles, and sales incentive / compensation plan. Some companies need to acquire customers rapidly to execute strategy. As the company matures, that may change, and tactics will shift. Or, the company might have long product life cycles, and Sales cannot make quota without voraciously acquiring new customers. (I know this firsthand – in such situations, a rep can close a large, six-figure deal, and the customer might spend a small amount for several years on high-service, low-revenue ancillary supplies until the next generation of equipment comes out. In such instances, the only way for reps to make goal is to land the new opportunities.)

    Though the percentages vary, every company I work with accepts customer churn as a risk. When it’s cost-effective, it can be mitigated by retaining accounts. The risk is also mitigated by sustaining new account development, which carries different risks. An effective revenue strategy means being competent at both retention and acquisition, and, depending on the objectives of the business, knowing which to emphasize, and when.

  4. Lisa Yetman September 25, 2017 at 11:42 am (15 comments) #

    If I interpret this correctly, CX would mean something different for each customer. Of course, customers (or Guests, as I prefer to call them!), love when they have attentive CSRs coming to greet and aid them, if necessary. Buy what about those things that employees take for granted because they see their workplace everyday – decor, cleanliness, background music, etc. All these “incidentals” could be lumped as ambiance…and many people enjoy the ambiance more than the stellar service.
    As I wrote at the beginning of my post, different things bring each of your customers in to visit!

  5. Sonal Maheshwari September 26, 2017 at 6:06 am (1 comment) #

    Jim, I agree totally with your statement that high NPS(Net Promoter Score) is better than a low one. I also agree that customer retention is as important as getting new customers. Different customers have different opinions, views, and suggestions as to how the service and organization ought to function. While it is good to heed to customer opinions and try to model the service and organization likewise, the organization should not diverge its resources to comply with every single customer and this is very obvious. The organization should get a broad and common view of its customer base so that it can cater to a majority of its clientele. Let’s face the fact; you just can’t make everyone happy, can you? Customers will also tend to stick to the organization if the latter is very honest in its communication. This falls in line with the practice employed by Carl Pei, founder of OnePlus. Any shortcomings, delays should be communicated beforehand because it does not sit well with the customers when they find out on their own. As no organization is perfect; some small misgivings will be forgiven and the customers will remain clung to you.

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