How do you find the right customer experience KPI for your company?by
In the absence of a single, universally-accepted customer experience KPI, should organisations try to monitor as many as possible - or go all-in on one specific KPI? And if it's the latter, which should they choose? Ipsos suggests that what is right for one business, may not be right for another.
Tracking key performance indicators is crucial to customer experience management – as it is with any other area of business. But CX differs from other areas of business in that there is no definitive metric by which to track and measure success.
This vacuum has been filled with a host of KPIs that may or may not help organisations to gauge their customer experience success, depending on how they are being utilised.
According to The State of the Customer Experience survey 2018, every company it interviewed tracked customer experience using one or – less frequently – several of the 6 worldwide recognised customer experience metrics: Net Promoter Score (NPS), Customer Satisfaction (CSAT), Churn rate, Retention rate, Customer Lifetime Value (CLV) or Customer Effort Score (CES).”
Meanwhile, one area of concern that was raised by MyCustomer research from 2020 was how few are tracking financial metrics or ROI related to their CX programmes. The survey found that only around a third of organisations are trying to measure ROI, for instance. Given the growth of customer experience as a discipline over the past decade and the amount that some organisations have already invested in their CX teams, this is perhaps a surprise.
Forrester’s VP and research director Harley Manning believes that if customer experience leaders want to remain in their roles in the longer term, they will need to focus their efforts on commercial KPIs. “Those who do keep their jobs will do so by ensuring that their metrics and measurements relate to what matters most: “KPIs with a dollar sign in front of them,” he warns.
But with so many different KPIs that customer experience leaders can choose from, they are left in a quandary. In the absence of a single, universally-accepted CX KPI, should they try to monitor them all - or go all-in on one specific KPI?
In a recent research project (The Key To Your CX Success), Ipsos examined precisely this question. And Fiona Moss, head of the CX global analytics team, customer experience at Ipsos, concluded that using a single KPI can work - as long as it’s grounded in a sensible rationale. However, the killer KPI will differ from company to company – “What is right for one organisation will be too complex for another and too simplistic for another,” warns Moss.
With this in mind, Ipsos has outlined the ingredients of a good KPI, so that organisations can find the right customer experience KPI for their business. Outlined below are the criteria that Moss believes KPIs should meet.
1. The correct KPI will fit the culture of the organisation
“This can mean using a simple metric, such as the Net Promoter Score1 (NPS) or overall satisfaction, if simplicity is most likely to gain organisational buy-in,” writes Moss. “In other cases, this may mean using a more complex, composite metric that reflects the different facets of the organisation’s customer experience. In all cases, the rationale behind the choice of metric needs to be clear and transparent from boardroom to frontline staff.”
Moss also adds that it is also crucial that the organisation understands how the metric is reported. As an example, if NPS is being used, service staff need to be educated as to why the target should be a 9 or 10 (i.e. a promoter), something which can otherwise seem like an arbitrary or unachievable target for some employees.
2. The KPI must match the sophistication and maturity of the company’s CX leader
Ipsos emphasises that organisations need to ensure that what is being measured is what is most urgent or relevant to the business now.
“If an organisation is struggling to meet the functional needs of its customers then a functionally focused KPI such as overall satisfaction can be very useful,” explains Moss. “However, if customers’ functional needs are met in almost all cases, then adding an emotional layer by means of a composite KPI encompassing the functional and emotional can transition the KPI from a needs-based metric to a measure of relationship strength with the brand’s customers.”
3. The KPI must fit the nature/sector of the organisation
If the KPI doesn’t feel like a natural question to ask a customer in a particular role or using a specific sector, then the KPI isn’t a good fit. For instance, in low engagement industries such as insurance, customers may not feel that they have enough experience of the brand to recommend it or say whether they are satisfied. “Churn-orientated metrics such as likelihood to continue may be more helpful here,” notes Moss.
Meanwhile, in the B2B world, it is crucial that the right people are surveyed. Non-decision makers, for instance, may give a very different set of answers when asked about the likelihood to continue than decision makers.
4. The KPI must be a good cultural fit for the customers too
Understanding and pre-empting cultural nuances can be challenging, but is a crucial consideration.
“The KPI needs to be relevant and intuitive to the business and its customers,” Moss says. “For example, in some cultures recommendation is simply not the ‘done thing’, so NPS may not be a reliable metric to use. In other cultures – sometimes specifically even within sectors – a customer admitting anything less than a high level of satisfaction is akin to a loss of face, so overall satisfaction should not be the first choice.”
Furthermore, if a global organisation is conducting research across multiple markets, it needs to be aware of cultural response bias, which leads some markets to consistently gives scores at a similar level on a response scale, regardless of what is being asked, therefore giving the appearance that some markets are more performant than others.
5. The KPI must fit into the appropriate part of the research ecosystem
It is commonplace for organisations today to run multiple research studies to help them to manage various aspect of customer experience. However, while using the same KPI in all studies might seem important for consistency’s sake, the results delivered will not necessarily be very useful unless there has been due consideration to what action the KPI should trigger.
As an example, take a relationship study looking for a KPI for strength of customer relationships. A transaction-based study may want to focus on a functional assessment of whether customer needs have been met to ensure a smooth transaction, whereas a survey of customers following a complaint may instead focus on the perceived effort the customer had to invest to resolve the issue compared to the perceived effort invested by the organisation.
“If the purpose and role of each of these KPI metrics is clearly defined and understood, this approach need not drown an organisation in KPIs, but simply allow it to focus on the most appropriate metrics to drive improvements in specific aspects of the customer experience,” notes Moss.
The financial consideration
Of course, as we noted earlier, KPIs also need to connect to the organisation’s bottomline or reflect desirable business outcomes. As the Ipsos report emphasises, this means that higher KPI scores need to be associated with:
- Higher spend/product holdings
- Higher customer value
- Increased repeat purchase
- Reduced churn/increased loyalty
- Increased operational efficiency
“The rationale for this is simple: given enough time and money most customer needs can be met (and a KPI can reflect this), but they need to be met profitably in order for a business to be successful, and the KPI needs to encompass this element of success,” says Moss.
The choice of a KPI is a major decision for any organisation. But when it relates to customer experience management it can be particularly confusing and confounding. However, as the Ipsos report reinforces, if appropriate consideration and validation are invested, companies can make the decision with confidence.
“This remains one of the most frequently asked questions across programmes and area we provide a lot of support on,” concludes Jamie Thorpe, head of experience management at Ipsos MORI CX. “It’s interesting that the question used to be how to avoid the organisation chasing a number but is now focussed on which KPI is right and how should it be used – an indication of the advances in CX over time.
“Of course, many organisations still utilise NPS but we are seeing an active shift to effort based KPI’s which reflects the modern customers need for a frictionless experience in their busy and complex lives. There is no silver bullet as maturity levels vary but as business start to accelerate out of the pandemic what to measure and what to aim for is arguably more important now than ever before.”
Neil Davey was previously the editor of MyCustomer from 2007 until May 2023. An experienced business journalist and editor, Neil has worked on a variety of newspapers, magazines and websites over the past 20 years, including Internet Works, CXO magazine and Business Management.
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