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Customer experience measurement: You can't manage what you don't measure

21st Oct 2010
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Mark Gentry examines the need for customer experience programmes to start delivering real value for clients. In this best practice feature, he outlines an approach based on greater measurement which can help to deliver a more effective customer strategy.

Throughout the world, and across all sectors of the economy, many major organisations have embraced the vision of putting the customer at the centre of their decision-making processes.
Happy customers, the theory goes, will reward you with: repeat business; greater opportunities for cross and up-selling; word of mouth recommendations (and other forms of verbal support – increasingly important in the age of social networking); and lower cost to service.
By focusing on meeting the needs of the people who buy or use their products or services, these organisations expect to achieve greater business success. Once this has been set as a business goal, however, the question arises as to how to measure whether it is being achieved.
Many organisations are now committed to measuring performance based on the quality of the experience they deliver to customers. Alongside internal performance monitoring and the use of mystery shopping to take 'dipstick' measures of service quality, direct feedback from customers is the ultimate measure of success.
Gathering direct feedback from customers, however, can be costly. In times of severe budgetary pressure it is more vital than ever to ensure that the money spent on these measurement programmes delivers a return on the substantial investment they require.
These programmes can only deliver value for money if they identify the areas of the customer relationship that matter most to customers, identify if customer expectations are being met, and give specific direction on what it is that customers want. This information can then be used to set clear objectives and detailed action plans for process improvements and training for customer-facing employees.
Focus on both strategic and tactical level measurement
To provide a complete picture of the customer relationship, the measurement programme needs to provide strategic-level information, focusing on the relationship in its entirety, and tactical level information, focusing on the detailed aspects of the relationship that drive overall perceptions among customers.
  1. Strategic healthcheck
    1. Relationship monitoring: provide a regular 'healthcheck' on the level of positive behaviour, feelings and opinions among the customer base as a whole.
    2. Priority setting: identify which 'touchpoints' have the greatest ability to influence the customer’s perceptions of the relationship, both in terms of their 'reach' within the customer base and the level of impact that they have for individual customers.
This information needs to be used at a senior level in the business, with key points and the actions planned to address them communicated throughout the business. This sets the overall agenda for action, and should be used to identify where service needs to improve and who to task with achieving it.
  1. Tactical-level diagnostics

