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3 four How to measure customer experience Carlos Molina

4 In most organizations, CRM strategy now focuses on customer experience. Measuring customer experience has thus become one of the biggest challenges that businesses face. Let s take an example: Somebody goes into a store. It is clean and tidy. The customer finds what she wants and takes it to the checkout counter. The friendly store clerk takes the customer s money in payment for the goods. Before the customer leaves, the clerk says Have a nice day! If we look at the buying process from the service standpoint, we can assume the customer s perception was positive. It went along without a hitch. If we called the customer and asked her if she was satisfied with her purchase and with the service dispensed by our employee, it is likely she would say yes; if we asked her to rate the experience, she would give a high score. But is this really what customer experience is about? Was her purchase experience in our store something so special that the customer will remember us by it? Crucially, will this experience influence her future buying behaviors and decisions, thus impacting our business earnings? Probably not. A customer experience measurement model must heed the basic indicators. But if what we want to do is manage and use the data effectively and create memorable experiences, we must deploy more advanced models that go beyond satisfaction and make a real fit with business performance. 37

5 Mapping all points of contact Customer experience is an abstract concept. Measuring it requires breaking it down into concrete, tangible elements. One such element is the Moment of Truth, or MOT. Not all of a customer s interactions with a business are important to him. So it is not every interaction that gives a chance to really surprise him and create a memorable experience. An experience map - a concept that goes by a variety of names - is an account of a given customer s experience over the lifecycle of the relationship; this analysis compares the customer s expectations to his perceived experience. To build an experience map, you must: Analyze the lifecycle of the relationship and map the main points of contact. Design a survey capable of obtaining data on customer experience at each point of contact. We need to ask the customer the following:» Importance: What are his expectations of the company at that specific moment of the relationship?» Experience: How did the actual interaction with the company turn out? Generate indicators for each point of contact. It is a good idea to use a numeric scale and focus on the results clustering in the top and bottom boxes. 38

6 Graphically draw the experience map, comparing results for importance versus satisfaction. Companies must focus their effort and investment on the basis of the lessons drawn from the experience map. First, it is important that experience basics are fully covered. If there is a point of contact where expectations are low but actual experience falls short nonetheless, these issues need to be resolved first, so we can deliver the basic experience the customer expects to get. However, more important even than working on points of contact where the gap is greatest is to work on points of contact where the customer s expectations are highest. These are the Moments of Truth. This is where it is feasible to impact the customer s perception and create an experience he will remember. This same concept is also discussed under different terms - customer pathway, customer journey and customer heartbeat - but is not always applied in the same way. But, however one might go about this, it is always important that expectations and experience can be compared at each point of contact of the life cycle. Physical and emotional variables Customer experience comprises various physical variables - time, cleanliness, functionality, temperature, environment, etc. - and various emotional variables, shaped by the character traits of the person involved and her way of perceiving and processing the experience. A variable such as waiting time is open to many different interpretations, depending on the type of experience and on the specific person concerned. By adding emotional variables to our experience assessment model we can better understand how customers perceive and respond to interactions with the company; this in turn enables us to design better experiences. Experience is not measurable by focusing on conventional physical variables only. The variables informing an assessment of a customer s experience with a company should not be viewed in isolation but with reference to a specified goal. We should accordingly use two tools operating in tandem: 39

7 Correlation analysis: Regression models enable us to compare two data series - the experience indicator and the business target - so that we can identify the extent to which they are correlated. Impact matrices: Impact matrices graphically represent indicators by score and correlation index. They enable us to visualize the variables of an experience and clearly distinguish existing strengths from the most urgent opportunities for improvement. Net Promoter Score: the definitive question? One of the most fashionable metrics in the field of customer experience is the net promoter score, or NPS. Valuable information is extracted by a single straightforward question: Would you recommend this company to a friend or relative? NPS partly reflects a customer s emotional loyalty. In addition, it is highly suitable for benchmarking because many companies use it as a standard. These features, coupled with its sheer simplicity, make the NPS a favorite with company boards and executive committees. Most companies use a combination of several metrics - seven on average - to measure and manage customer experience; NPS, however, is the metric picked for presentation to management. 40

8 The hidden challenge in the NPS lies in the post-measurement phase, however. NPS is a general indicator of the company s health, but it tells you nothing about where and how to improve. In addition, some circles are very skeptical of the NPS, and the scientific community says that there is no proven correlation between NPS and business growth. Customer Effort Score (CES) & Customer Advocacy (CA) NPS has inspired conceptually similar approaches. One popular metric is Customer Effort Score, which measures the effort a customer must make to do business with a given company, in a bid to reduce that effort. CES is a valuable indicator in all matters relating to customer service interactions. Some research suggests that it is more closely correlated than conventional satisfaction metrics and the NPS with customer decisions and behavior: repeat purchases, increased spend or referral. CES is based on the following question: How much effort did your request take? The customer scores the question on a scale of 1 - negligible effort - to 5 - a big effort. Another metric designed to assure correlation between experience indicators and business performance is Customer Advocacy. CA is also based on a single question: Do you think your company does what s best for you, or only what s best for its income statement? So there are several approaches that reach beyond the satisfaction concept and attempt to build a metric that better explains customers future behaviors and decisions. Customer experience benchmarks Rather than ad hoc models implemented by individual companies, it is necessary to obtain comparative customer experience data, rankings and research that evaluate all businesses under common criteria. 41

