Navigating customer experience metrics

One of the first things any company new to customer experience should ask is, “How can we measure customer experience?” Firms often have internal proxies for measuring customer experience such as operational metrics (e.g. call handling time, first call resolution, on-time delivery) or financial metrics (e.g. loyalty, customer lifetime value, wallet share). However, while these may be important, they do not measure how customers perceive their interactions or relationship with a company.

Several reputable customer experience benchmark metrics exist. The following is not exhaustive, but should provide companies with a solid starting point – you won’t fail using any of these! When assessing these options, consider whether you are looking for a “relationship” metric (e.g. the overall perception a customer has of your company) or a “transactional” metric (e.g. the perception a customer has of a specific interaction or set of interactions).

NPS ("Net Promoter Score")

One of the most established and well-known metrics in the field of customer experience is NPS. It consists of a single straightforward question: "Would you recommend this company to a friend or relative?” Using a 0-10 scale, an aggregate score is calculated for the benchmark based on the % of “promoters” minus the % of “detractors,” giving you insight into how much a company's promoters outweigh its detractors.

Pros:

• Reputation and credibility: NPS has a 15+ year history
• Widely considered the industry standard: Firms can benchmark against 200+ companies
• Easy to understand
• Highly relevant in a social media fueled world where recommendations and reviews through word of mouth carry substantial weight in purchase decisions
• Financial impact: Substantial research suggests that results tie back to increased revenue (e.g. higher wallet share, word of mouth, decreased churn)

Cons:

• Difficult to tease out and understand customer experience drivers from a single question
• NPS has logical challenges in markets where customers have little choice of providers, thus the likelihood of recommendation doesn’t make much sense
• Measures “intention” based on the experience, rather than the experience itself

Corporate Executive Board’s Customer Effort Score (CES)

Customer Effort Score measures the effort a customer must make to do business with a given company, in a bid to reduce that effort. CES is based on the following question: “Did the company make it easy for you to resolve your issue?" The customer scores the question on a 1-7-point scale.

Pros:

• A solid transactional metric that is simple to understand and a great place to start to focus on the “table stakes”
• Easy to understand experience drivers that connect with operational metrics
• It is a valuable indicator relating to all customer service interactions
• Financial impact: Most research shows fixing ease-of-doing-business issues lowers operating costs; some research also suggests that it is closely correlated to customer decisions and behavior (repeat purchases, increased spend or referral)

Cons:

• It is very much framed as a transactional metric (heritage started in the contact center) rather than a relationship metric
• Focuses largely on the contact center rather than the full relationship; firms looking beyond contact center can consider the “effort” part of Forrester CXi or Temkin Group’s Experience Ratings
• Lacks easily accessible benchmark data (dashboard exists, but a data set to purchase does not exist)
• Overlooks emotional aspect of experience, which often drive behavior as much or more than the ease of doing business

Forrester Customer Experience Index (CXi)

Conducted annually since about 2009, the survey evaluates customer experience with over 150 companies in the United States. Forrester measures three elements of customer experience: effort, ease, and emotion. Forrester publishes the results for leading companies and comparative data for the industries surveyed. The latest US Customer Experience Index for 2016 can be found here.

Pros:

• More sophisticated measure of the experience itself, providing insights not only into the "ease" of doing business but also the emotional aspects
• Long heritage in the human-centered design world, based on strong academic research dating over 30 years ago; the core approach has stood the test of time
• Credibility from Forrester’s brand
• Financial impact — strong correlation with loyalty measures (e.g. recommend, buy again, remain) that drive revenue

Cons:

• Not as easy to understand as others as it is a more sophisticated metric comprised of three questions
• Somewhat focused on transactions rather than overall relationship
• Smaller set of companies and industries to benchmark against
• Business-to-Consumer (B2C) focused, not Business-to-Business (B2B) focused

Temkin Group’s Customer Experience Rating

Temkin Experience Ratings (TxR) is an open standard for measuring customer experience. It’s based on evaluating  three elements of every customer experience: success, effort, and emotion. It’s almost identical to Forrester's CXi.

Pros:

• More sophisticated measure of the experience itself, providing insights not only into the "ease" of doing business but also the emotional aspects
• Long heritage in the human-centered design world, based on strong academic research dating 30+ years ago; core approach has stood test of time
• Larger benchmarked set of companies—nearly 300 firms across 20 industries based on a survey of 10,000 US consumers
• Least expensive to access benchmark data
• Financial impact — strong correlation with loyalty measures (e.g. recommend, buy again, remain) that drive revenue

Cons:

• New: TxR has only been around since 2011. It has less history than other metrics
• Lack of credibility: Temkin Group is a relatively new and an unknown entity outside of the customer experience realm

Some others to consider are the American Customer Satisfaction Index and JD Powers.

Parting thoughts

Firms can achieve success with any of these metrics, or a combination of them. Regardless of which metric, it remains a high level signal of the health of your customers in a rapidly changing environment. Success will depend on what the firm does to understand the underlying drivers and take action on insights. West Monroe  suggests that companies:

1. Treat CX metrics as an early warning system. In dynamic marketplaces with evolving competitors and customer demands, customer experience scores provide firms with an early warning to changes…or simply internal problems or opportunities for improvement.
2. Continuously improve experiences rather than fixate on scores. Set-up processes to identify root causes of score movements. Then ensure that strong governance structures prioritize actions that drive improvements in customer perceptions.
3. Connect experience metrics to operations and financials. Firms that deliver great experiences understand the relationship of its operational metrics on customer experience, and in turn the financial impact of delivering great customer experience. Don’t stop at simply measuring the experiences, connect them to operations and financials.

If you would like to discuss more about the different customer experience metrics and which one would be right for your organization, please contact Paul Hagan.