Customers love a company because they perceive value in their interactions with its people, products, and services. As customer experience (CX) professionals, we usually measure this sense of value with the Net Promoter Score®, or NPS®, which is a nominal indication of how likely the customer is to recommend the company to another person, and which correlates with other customer behaviors (such as loyalty.)
So what is it that drives a customer’s value perceptions?
A Value Perceptions Study
A new article in the Harvard Business Review proposes a theoretical model of elements on which a company can distinguish itself, and which are determinant of its value rating (i.e., its NPS®.) The authors derived their model by reviewing past studies they’d conducted, and looking for data and anecdotes to help clarify why a customer would rate a particular company’s value highly (or not.) They came up with thirty concepts, such as “saves time”, “provides hope”, “reduces risk”, and “quality”, on which customer perceptions can be measured on a simple Likert scale. They then did a large (10,000+ subjects) study to validate it, and their findings suggest some useful ideas.
Choose more than one element to target
They found that companies which scored highly (8+ on a scale of 1-10) on four or more of the thirty elements had triple the NPS® and quadruple the revenue growth of companies with only one high score. These highly-rated companies also had twenty times the NPS® of companies with no high scores!
In other words, the more elements on which a company scored highly, the higher their NPS® score was likely to be. The lesson here is to focus your CX improvement efforts on more than one element. Don’t just try to excel at saving customers’ time, or creating a sense of belonging. Rather, you should choose a set of elements to target, and develop a strategy for building customer’s perceptions of how well you do on each one.
Don’t try to target all thirty elements
No company scored well on all
thirty elements. The authors found that even a wildly successful company like Apple scored highly on only eleven elements. They also found that the elements that drive customers’ value perceptions vary by industry. For example, in Auto Insurance, “Quality”, “Reduces Anxiety”, and “Reduces Cost” were the top three determinants of NPS®.
This suggests you should be strategic in your choice of elements on which you focus. Consider those most important in your industry, and those on which you already have a competitive advantage, when you’re deciding where to invest on improving the customer experience.
Make sure Quality is on your short list
Across industries, the authors found that the element of Quality stood out as most determinant of value perceptions. In other words, quality ratings were most strongly correlated to NPS®, regardless of the industry in which the company being rated was competing. As such, when you’re deciding your focal elements, make sure “Quality” is one of them.
Bonus suggestion: Study your success!
If you’re going to pursue improvements on a strategically-selected set of drivers of value perceptions, be sure you measure how you’re doing! Collect ratings over time on all thirty elements from a meaningful number of your customers. You should be able to use statistical analysis to tie your business changes back to improvements in your chosen elements, and in your NPS and revenue growth. You can then draw a direct line between your organizational change initiatives, and improvements in customer’s value perceptions and loyalty.
Maintaining a valuable relationship
Remember that your customers love your company because they value their relationship with it, and that sense of value is driven by the effectiveness with which your company delivers any of the thirty elements from the study under discussion. By strategically developing your CX program around Quality and other elements that are important in your industry, and tracking and analyzing your results, you’ll be able to show your stakeholders the direct relationship between implementation of the program, improvements in customers’ KPS ratings, and accelerated revenue growth.
The article on which this post was based can be found at https://hbr.org/2016/09/the-elements-of-value.
This article originally appeared in the CX Cafe.