Measures of Success
The top objective for nearly half of corporate social
strategists in 2011 is to create ROI measurements for
their social media strategies.
—ALTIMETER GROUP, 2010
Reza Soudagar, Vinay Iyer, and Dr. Volker G. Hildebrand
MANAGEMENT GURU PETER DRUCKER had it right: if you can’t measure something, you can’t manage it. And with regard to the customer experience, he might have added, if you can’t manage the effort, it’s going to fail, sooner or later.
Of course, metrics is a topic that people seem to prefer reading about to implementing. And even when companies do use metrics, they often measure the wrong things. In most organizations, many employees are compensated based on metrics that actually work against improving the customer experience (average call-handling time, for example, rather than first-call resolution). Metrics are often shrouded in dysfunction.
It’s understandable. Measuring is hard work, often subjective, and not as interesting as the mainline work of improving the customer experience. People are often tempted to skip measuring in favor of doing. Again, this may be human nature, but tracking your customers’ experience and measuring your performance at improving that experience are at the very heart of obtaining the customer experience edge. Proceeding without confirmation that your customers appreciate what you’re doing is part and parcel of the old way of doing business. You need to be absolutely certain, from your customers’ point of view, that you are doing the right things.
The key is to select metrics that reflect your customers’ state of mind and measure the activities that drive customer value. Think for a minute about the classic metrics upon which businesses have been run for decades. These include financial measures like revenue (per geography, per product line, per customer group, per unit of time); return on assets; return on investment; and earnings before interest, taxes, depreciation, and amortization. Of course, you have to pay attention to these things, but these classic financial metrics do not relate to the way your customers perceive you. They say nothing about whether your customers are about to buy more from you or jump to a competitor. Even a market leader’s customers may be on the verge of defection—you can’t tell by looking at market share alone. Traditional financial metrics also say nothing about whether your employees are empowered and given incentives to solve customer problems. That’s why it is crucial that you start developing and using customer-centric metrics.
It is equally critical, however, not to track too many metrics. Measurement overload is akin to analysis paralysis—too many metrics take up too much time, confuse everyone, cloud insights, and stymie positive action. Metrics should be focused and well understood by the broader organization. Focus on a handful of metrics that matter—certainly, no more than 10.
Creating Metrics for CE: Guiding Principles
In a blog post, customer experience (CE) consultant Lynn Hunsaker advises companies to let the following four principles be their guide when creating customer experience metrics:
1. Connected. Make sure you’re measuring things that have a strong connection to overall business objectives (such as to increase profits or retain the highest-value customers). The goal is cascaded to each level of the program or organization, to identify successive contributions to the big-picture objective.
2. Actionable. Select strongly connected success measures that allow you to control outcomes. Metrics at an organization’s lowest layer are the most actionable.
3. Predictive. Emphasize metrics that have a strong cause-and-effect relationship with objectives. Rather than focusing on customer satisfaction as measured by a survey after a transaction, for example, look at leading indicators of customer satisfaction, such as on-time delivery. This eliminates the pitfall of operating in reactive mode. “Most metrics look through the rearview mirror to say, what happened in the past? But you really need to look forward to where you’re going to take your business,” says Greg Langston, vice president of sales for the Harris Products Group, a subsidiary of Lincoln Electric Company that sells welding and brazing equipment.
4. Sustained. Set up the right environment for predictive measures to keep producing strong results. Your ability to sustain these results will depend in part on keeping the key metrics in front of everyone in the organization (via tools like dashboards and scorecards) so that they can see areas that need immediate attention, as well as how performance is trending.
Types of CE Metrics
Old-school metrics often track cost and other financial measures, reflecting a company-centric worldview. The best customer experience metrics relate to a customer goal, while also measuring how well your organization has furthered that goal.
First-contact resolution is a good illustration. The first and most important aspect of this metric is the number of times your customers’ issues were resolved during their first call to the contact center or first visit to your website or store. This is directly tied to your customers’ desire to minimize the amount of time spent getting their problem fixed. First-contact resolution stands in stark contrast to the old-school metric of average callhandling time, which can backfire because it gives customer service reps an incentive to wrap up calls quickly, even if the customer’s problem has not been resolved. This metric speaks only to organizational imperatives such as cost efficiency.
