While many corporates have launched customer centricity programs, they also need to answer the question on how to measure their effectiveness in driving customer preference. Why is it important to measure performance for the customer, in addition to the traditional financial metrics? What are the right metrics and how to select them? This article will provide some evaluation of various methods of customer performance evaluation.
Before detailing possible measures, it is important to lay the guiding principles of performance measurement for the customer.
- Financial metrics are often insufficient to tell us how customers feel. In addition, some have a lag in revealing issues. For example, customer attrition might take months or sometimes years to surface in industries with infrequent purchases. We need metrics with the ability to track customer satisfaction and perceptions that would help reveal the health of the business, in terms of acquisition, reputation, attrition, etc.
- Metrics have to be aligned with the expected business outcomes. It is critical that customer metrics are selected to serve the ultimate key performance indicators (otherwise they are doomed to fail). Measuring the right things at the right time is required. For example, an e-commerce company targeting a reduction in cost-to-serve could measure respect of delivery time and quality of goods / returns. And the timing of reporting should be aligned with the standard business reporting cycle as well.
- Similar to other metrics, the customer ones need to be set as targets. To the well-known “If you can’t measure it, you can’t improve it”, I would add “if you are not accountable, you don’t improve it”. Some companies have elevated customer metrics to a substantial share of leaders’ variable compensation; in some cases, customer indicators represent 50% of their targets. It is even more effective if that accountability is pervasive throughout the entire organization; employees having their own targets based on their roles and ability to impact.
- Finally, metrics have to be actionable, meaning they should be easy to understand and more importantly, what drives and influences them need to be clear and transparent. Training employees on how they influence the metrics is key.
- Company internal data
Operational metrics are often the most accessible data to start measuring customer satisfaction. They often relate to the promise of the company. For example, “next day delivery” is a very measurable outcome that will set the minimum expectation from customers.
But sometimes operational metrics can be more focused on internal efficiency and yield the opposite results (higher customer dissatisfaction). For example, call duration often used in service centres as a measure of performance can generate customer dissatisfaction: the operator is motivated to hang up the phone as quickly as possible, while the customer wants a single call to get his answers, no matter the duration. Operational metrics should be aligned with customer expectations. It is important to prioritize the internal metric on what matters more to customers. E.g. maybe duration of the call is not important for customers and would prefer a more friendly and solution-oriented interaction.
Customer feedback and deeper analysis of the data is fundamental to reveal what matters to customers and select the right metrics to each organization.
2- Survey-based metrics
Survey-based metrics require a research infrastructure to survey regularly the customer base.
Some of them are transactional, which means that they evaluate the satisfaction about one interaction, for example, purchasing a product or ordering online.
- Customer Satisfaction Score: a CSAT survey consists of one or more simple questions relating to satisfaction with product, service or experience.
- Transactional Net Promoter Score: tNPS is used to assess the customer’s opinion on a certain business transaction by asking: How likely would you be to recommend our company to a friend or colleague?
- Customer Effort Score measures how hard it was for customers to achieve their goal (get help, make a purchase, solve a problem, etc.).
These metrics are great to evaluate the quality of touchpoints and identify issues in a rapid manner (survey is conducted right after the interaction). The other benefit of these metrics is that they can be used to close the loop immediately after the interaction. i.e. if a customer reports to be dissatisfied with the interaction, the case can be sent for remediation. It implies however that the company needs to be set up to do so. Nevertheless, the limitation of such metrics is that they are only conducted with customers who perform the transaction (which in some businesses can be less than 5% of the entire customer base) and do not represent the overall quality of the relationship.
Other surveys look at the end-to-end relationship. For example, relationship NPS is general and designed to assess the strength of the relationship with a customer. Because relationship surveys are sent on a scheduled basis and aren’t tied to any specific event, they’re ideal for generating feedback on the strength of the relationships with customers, as well as getting insights on competition. Most interestingly, they represent the starting point to understand the drivers of satisfaction (such as the brand perception, the product or service, and the quality of the interactions and relationship). These metrics are more strategic in nature and unlike the transactional ones, they do not provide instant resolution to a problem.
3-Social listening sentiment
Given the prevalence of digital in most customer journeys and the easiness for customers to comment about brands and experience on social media, measuring social media sentiment needs to be part of the equation.
Investing in social listening will not only provide additional indicators but will help identify early on customer service or product issues, before they become major problems and a threat to the entire business. If we look at a restaurant for example, negative reviews have the potential to shut a business down. It is also a great source of insights, as consumers express what they really want, and it is freely available at the click of a button.
Today, it’s more important than ever to stay on top of what people are saying about brand, product and service on social media, without forgetting obviously influencers, who can sway the opinions of thousands at a time.
Richard Branson’s quote “Take care of your employees and they will take care of your customers” is supported by abundant research demonstrating the direct correlation between engaged employees and customers’ satisfaction.
Engaged employees will go the extra mile to resolve the client’s problems or work hard to close a sale. They contribute to a culture that consistently delivers great service. They take ownership, deliver on their commitments and are passionate about satisfying the customer.
Aligning employee feedback to customer feedback and measuring employee engagement is part of the toolkit of customer performance. It is very complementary to external surveys, as it will surface the internal struggles and roadblocks to serve customers. While a customer will complain about spending 20 minutes on the phone to get an answer, the employee will explain that he does not have a simple way to identify the customer, that he has to open 5 different systems to get the full picture, and that he needed to get validation from the manager before answering. Often, companies include the same questions they ask customers in employee surveys to understand how the employees feel they are delivering towards the customer, identifying gap in expectations.
5- A new era for customer performance measurement?
All the above surveys and metrics have their pros and cons and bring a certain angle to customer performance. For instance, survey-based metrics such as tNPS or CSAT are sometimes criticized – only a small pool of respondents (especially for transactional surveys which survey only those customers who transact with the business), not reactive (often long delays between the survey and the results) and often ambiguous (only 16% of CX leaders believe surveys are granular enough to act on – source McKinsey).
The new era for customer performance is about combining all sources of data and merging them thanks to AI to provide more relevant and reactive insights:
- Customer, financial and operational data as well as employee engagement can be aggregated at the customer level and made available through a single analytics platform
- Machine Learning algorithms are able to score every customer by revealing relationships among journey features, satisfaction and value
- Actions and insights from the aggregated data will enable daily operations and strategic direction.
We are just at the beginning of this journey, and we can bet that new ways of measuring the performance of an organization for its customers will emerge.
As it is critical to establish a system of performance measure for the customer, it is important to remember that this system will need to be tailored to each industry and even each company. There is not one golden metric.
Secondly, the system should allow for a certain granularity of metrics across the organization so that each employee understands how he/she can influence the outcome. Creating a culture of relentless improvement and learning goes along setting those targets. As indeed, these goals need to be part of the compensation and rewards system.
Needless to say that beyond the strategic intent, building the right infrastructure to access the data is a must.
Sources: Data from McKinsey Customer Experience summit 2020