Customer experience metrics are the most important choices in your CX strategy! What you monitor shapes your mindsets, conversations and actions.
Yet recent studies show that only 21% of businesses are “very or extremely satisfied” with their ability to quantify the impact of customer experience on business results.1
There’s no shortage of popular customer experience metrics like Net Promoter Score®, CSAT (customer satisfaction), customer retention or churn, CES (customer effort score), customer health scores, CLV (customer lifetime value), ROI (return on investment), FCR (first contact resolution), CAC (customer acquisition cost), conversion rates, and so forth.
Still, quantifying customer experience ROI is consistently the #1 overall customer experience management challenge.1
Customer Experience Metrics Fallacies
Why are customer experience metrics falling short?
- The metrics listed above are generally customer behavior metrics: what the customer is doing for the supplier, or otherwise, they’re efficiency metrics (e.g. FCR, CES, CAC).
- They’re more interaction-oriented than relationship-oriented.
- These metrics are more supplier-centric than customer-centric.
- Assumptions abound — examples: do the positive percentages represent core-growth customers or low-growth customers? what’s the propensity to actually recommend? will more than one brand be recommended? does positive word-of-mouth actually cancel-out negative word-of-mouth at a 1:1 ratio?
- These are all lagging indicators, not leading indicators.
Fallacies. Customer experience metrics fallacies abound because they originated from a marketing or service operations perspective. In the quest for rapid upticks in these customer-facing functions, cause-and-effect visibility is limited. Through the direction of tech providers, actionability is an afterthought or misguidedly integrated into the technology. In the exuberance of flashy dashboards or a single ultimate metric, top management has forgotten to demand scrutiny similar to manufacturing and operations metrics.
Priority. This is ironic because there’s really nothing more important in business than customer experience strength. Manufacturing, operations, marketing and service (and so forth) are pointless unless customers are pleased enough with your brand to keep funding salaries, budgets and dividends. Sometimes managers are adamant that investors provide this funding — but if so, that’s a ponzi scheme — investors expect revenue from customers to reward them by funding salaries, budgets and dividends.
B2B is Unique. B2B CX maturity is independent from borrowing practices from B2C customer experience metrics.
- In B2B, there are multiple parties within the customer company who play a role in purchase decisions, and accordingly, whose expectations need to be monitored.
- For B2B purchases, relationships are vital and sales cycles may stretch across weeks or months.
- After purchase, B2B customers typically interface with suppliers significantly — and the stakes are high — making post-purchase marketing and customer experience management just as important as the pre-purchase phase.
- B2B interfaces between customer and supplier tend to be far-reaching beyond customer service. Numerous parties inside the supplier company interact with their counterparts in the customer company, in many cases.
- The significance of the B2B solution’s performance, per se, cannot be underestimated.
Customer experience metrics must reflect these realities for B2B CX maturity. Adjust your voice-of-customer, marketing, service, success, sales and operations metrics accordingly.
Customer Experience Metrics Truths
1) How Metrics Work: Every metric is part of a chain reaction. The concept of “no man is an island” applies to metrics: without context, your view will be myopic and your decisions will be weak compared to the situation’s inherent potential. The context of a metric goes beyond the elements in its equation. The chain reaction is fueled by underlying processes across the supplier-to-revenue spectrum.
Drill Down. Peel the onion: financials are generated by customers’ sentiments and behaviors, . . . which are shaped by outcomes of your company’s workflows, . . . which are influenced by workflow decisions and workflow inputs from suppliers.
Too Late. Financials, customers’ sentiments and behaviors, and outcomes of workflows are lagging indicators. The train has left the station — it’s too late to make adjustments at those points.
Get to the Heart. Lagging indicators are certainly important. However, they’re not actionable. You must peel the onion to identify the most relevant workflow decisions and supplier inputs that are at the heart of your vital lagging indicator’s performance.
True Leading Indicators. It’s these relevant workflow decisions and supplier inputs that are true leading indicators. You see their performance before customers experience their outcomes. You can make adjustments before the train leaves the station.
Predictive. By focusing on true leading indicators, you can predict lagging indicators’ performance — they’ll follow the same upward or downward trend as your workflow decision and supplier input trends.
2) Start Right: Before dedicating your attention to any customer experience metric such as NPS®, double-check the veracity of your assumptions. Validate potential metrics with questions like these:
- Are your customers inclined to recommend your brand externally, or is your customers’ industry so competitive that they’re not inclined to do so?
- Are participants in your surveys representative of your core-growth customers?
- Is it true that “likely to recommend” corresponds to actual recommendations?
- Is it accurate that those who recommend your brand are focusing on your brand, and not yours along with your competitor’s brand?
- Is the degree of positive word-of-mouth (passion and duration) equal to the degree of negative word-of-mouth?
- Are those who are “likely to recommend” representative of your core-growth customers, or influential to potential core-growth customers?
Customers First. Always choose customer experience metrics that make the most sense to your customers first, followed by what makes the most sense to your company’s managers. There’s no magic aura of any particular metric that makes it the be-all for every enterprise.