But first-contact resolution doesn’t stop at making customers happy. This metric also speaks to organizational efficiency. If the issue is taken care of on the first go, not only does the customer go away satisfied, but the company also saves money by avoiding subsequent calls. First-contact resolution is a prime example of a metric that aligns the customer’s best interests with the company’s.
Number of unsolicited leads is another such metric. Here, a customer seeks you out based on a recommendation. From your perspective, this person drops into your corporate lap as if heavensent—your organization did not have to spend any time or money chasing those who are not interested.
Not all your CE metrics will be so perfectly balanced, but a few should be. The key is to locate the areas where customer and corporate interests intersect and create metrics around those points. The principle that you can run your business better by serving your customers better should be the backbone of your customer experience metrics. A number of customer experience metrics are summarized in Table 11.1.
Net Promoter Score
Net promoter score (NPS) has become a very popular way of measuring the customer experience, based on its simplicity, and also on studies that have shown a correlation between a high NPS score and corporate success. NPS is obtained by asking customers a single question on a 0 to 10 rating scale, where 10 is “extremely likely” and 0 is “not at all likely”: “How likely is it that you would recommend our company to a friend or colleague?” Based on their responses, customers are categorized into three groups: promoters (9–10 rating), passives (7–8 rating), and detractors (0–6 rating). The percentage of detractors is then subtracted from the percentage of promoters to obtain the NPS. NPS is a key indicator, the theory goes, because a person’s willingness to recommend your firm to a friend or family member is the definitive indicator of satisfaction.
TABLE 11.1: New Customer experience Metrics
Indeed, to loyalty guru and author Frederick F. Reichheld, “Would you recommend this company to a friend?” is The Ultimate Question, the name of his most recent book. According to research that Reichheld conducted in conjunction with Bain & Co., a high NPS is correlated with higher profitability. The analysis shows that sustained value creators—companies that achieve long-term profitable growth—have an NPS two times higher than the average company. And in most industries, NPS leaders outgrow their competitors—by an average of 2.5 times.
To Reichheld, NPS is the metric around which every company should organize—it is more important by far than any financial measure or customer satisfaction score. The average company achieves an NPS of only +5 to +10, meaning that its promoters barely outpace its detractors. Many firms—and some entire industries—have negative NPSs, says Reichheld, which means that they are creating more detractors than promoters on a daily basis. Companies with bad NPSs cannot hope to achieve profitable, sustainable growth, no matter how aggressively they spend to acquire new business. Even companies that are at the top of the heap score NPS efficiency ratings of +50 to +80, leaving room for improvement. As with the rest of your CE journey, you should strive for continuous improvement in your NPS.
Although NPS is a great way to measure customer experience success, its detractors point out that it is limited. For instance, it is not actionable— there is no way to know from the score itself what a company is doing wrong. This is why many companies either add a section to their surveys asking for further comment or create a process to follow up with lowscoring respondents.
For Dell, even the mighty NPS is eclipsed by another metric: customers who were detractors who have turned around and are now promoters. This experience magnifies the positive effect, says Manish Mehta, vice president of social media and community for Dell. “You’ll find someone who will say, ‘I will never buy from Dell again.’ If we can turn around that situation by solving their problem, that same person will say, ‘I am now a Dell customer for life,’” says Mehta.
Organizational Metrics
Organizational metrics should be modified to better link employee compensation with the customer experience. At Synopsys, the leading supplier of software that helps semiconductor companies design new integrated circuits, for example, support engineers receive bonuses based on how many customers grade them as “exceeding expectations.”
Even a company that tracks wrong-headed metrics like average callhandling time has the possibility of redemption if its employees are trained to see the bigger picture and have the tools necessary to take corrective action. Say, for example, a credit card customer calls, trying to get to the bottom of a problem with his account. He’s told that he’ll need to wait a few days while the fraud department investigates the issue. After numerous unsatisfactory attempts to straighten out the problem, the customer— dogged, if not optimistic—calls yet again. This instant is a moment of truth —the organization has the opportunity to turn things around.