9 There are two leading surveys on customer experience: Forrester Index (CxPi): Conducted annually, the survey evaluates customer experience with over 150 companies in the United States. Forrester defines customer experience into the three levels of the classic needs pyramid: basics, value creation, and, finally, surprising the customer. Forrester publishes the results for leading companies and comparative data for the various industries considered by the survey. IZO Best (BCX): This more recent survey is the only one of its kind that focuses on companies operating in Latin America, offering data and results specific to Latin American customers and brands. The survey considers more than 130 companies in main sectors, operating in Brazil, Chile, Colombia, Spain, Mexico and Venezuela. The BCX index comprises three dimensions, including experience with the brand, experience with the product, and interactions with the company. Relationship economics You can t measure customer experience without considering the financial angle. Customer experience is a business strategy that ought to be results-oriented. Historically, one of the mistakes made in customer management has been a failure to link metrics to the business. One of the questions we hear most often from company boards is how much more are we going to earn if we raise our satisfaction score by one point? We must bear in mind that this is an entirely reasonable question. The objective of an organization is to make money, and customer experience is a strategy the result of which ought to be to maximize the benefit of the relationship for the company. If we have no robust answer to that question, it is unlikely that an organization will make the investment decisions required to create the desired experience. So customer management models and scorecards must be equipped with ways of linking these metrics to business earnings. 42

10 But how? Most companies do in fact have the tools to do this within their grasp: we are simply not using them. CRM systems offer a rich store of information about our customers that will stand us in good stead for achieving these outcomes. The key questions we need to answer are: Premium price: Are consumers willing to pay more for a better experience? Share of wallet: Do consumers enjoying a better experience spend more with the company? Are we passing up business opportunities with our existing customers by not aligning ourselves with their needs and exceeding their expectations? Relationship duration: Do customers enjoying a better experience churn less? How much longer will they continue to be our customers if we deliver a better experience? Referral: Do customers refer our company to other people? The results of the Best (IZO, Q4-2010) survey for Latin America offer some answers to these questions. If we classify customers into promoters (highly satisfied), indifferent (neutral) and detractors (highly dissatisfied), we clearly see that creating experience powerfully enhances buying intention and loyalty. However, it is important to note that these benefits are achieved only when customer expectations are exceeded. The results show that simply removing the causes of dissatisfaction is not enough to impact consumer behaviors and decisions. 43

11 How can you measure these indicators for your company? You can replicate these survey metrics in your own organization and obtain even more accurate data by using the information available about your customers in your company s management and information systems. To construct your business case and correlate customer indicators with business performance you need to link customer experience metrics - using some of the indicators discussed above - to real figures on expenditure, profit, customer unsubscribes, etc. drawn from your customer database. To do this, you can follow these steps: Classify customers into experience-driven categories: detractors, neutrals, promoters. Extract the business indicators for these customers from the CRM system and calculate them for each category: ARPU, average revenue, average cost, churn, etc. Analyze how these indicators behave in each category and compare behaviors across categories. Your results will enable you to determine the business impact of turning detractors into promoters, and thus justify the necessary investment. 44

12 Some thoughts and guidelines Measuring customer experience is one of the main challenges faced by organizations today. This challenge is addressed by a range of indicators designed to implement an evolution from the conventional concept of customer satisfaction to a model that predicts impact on customer behaviors and decisions and thus on company earnings. There are various kinds of metric, each with its fans and skeptics. However, three guidelines always apply when measuring and managing customer experience: Measure experience throughout the entire customer relationship lifecycle. Use international benchmarks so you can compare yourself to others. Cross-refer experience metrics with customer business data. 45

13 References Dixon M., Freeman K. and Toman N., Stop Trying to Delight Your Customers. Harvard Business Review. Arussy, L., Passionate & Profitable: Why Customer Strategies Fail and 10 Steps to Do Them Right! Hoboken, New Jersey. John Wiley & Sons, Inc. Reichheld, F The Ultimate Question: Driving Good Profits and True Growth. Boston, Massachusetts. Harvard Business School Press. Online references Search Crm Customer Think The Marketing Spot Blog Forrester 1 Blog Forrester 2 Izo Systems Strativity Experience Matters Clientesfera Aiarec 46

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