1 Size Does Not Fit All. Resist the temptation to over-use a metric. For example, after an airline was a day late in delivering my luggage to me, I received repeated requests for feedback. Yet the only opportunity for giving my feedback was a single rating question: “how likely are you to recommend our brand?”. This made no sense to me. Were they asking whether this mishap meant I’d no longer be a fan of their brand? It would have been better to let me give my feedback any way I’d like (comment, rating, photo, video, etc.), and to use data mining technologies for their managerial reporting. They might have learned some valuable insights and I would have been glad to share my views and suggestions. As it was, ironically, negative word-of-mouth about this incident has continued as I’m continuing to share this example with you.
Make sure you’re including the important facets of B2B CX realities in your suite of customer experience metrics.
3) Customer-Centric Metrics: What do customers care about most?
- Achieving their intended outcomes, foremost
- Ease-of-business along the way
- Their realities matching their expectations (integrity of your value proposition)
Customer-Centricity. How can you measure these care-abouts? Get crystal-clear about why they’re pursuing your solution: what is your solution achieving in their business? Ease-of-business doesn’t mean effortless — it means smoothness and lack of negative surprises. Realities matching expectations means you delivered exactly what you promised.
Follow the Money. Why should you bother with customer-centric metrics? When you please your boss, your boss is more inclined to please you. As providers of your salaries, budgets and dividends, customers are surely “your boss” for all parts of your company. When you’re monitoring their care-abouts, you’re gaining insights into their evolving expectations. By doing this, you’re opening the door to strengthening your relationship and customer lifetime value in ways that haven’t yet occurred to your competitors.
Context is Key. I’ve seen situations where emphasis on company-centric metrics (e.g. efficiencies, yields, value stream mapping) was causing customers to distrust a brand, split their orders among other suppliers, and/or buy less because their resources were tied up in resolving issues with the supplier. Don’t “shoot yourself in the foot”. It’s always best to use customer-centric metrics as the context for your company-centric metrics.
4) Focus on Leading Indicators: Every metric can be diluted by outliers. For strongest results, filter your calculation to focus on your core-growth customers. For example, your Net Promoter Score® typically includes all participants in a survey, but only some of these participants are most important to your company’s growth in the near future. These are your core-growth customers. Among them, what are the key drivers of loyalty? This is determined through a key drivers analysis (KDA), also known as correlation analysis.
Your core-growth customers’ key drivers of loyalty indicate which workflow outcomes are of greatest interest.
It Works!. An example of “moving the CX needle” by improving workflow outcomes was shared by tw telecom, resulting in 27% reduced customer churn, 65%increased Net Promoter Score®, and 20% better performance than competitors in sales, purchasing, ordering, installation, billing, service inquiry, maintenance and account management processes.
Identify Leading Indicators. Leading indicators are identified by starting with each of your key drivers of loyalty:
- What does a Pareto analysis reveal as the vital few forces on moving the needle?
- What does root cause analysis reveal as the 5th why behind each of your vital-few symptoms?
- For the workflow process(es) associated with the 5th why, which “diamond” or “workflow input” is a faulty filter? Faulty filters are allowing poor performance to be experienced by customers. Fix the filter and, in turn, you’ll fix customer experience and corresponding financials.
Bonuses & Recognition. Focus teams’ attention on faulty filters. These are true leading indicators. When I led company-wide customer experience management at Applied Materials, we focused executives and teams on leading indicators as the basis for recognition awards, bonuses, and organizational/individual performance reviews. Examples of achievements that grew customer trust, and accordingly, grew revenue and profit:
- 16X reduction in customers’ time for service
- Exceeded customer expectations by 75%
- 10X increase in customer productivity
- 10X reduction in lead time from 5 days to 5 hours
- 6X improvement in trouble-shooting cycle time
- $1M savings monthly to the customer
- 80% reduction in customer engineers’ learning cycle time
- 75% reduction in customer-reported bugs/issues
Quantify CX Impact on Business Results
Chain Reaction. When you identify the chain reaction behind one of the popular customer experience metrics you’re using, according to the steps outlined above, you’ll be able to clearly quantify CX impact on business results. Peel the onion to identify what causes what. When that’s done robustly, you can focus everyone’s attention on leading indicators. You’ll find that your important lagging indicators will validate the trends you’re seeing in the leading indicators. Voice-of-the-customer and customer behavior metrics will echo what your leading indicators are showing.
Logic. Not sure whether this is true? Think about a child struggling in school exams. Rather than show the child how to beat the tests, you’d explore whether the learning environment is ideal, how well the child can see and hear, how much sleep and self-confidence the child has, and whether the child is completing assignments satisfactorily. You’d narrow down this list to the vital few, and then the actual root cause. As you monitor these leading indicators, you’d have confidence that the child’s exam performance will improve. Test this logic with other situations in life.
Summary. Customer experience metrics choices often determine the longevity and clout of your customer experience and marketing teams. CX metrics usage certainly shapes mindsets, conversations and performance.
- Shift to customer-centric, relationship-oriented metrics for overall context.
- Make sure your B2B customer experience metrics address the unique aspects of B2B.
- Scrutinize potential metrics for how well they contribute to sustainable growth.
- Test your assumptions and filter-out the outliers as needed.
- Robustly explore key drivers of loyalty for the vital few sub-themes and identify true root causes.
- Focus everyone on fixing faulty filters.
This is how customer experience performance will breakout of the lackluster index ranges of this past decade.2 This is how to finally resolve your biggest challenge — quantifying customer experience ROI — with astounding growth for customers, employees, revenue, profit and customer lifetime value.
More B2B customer experience maturity resources: https://customerthink.com/author/clearaction/page/6/