TIP
Dell goes beyond the NPS metric by turning unhappy customers into promoters. It actively monitors social media sites and e-communities to discover influential individuals who are vocal about their negative experiences with Dell. Then, several times a year, the company invites 15 of its most unhappy customers to fly, all expenses paid, to corporate headquarters and participate in a Customer Advisory Panel. As it turns out, detractors are just as happy to vent in person as they are online, especially when they are surrounded by other like-minded individuals. But soon (usually by the second day) they begin to see that Dell is listening and working to resolve their issues, says Manish Mehta, vice president of social media and community at Dell. At this point, most are transformed from detractors to promoters. “After a while, when they see that we are listening, they start listening as well,” he says. When negative experiences can be converted into positive ones, loyalty is even more guaranteed.
This time, let’s say the agent is able to see in the customer record that this person is a good customer and has called three times to resolve the same issue. If the agent is empowered to take ownership of the situation by saying, “I am going to stay on the phone with you until we sort this out,” there is a good chance that the customer is going to feel taken care of by the end of the call. That kind of good feeling translates into true loyalty. As at Dell, a customer who started out unhappy but for whom the situation was turned around is probably going to be an advocate, someone who will tell people about the positive experience he had with your company.
Financial Metrics
As we’ve said, traditional measures of corporate performance are not the most accurate measures of the customer experience. However, you can spin these metrics so that they are aligned with your customer’s point of view. Take the metric of customer profitability. Generally, you would interpret this from an enterprise perspective (“How much profit did we make from this customer?”), but you can and should view it from the customer’s point of view, too. Customers who understand and buy into your value proposition tend to be of higher value from a profitability standpoint than those who don’t.
Take someone who buys a luxury car for the first time. The customer has seen enough commercials to understand the car’s value proposition (“This car is better than the rest, and I will look good driving it”), but in the end, it’s not the right car for him. Let’s say he failed to confer with his spouse prior to buying the car, they can’t really afford it, and so on. Now, after the purchase, he has a major case of buyer’s remorse that causes him to contact the call center to report on tiny flaws, in hopes of getting the deal reversed.
In this instance, there was never a true meeting of the minds. The customer thought he wanted the car, but he couldn’t afford it. The dealership thought the sale was legitimate, but it turns out to be too much of a hassle to continue serving this customer. A dealership that is on the lookout for this scenario will rescind the sale. It simply costs too much to try to serve a customer who should never have bought the product in the first place. The relationship is not going to be profitable for either side, so the best thing is for both parties to walk away. Customer experience means delivering the right experience to the right customer, and metrics should measure how well you do that.
There is another important component: compensation for sales staff needs to be based at least in part on customer satisfaction or another customer-facing metric, not just sales numbers. Pay for salespeople will always be based on their numbers, of course, but it is imperative to add in some customer-centric measures as well. Otherwise, customers will view the relationship as adversarial rather than collaborative and mutually beneficial.
The salesperson and the customer service rep are prime examples of employees whose compensation needs to be aligned with the customer experience. But this is also true for employees in other roles. You need to break down what drives compensation for employees across the company and ask if each element contributes to or detracts from the customer experience. There should be some customer-centric metrics embedded in every employee’s compensation model, such as customer satisfaction with the most recent transaction.
Social Media Metrics
Companies can use social media both to measure their customer experience and to improve their metrics. For instance, companies can leverage social media to learn about a prospect prior to making a visit or cold calling. You can unearth a lot of information about a person, such as her work experience and personal interests, just by examining her LinkedIn profile. Instead of making hundreds of calls per week (an old-school metric), your sales team might make 15 calls, but these calls are now much more relevant to the customer because of the background work. The new metric here would be something like, “How many calls result in a follow-up meeting or discussion?” When the customer or prospect opens the dialogue, you know you are onto something. You are not going to differentiate your business by getting your sales team to rack up the highest number of visits. When you can use social media to increase your relevance and convenience for customers, you are much better off from a customer experience standpoint.
Meanwhile, when it comes to measuring the success of your social media campaign itself, there are a number of metrics you could use. Cognizant suggests four KPIs that use social media traffic examples like sales leads (see Table 11.2).
TABLE 11.2: CE Metrics for Social Media
Source: Cognizant Technology Solutions.
Recent surveys show increased interest in creating ROI measurements for social media strategies. In a 2010 survey by Altimeter Group, 48.3 percent of 140 corporate social strategists named this as a top objective for 2011. Evidence is beginning to accrue that a highly engaged social media strategy is related to higher revenue. According to a 2009 Altimeter Group study, companies that are heavily engaged in social media saw revenue growth of 18 percent that year, whereas the least engaged companies on average saw a decline of 6 percent in revenue during the same period. The same holds true for two other financial metrics, gross margin and net profit.
