What is customer experience, anyway? What is all the hype about? Is it just one of the many trends...
While Customer Experience (CX) is clearly an important component of companies’ strategy, it must nevertheless be able to provide clear and measurable success that directly contributes to achieving business goals. This can often be difficult because CX is a broad term encompassing a wide range of activities which can often be difficult to link together in a direct causal relationship.
For executives, CX initiatives often appear to be a black box whose justification boils down to “trust us.” But that’s unacceptable. Here are a list of important prerequisites and metrics to ensure your CX strategy and tactics are quantifiable and their impact can be measured and analyzed.
Important steps to measuring CX success
The key questions coming from C-level executive include:
- How can companies align their CX initiatives with revenue and other business goals?
- How can valuable CX drivers be identified and managed?
- How can we better measure and show the concrete contributions of CX?
The answer is Customer Experience Management (CEM), whose strategy and implementation are laid out in this article by Harald Henn.
Let’s get started with four recommendations:
Define Success Criteria
As with any project, it is critical to clearly define success and how you will measure it. There are many parts of the customer experience, large and small. This begins before a customer purchases your product or service and extends through the the purchase experience to every contact with the company afterwards. It is therefore important to take a holistic view of your customers' experience as you would a relationship between two people instead of focusing on a specific event or phase.
Therefore, don’t disproportionately focus on classic KPIs such as churn rate, bounce rate, or sales, but also “background” criteria such as valuable content for existing customers, e.g. tips & tricks, travel routes, etc., and soft KPIs such as scroll depth or average session time. If possible, consider all customer contact points (touchpoints) to create a holistic picture. Your specific criteria will depend on the type, size and strategy of your company. Pure ecommerce companies have it easier than others that may need to define new metrics to fit their situation.
To Calculate ROI, Evaluate Where you Stand Now
The introduction of Customer Experience Management can be very costly in terms of both time and financial resources. But that shouldn’t deter you from getting started with CEM.
Begin by evaluating where your organization stands today. This will be the basis for calculating your ROI. Ask yourself:
- What processes are currently in place?
- What are your current customer touchpoints? How often and to what extent do customers use them?
- How satisfied are customers with them now?
- What market research, customer surveys and related data do you have today?
Take great care to capture all touchpoints both digital and analog. By comparing your answers against your stated goals, you can now identify where the greatest potential lies to positively impact CX. Companies will see the greatest ROI by concentrating on the few touchpoints that promise the greatest improvement in customer satisfaction versus trying to spread your efforts out over the entire range of possibilities. Remember the 80/20 rule!
Experience has also shown that high costs or effort are always associated with big gains. Sometimes simple measures such as optimizing contact forms to reduce additional questions and follow ups can have a big impact that cascades through a customer’s experience. It is important to both regularly review and question the status quo. It should be a permanent process, not a one-time project.
Link Operational Customer Data with Experience Data
Without context, customer data is meaningless. It only becomes valuable in terms of ROI when operational and qualitative data are linked. This can be achieved by using a comprehensive and integrated customer platform that orchestrates important CX elements such as self-service, chatbots and an AI-powered knowledge base. By correlating your customers' words, actions and spending, you can understand which key factors are relevant at each stage of the customer lifecycle.
Create Predictive Customer Experiences
Let's look ahead: Enthusiastic customers are the future currency of tomorrow's corporate success. Starting from this premise, it is necessary to anticipate customer behavior, optimize the next best action accordingly, make automation more intelligent and become more proactive overall. Know your customers‘ needs, i.e. understand the driving forces behind concepts such as customer satisfaction and discover the "why" behind the "who, what, where" - in order to use these predictive behavioral analysis findings to drive optimization. Learning, data-driven, AI-supported systems form the basis for these optimizations and are ultimately a key factor in the return on CX.
The Right Customer Experience Metrics
The positive effects of modern Customer Experience Management (CEM) on financial measures such as sales growth or cost optimization are undisputed. Higher sales values, increased cross sales or a higher life cycle value of products are well documented in studies by Forrester, McKinsey, Murphy&Murphy or Watermark Consulting, among others, and are directly dependent on factors such as customer loyalty. The relevant indicators are manifold and vary from company to company. According to Gartner, large corporations sometimes use hundreds of CX metrics. The challenge is particularly great for these companies to be able to provide a consolidated overview of the metrics used, e.g. via a CX dashboard.
In practice, however, it is the weighting and evaluation that is decisive. Just because you can measure something does not make it inherently important. As a rule, only a few key figures have a major impact on success. The most important and globally recognized KPIs are outlined below.
Net Promoter Score (NPS)
NPS is the most popular customer experience metric. It uses a standardized survey to determine the extent of user or customer loyalty and customer retention towards a specific brand or company. The metric is determined from empirical data collected through a simple quantitative survey: "On a scale of 0 to 10, how likely is it that you would recommend the company or agent you spoke with to a colleague or friend? And why?" Once the results have been evaluated, the customers interviewed are placed in one of three categories according to their response. These are: Detractors (0 to 6 points), Indifferents (7 to 8) and Promoters (9 to 10). For the score, the percentage of critics is subtracted from the promoters' score.
Customer Satisfaction Score
To determine the Customer Satisfaction Score (CSAT), the customer is directly asked to rate his satisfaction with a product or service. The CSAT score is then the average rating of customer responses.
How satisfied were you with the buying experience?
The Customer Satisfaction Score is flexible and easy to use, as it can refer to any interaction a customer has with a company. Companies receive precise and immediate feedback on a specific experience. However, CSAT does not cover the overall impression a customer has of a company.
Customer Effort Score (CES)
With this method, customers are not asked about their satisfaction or the probability of a recommendation, but about the effort they have to put in to solve their problem. The rating is usually given on a scale from 1 for very low effort to 7 for very high effort. The aim is to lower this average value. Studies show that 96% of customers who rate the effort as high show less loyalty in the future, while this is the result of only 9% of those who rate the effort as low.
Other aspects frequently measured in practice include recurring customers or orders, the churn rate, punctual delivery, response rates, the reference customer rate, the volume of support requests or the first-call resolution rate. For a comprehensive, realistic CX picture, Gartner recommends that you develop a mix of higher-level and lower-level metrics based on your business strategy and monitor and control these transparently using a CX dashboard.
Jarrod joined USU's US marketing team in 2019. He previously worked at German ecommerce and telecommunications companies with a focus on international marketing and growth in English-speaking markets. He studied international relations and enjoys history, fly fishing and grilling in his free time.