    1. Performance monitoring: provide on-going measurement of customers’ opinions of service performance in those 'touchpoints' and 'moments of truth' in the customer lifecycle that are shown to have greatest impact at a strategic level.
    2. Understand customer needs: generate 'rich' qualitative insight into what good service looks like to customers, to provide a model to work to.
    3. Targeted measurement: compare performance between specific customer groups, channels, teams etc. to identify where action is most urgently needed.
This information needs to be delivered to the people who can act on it, along with clear action plans for enhancing the experience and, potentially, targets to motivate them to achieve improvements.
A best practice model for research that delivers on these levels would look something like the following:
Choose the best metrics for your business
It has been stated many times in recent years that overall 'satisfaction' with service has limited connection with the financial performance of a business. It is a worthwhile metric to measure but is not the best indicator of the overall health of the customer relationship on its own.
The best top level strategic measures are based on customers’ predicted behaviour with regard to your business. These measures typically focus on 'loyalty' or 'commitment', which can be characterised by several types of behaviour:
  • Staying with you.
  • Spending more with you.
  • Advocacy of your business to others.
  • Compliance with your requests.
  • Support for you in broader community issues.
In recent years, the main focus of these measurements for many businesses has been advocacy. The Net Promoter Score has been widely adopted as a single KPI for customer loyalty, based on a single question 'How likely are you to recommend XXXX' and measured on a 0-10 scale. There are clear advantages with NPS in terms of ease of communication, simplicity, comparability and the level of buy-in that it is achieving through publicity and word of mouth among senior executives.
Several valid points of criticism have been levelled at NPS, however:
  • The link between customer advocacy and business performance is not fully understood and its validity as a predictor of business performance on its own has been questioned by some studies – advocacy may not equate to success for all businesses.
  • The 0-10 rating scale is not always used consistently by customers eg we have seen many cases where, based on subsequent comments, it is apparent that some customers regard 6, or even 5, as a high score, though these customers would be classed as 'detractors' in the NPS calculation.
  • The way NPS is calculated makes it quite a volatile statistic, prone to quite extreme fluctuations.
Whilst monitoring a single number loyalty metric is a good idea, it is clear to us that NPS may not always be the best measure to adopt, and businesses would be well advised to consider a variety of options.
Alongside a loyalty measure, it is also advisable to track and report on high level brand/image perceptions of the organisation, to monitor changes in the perceived character of the business among customers, and particularly to monitor if changes in service delivery are affecting brand perceptions that might, in turn, drive changes in loyalty.
Use competitive benchmarking carefully
Whilst benchmarking against your competitors is an attractive option to put your results in context, this should be approached with great care and should not detract from your ability to measure your own performance as effectively as possible.
There are several key points to take into consideration if benchmarking is to be used:
  • Select competitors that provide valid and useful comparisons – there is no point spending money on comparing your performance with companies that are fundamentally different or where you cannot identify why differences appear.
  • Although attractive, it can be very costly to reach customers of high quality 'niche' competitors in sufficient volume to give you robust data.
  • Take into account the difference in the profile of competitors’ customers when analysing results – there may be a natural tendency for your results to look worse on paper if you have a more demanding customer base.
  • Take into account the different way that competitors deal with service to their customers – your customers may have a substantially different set of experiences dealing with you than they would have dealing with a competitor, and some comparisons may not be comparing like with like.
Design your customer sampling process appropriately
As outlined above, it is important to ensure that the research is being conducted with the right sample size and frequency for each level of measurement.
Tracking strategic level indicators on a monthly basis is unlikely to show much change over short periods of time, which will lead to perceptions that nothing can be done to change them. Tactical surveys, on the other hand, must be conducted frequently enough, and in sufficient volume, to be sensitive to fluctuations in service levels.
Sometimes it is also appropriate to switch certain elements of the tracking 'on' or 'off' depending on company developments and new initiatives – e.g. if a new system is rolled out, it is appropriate to measure experiences prior to the implementation and then again, once it is up and running. By separating the tactical tracking from the strategic measurement, there is greater flexibility to do this.
The ideal model
An ideal model for devising and conducting a customer experience measurement research programme would consist of the following elements:
  • Qualitative research with customers to establish their overall views on service, identify 'moments of truth' and their likely behaviour in response to good or bad service.
  • Stakeholder interviews to gather the views of key internal personnel.
  • Benchmark quantitative research at strategic level.
  • Key driver analysis to establish priorities - evaluate which experiences have the greatest positive/negative impact on customer loyalty.
  • Establish event-driven tracking.
  • Tracking waves of strategic research.
  • Further qualitative research into specific events if needed to give greater depth of insight into customer experiences.
  • Conduct local workshops with staff responsible for delivering key customer experiences.
Establish buy-in to using the data
It is also crucial for any customer experience measurement programme to establish buy-in within your organisation before and during its implementation. At the outset, it is advisable to involve key stakeholders in the process by consulting with them about what are the key issues they think the company faces in dealing with customers, and also about the information they want and how they want to use it. One-on-one discussions with these key stakeholders is an important stage in the process of designing a customer experience measurement programme.
On a practical level, responsibility for the implementation of the research should be clearly allocated to a specific department and individual(s), usually within market research or customer insight functions.
However, this should be supported with the involvement of a 'steering group', consisting of colleagues from a range of business areas that will be using the information. This could include customer services, CRM/databases, billing and other teams.

Finally, reporting and usage of the data is key to maximising the return on the investment

Maximise use of the information
Information from the customer experience programme should be delivered to various levels within your organisation, in an appropriate format for the users at each level.
We continue to find that presentations to senior management have an important part to play in establishing buy-in to the research, but we also believe that detailed information should be delivered to the users at the 'coal-face', enabling them to view the results at a micro level and take appropriate action. The development of web-based reporting tools has made the latter much more accessible and cost-effective.
  • Senior management – face-to-face presentations, dashboard metrics.
  • Channel/team management – presentations, specific metrics, sub-level comparisons.
  • Tactical level (team, etc) – access to tracking data on the areas they are responsible for, targets, action plans, customer comments, 'red flag' customer issues highlighted by the research.
  • Branch level – rolling data on good/poor performing branches to monitor maintenance and improvement activity.
Customer experience measurement has the potential to be a vital management tool if implemented effectively. By following the principles we have outlined above, and carefully evaluating how they fit with the context of your business, you can devise a measurement programme that delivers genuine returns on investment.

Mark Gentry is research manager at McCallum Layton.

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