The Altimeter blog post discussing this study was quick to point out that there may not be a causal relationship between revenue growth and the effective use of social media, but there is a clear correlation and connection. For example, a company with a mindset that allows broad engagement with customers probably performs better because the company is more focused on its customers than its competitors are.
While it isn’t clear yet, the link between social media and sales is rapidly evolving into what some are calling social commerce. A social media dialogue between company bloggers and prospects, for instance, leads directly to incremental revenues. Dell’s social media team is already talking about this as a phenomenon that it will be able to track in 2012.5
Predictive Metrics
Good customer experience metrics can produce actionable insights. Rather than saying what happened in the past (“Longtime Customer A has not ordered from us for 18 months”), these metrics can point the way to action before the damage grows too deep (“Longtime Customer A’s order pattern has changed—it hasn’t ordered from us in two months”). Marriott, for example, tracks two sets of measures, Ed French, senior vice president of Marriott Rewards, tells us. One set concerns satisfaction and the net promoter score, such as, “How satisfied were you with your recent stay?” and “Would you recommend Marriott to someone else?” And at the individual customer level, Marriott tracks financial metrics, including, “What type of revenue does this customer drive?” and “How much share of her wallet do we receive?”
“We can see when things drop off and act on that,” says French. Most of the time, when an individual guest’s revenue trends down sharply, it’s because of a change in his personal situation, he adds, like a job change. “In a small number of cases, about 10 percent, we find an issue. What has been surprising is how effective simply reaching out to the guest can be.” One part of the interaction is acknowledging that there might be an issue and asking if the guest would like to discuss it, to see if the hotel can do anything for her. “We might hear about the difficulty of reserving the type of room they want in the type of hotel they want. It doesn’t take more than an e-mail to make it right for this guest,” he says.
Avoid Measurement for Measurement’s Sake
Lincoln Electric’s Langston knows all too well the pitfalls of misaligned metrics. In late 2008, when he joined the company, his mission was to increase his wallet share with his customers. Lincoln Electric sells directly to distributors, which might stock brazing alloys from five different vendors. The only hope for increasing wallet (and therefore market) share, Langston says, was via a superior customer experience.
“Our products have a lot of commodity elements to them,” he says. “Our value proposition is how close we are to our customers. We need to go beyond pricing to provide an experience customers like and want to replicate.”
Langston’s first step was to take a hard look at the metrics the sales organization had been using. Then he installed a structured sales process with metrics, followed by implementation of a SAP customer relationship management (CRM) system to give sales personnel visibility into customer accounts that they sorely lacked.
One problem was measurement for measurement’s sake. “We had report after report that no one ever read. There was a level of granularity that would surprise the people that created the Sarbanes-Oxley Act,” he says. Langston held an organizational review in which he spelled out metrics to be used moving forward. These were built on five key questions: What do we want to sell? To whom? What does a good order look like? Is there an incumbent vendor on this order? If so, why should a customer switch to us —what is our value proposition? “This helped create some clarity. Without that, people don’t know if they are winning or losing,” he says.
These metrics, especially the last one, helped keep the customer experience top of mind. And they were critical to turning the organization around, even in a negative economic climate, says Langston. “We saw double-digit sales growth in 2010 vs. 2009, and that is continuing in 2011.”
Now, every Lincoln Electric salesperson tracks a Top 25 account list in the CRM system. These are the all-important customers that will generate the most business in the calendar year. Everyone pays much more attention to opportunity management, staging each prospect in the pipeline and tying his own sales calls to ripening prospect opportunities as well as visits to the most valuable customers.
Langston attributes much of the increased sales to the new “clarity and accountability,” measuring and tracking the right things. “Specific behaviors drive profitability for the company,” he says. “Now, that’s what we measure.”
Notes
Quoted material that is not referenced is from personal interviews.
1. Lynn Hunsaker, “Driving Sustained Customer Experience Improvement: Four Metrics Tips,” CustomerThink, March 6, 2009,
http://www.customerthink.com/article/four_metrics_tips_drive_sustained_customer_experience_improvements.
2. Frederick Reichheld, The Ultimate Question (Boston: Harvard Business School Press, 2006),
http://www.theultimatequestion.com/theultimatequestion/home.asp.
3. Amy Porterfield, “Study Reveals Top 6 Social Media Goals for 2011,” Social Media Examiner, February 11, 2011,
http://www.socialmediaexaminer.com/study-reveals-top-6-socialmedia-goals-for-2011/.
4. “New Study: Deep Brand Engagement Correlates with Financial Performance,” Altimeter Group, July 20, 2009,
http://www.altimetergroup.com/2009/07/engagementdb.html.
5. Fred Sandsmark, “From Social Media to Social Commerce,” Microsoft Global High Tech Summit II, Spring 2011,
http://tinyurl.com/3r48aty.
Bibliography
1. Lior Arussy, Customer Experience Strategy: The Complete Guide from Innovation to Execution (Strativity Group, Inc., 2010).
Arussy provides a practical soup-to-nuts blueprint for understanding what the customer experience is, determining how to measure current experiences, and coming up with an action plan for developing greater customer experiences.
2. Shaun Smith and Joe Wheeler, Managing the Customer Experience: Turning Customers into Advocates (London: FT Press, 2002).
The authors offer practical advice on how companies can build the power of the brand, not through advertising, but by the experience and value that they offer their customers. The book provides analysis and concrete methods for increasing loyalty and advocacy in customer experience in a targeted way.
3. Shaun Smith and Andy Milligan, Bold: How to Be Brave in Business and Win (Philadelphia: Kogan Page, 2011).
This book highlights 14 businesses that illustrate what the authors say is necessary to stand out in business today: putting purpose before profit, going beyond what customers expect, and relentlessly differentiating.
4. John A. Goodman, Strategic Customer Service: Managing the Customer Experience to Increase Positive Word of Mouth, Build Loyalty and Maximize Profits (New York: AMACOM, 2009).
This book focuses on the strategic alignment of customer service with overall corporate strategy. It draws on research from the author’s work with the likes of Chik-Fil-A, USAA, Coca-Cola, FedEx, GE, Cisco, Nieman Marcus, Toyota, and Cisco Systems. It includes both case studies and formal research. Many aspects of conventional wisdom are challenged with hard data that show how any company can increase loyalty, win customers, and improve the bottom line.
5. Patricia Seybold, Outside Innovation: How Your Customers Will Co-Design Your Company’s Future (New York: HarperCollins, 2006). Seybold explores how businesses can unleash innovation by
inviting customers to co-design what they do and make.
6. Denis Pombriant, Hello Ladies: Dispatches from the Social CRM Frontier (lulu.com, 2010).
7. Paul Greenberg, CRM at the Speed of Light, 4th ed. (New York: McGraw-Hill, 2009).
Greenberg reveals best practices for a successful social CRM implementation and provides examples of the new strategies for customer engagement and collaboration being used by cutting-edge companies, along with expert guidance on how your organization can and should adopt these innovations.
8. Seth Godin, Purple Cow: Transform Your Business by Being Remarkable (New York: Portfolio, 2009).
Run-of-the-mill TV commercials and newspaper ads are no longer effective for reaching consumers because consumers are tuning them out. So you have to toss everything and do something remarkable, the way a purple cow in a field of Guernseys would be remarkable, according to Godin. He uses examples of companies including HBO, Starbucks, and JetBlue to illustrate new ways of doing standard business with measurable results.
9. Frederick Reichheld, The Ultimate Question: Driving Good Profits and True Growth (Boston: Harvard Business School Press, 2006).
Reichheld argues that customer satisfaction is more important than any other business criterion except profits and that the best measurement of customer satisfaction is whether you would recommend a business to a friend—the foundation of the widely used net promoter score.
10. Tony Hsieh, Delivering Happiness: A Path to Profits, Passion, and Purpose (New York: Business Plus, 2010).
The CEO of online shoe giant Zappos, Hsieh details his rise from Harvard student entrepreneur to the creator of a hugely successful brand. Customer service became the focus of the start-up retailer, even when funding dried up. The book recounts how Zappos survived, eventually being acquired by Amazon for more than $1.2 billion in 2009.
11. Jim Joseph, The Experience Effect (New York: AMACOM, 2010).
Joseph focuses on how to create “the experience effect,” which is a combination of marketing message, advertising, sales approach, website, interaction with company personnel, and more.
12. Brian Solis, Engage! The Complete Guide for Brands and Businesses to Build, Cultivate, and Measure Success in the New Web, rev. & updated (Hoboken, N.J.: Wiley, 2011).
Solis’s updated primer focuses on how to use social media to succeed in business. Learn about the psychology, behavior, and influence of the new social consumer, and define and measure the success of your social media campaigns. It features a foreword by actor Ashton Kutcher, who has more than five million followers on Twitter.
13. Bernd H. Schmitt, Customer Experience Management: A Revolutionary Approach to Connecting with Your Customers, (New York: Wiley, 2003).
Schmitt examines how customer experience management increases growth and revenues and remakes companies’ image and brands. The book offers a five-step approach to customer experience to connect with customers at every touch point, and offers case studies in various B2B and consumer industries.
14. Gerald Zaltman, How Customers Think: Essential Insights into the Mind of the Market (Boston: Harvard Business School Press, 2003).
Zaltman, a Harvard Business School professor, says that about 80 percent of all new products either fail within six months or fall short of their profit forecast. The reason? A disconnect between the customer experience and the way marketers collect information about how customers view their world. Analysis, success stories, and advice on rethinking marketing approaches are included.
15. Joseph Pine and James Gilmore, The Experience Economy: Work Is Theater and Every Business a Stage (Boston: Harvard Business School Press, 1999).
The authors make a case for focusing on the service economy and learning “to stage a rich, compelling experience” by adding service to differentiate products.
16. Chip Bell and John R. Patterson, Take Their Breath Away: How Imaginative Service Creates Devoted Customers (Hoboken, N.J.: Wiley, 2009).
A comprehensive look at what it takes to keep customers in today’s market as well as gain new customers. The book provides real-world examples of how 12 brands create customer practices leading to “irrational loyalty,” and explains how these techniques work and how to implement them.
17. John R. DiJulius, What’s the Secret? To Providing a World-Class Customer Experience (Hoboken, N.J.: Wiley, 2008).
An inside look at world-class customer service strategies at top companies, such as Disney, Nordstrom, and Ritz-Carlton. The book provides steps, best practices, and service standards needed to build a customer service machine that consistently delivers.
18. Jeanne Bliss, Chief Customer Officer: Getting Past Lip Service to Passionate Action (San Francisco: Jossey-Bass, 2006).
The author offers advice to companies that think they’ve committed to customer experience but haven’t.
Resources
1. Ashwin Nayan Rai, “From Brick to Click: E-Commerce Trends in Industrial Manufacturing.” Cognizant Technology Solutions, 2010, http://www.cognizant.com/InsightsWhitepapers/From-Brick-to- Click.pdf.
2. “Customer Experience Boosts Revenue,” Forrester Research, Inc., June 22, 2009.
3. “The State of Customer Experience, 2010,” Forrester Research, Inc., February 19, 2010.
4. “Three Secrets of Success for Customer Experience Organizations,” Forrester Research, Inc., April 29, 2010.
5. “What Is the Right Customer Experience Strategy?” Forrester Research, Inc., September 28, 2010.
6. “The Six Laws of Customer Experience: The Fundamental Truths That Define How Organizations Treat Customers,” Temkin Group, July 2010.
7. “Profiling Customer Experience Leaders,” Temkin Group, September 2010.
8. “The Evolution of Voice of the Customer Programs,” Temkin Group, September 2010.
9. “2010 Consumer Experience Study,” Strativity Group, September 2010.
10. “2010 Customer Scorecard Series,” Convergys, 2010.
11. “Q1 2010 Customer Experience Tracker,” Beyond Philosophy, 2010.
12. “Social CRM: The New Rules of Relationship Management,” Altimeter Group, March 5, 2010.
13. “Empathica Consumer Insights Panel: 2010 Year in Review,” Empathica, 2010.
14. “2010 State of Marketing,” CMO Council and Deloitte, 2010.
15. “Global Consumer Research Executive Summary 2010,” Accenture, 2010.
16. “Worldwide CRM Applications 2010–2014 Forecast: First Look at a Market in Recovery,” International Data Corp., May 2010.