BENCHMARK : BY TOM HOFFMAN Connecting Customer Experience with Business Value Many business leaders believe there s a correlation between providing customers with great s and positive changes in business performance. After all, when customer metrics such as customer satisfaction and Net Promoter Score (NPS) tick up, increases in profits, revenues, and other business results usually follow. A study by Forrester Research and Watermark Consulting helps bear this out. The two companies tracked the sixyear stock performance of companies on Forrester s Customer Experience Index. Even during the recession years of 2007-2012, customer leaders averaged double-digit gains in stock performance, beating customer laggards by an impressive margin. Despite these findings, many organizational leaders struggle to connect the dots between customer and business outcomes. Indeed, nearly half (47.3 percent) of the nearly 100 customer professionals* surveyed in the 2014 1to1 Media/Temkin Group study, Measuring the ROI of Customer Experience, say that their organizations are either ineffective or very ineffective at measuring the business impact of customer. There are several factors contributing to this disconnect. Part of the problem is that many organizations (43.7 percent) have trouble building models that connect customer metrics such as customer satisfaction and NPS with changes in business results (revenue, profits, share of wallet). Other challenges include gaining consensus on the right customer metrics to use (15.5 percent), presenting the information in a way that resonates with senior management (11.3 percent) and the ability to collect customer and business data from across the enterprise (9.9 percent). One of the problems is that the people who focus on customer don t speak in the language used by senior management, says Bruce Temkin, customer transformist and managing partner at Temkin Group. Customer leaders might point out that the company improved customer satisfaction by 23 percent or NPS by 15 points. That s great, but if I m a senior executive, I care about market share or growing sales quarter over quarter. Those are the things you need to communicate to them regarding the ROI of customer. In addition to talking the talk, customer leaders can also benefit by taking a more systematic approach to calculating the ROI of customer. This often requires organizational leaders to take a step back and examine how they currently measure customer, whether any changes to these measurements are needed, and whether this is being calculated with the most appropriate business metrics. 6 VolumE 6 issue 3 www.customerstrategistjournal.com Reprinted from Customer Strategist, Volume 6 Issue 3. 2014 TeleTech Holdings, Inc. All rights protected and reserved. www.customerstrategistjournal.com 1 CSV6v3_Bechmark_0918final.indd 6 9/18/14 12:11 PM
Who is responsible for measuring the business impact of customer? 12.3% C-level executive 1 5.1 % Customer leader (e.g., Customer Experience Officer) Functional business leader (e.g., marketing VP, customer service executive) 3 4.3% No one is currently responsible for these measurements 26.0% A crossfunctional team of executives 11.0% 1.4% Other How effective is your organization at measuring the business impact of customer? Nearly half (47.3 percent) of organizational leaders surveyed rate themselves as ineffective or very ineffective in measuring the business impact of customer. Part of the challenge many companies face is that senior management is often hesitant to invest in customer-focused programs without guaranteed returns, says Ron Wince, general manager of Peppers & Rogers Group. Sharing the business impact of customer-centric initiatives achieved by a part of the company or by a company s rival can help senior management stand up and take notice. Very ineffective ineffective Somewhat Effective Mostly Effective Very Effective 1 8.9 % 2 8.4% 3 5.1 % 1 2.2% 5.4% Nearly half rate as ineffective or very ineffective How often are customer insights used to drive decision-making around the company? What does your company s executive leadership think about the ROi of customer? 16% Infrequently Occasionally 37.3% Not at all 5.3% Frequently 30.7% Almost always 10.7% * 89 people completed the online survey in July 2014. Nearly 32 percent of respondents say senior management either doesn t believe there s significant ROI from customer or they re uncertain if ROI is generated. Doesn t believe in a significant ROI of customer : 4% Unsure if there is an ROI of customer : 27.6% Believes there is a small ROI of customer : 11.8% Believes there is a moderate ROI of customer : 23.7% Believes there is a large ROI of customer : 31.6% Other: 1.3% volume 6 issue 3 7 Reprinted from Customer Strategist, Volume 6 Issue 3. 2014 TeleTech Holdings, Inc. All rights protected and reserved. www.customerstrategistjournal.com 2
Putting measurements into Practice Gathering customer and business results is great. But it s only truly effective when insights generate actions. It s encouraging to see customer metrics being used to enchance the omnichannel customer, for example. There s no value in analyzing the insights unless they are used to drive operational improvements, says Temkin. A good starting point is to focus on how the insights are to be used. For example, identify the most pressing pain point (e.g., slowdown in incremental revenue growth) that the customer /business measurements should be applied to. Most popular customer metrics Customer satisfaction and Net Promoter Score remain popular but a growing number of companies are also attempting to measure the impacts of customer on customer lifetime value and on retention/renewal. 1. Customer Satisfaction 2. Net Promoter Score 3. Impact of customer on customer retention/renewal 4. Impact of customer on revenue 5. Impact of customer on customer lifetime value 6. Impact of customer on operating margin 7. Customer Effort Score 8. Impact of customer on share of wallet 8 volume 6 issue 3 www.customerstrategistjournal.com Reprinted from Customer Strategist, Volume 6 Issue 3. 2014 TeleTech Holdings, Inc. All rights protected and reserved. www.customerstrategistjournal.com 3 CSV6v3_Bechmark_0918final.indd 8 9/18/14 12:12 PM
What s are most enhanced or changed based on CX measurements? 1. Omnichannel 2. Mobile 3. In store/branch top actions taken based on customer metrics More than one-fifth of companies tie customer results to the compensation of executives and customer-facing employees. 1. Improve customer-facing operations 2. Review results across the organization 3. Improve channel interactions 4. Phone agent 5. Web 4. Report results to the entire organization 5. Improve non-customer-facing operations 6. Reward customer-facing employees based on results 7. Reward executives based on results How frequently do you measure elements of the customer? Although 26.2 percent of respondents say their organizations measure customer on a daily basis, most organizations only measure customer monthly, quarterly, bi-annually or not at all. Company leaders are missing out on rich opportunities to identify sudden shifts in sentiment, preferences, and other aspects of customer they could be acting on ahead of the market. The use of analytics tools and dashboards can help organizational leaders keep a finger on the pulse of customer and to act quickly when issues need to be addressed. For instance, a five-point drop in NPS for a particular customer segment may suggest a more wide-ranging problem that needs to be addressed. The use of analytics can help decisionmakers identify the root cause of a problem and then act quickly to address the issue and strengthen customer satisfaction. Bi-Annually Not at all Quaterly 1 0.8% 1 0.8% 8.1 % Other 8.1 % 24.3% Monthly Daily 2 1.6% 1 6.2% Weekly How companies share the results While it s encouraging that customer data is reviewed by cross-functional teams among 28.2 percent of respondents, fewer than one in five of executive teams review the data. Only 18.3% of executive teams review CX data volume 6 issue 3 9 Reprinted from Customer Strategist, Volume 6 Issue 3. 2014 TeleTech Holdings, Inc. All rights protected and reserved. www.customerstrategistjournal.com 4 CSV6v3_Bechmark_0918final.indd 9 9/18/14 12:12 PM
A Yardstick for success Business leaders may think their organizations are best-in-class in delivering customer s based on anecdotal feedback they may hear from a few customers. Nearly 27 percent of respondents say their customer is the best in their industry, and another 3 percent tout themselves as better than companies in all industries. However, benchmarking customer results against industry rivals and customer leaders in other industries offers revealing insights into how well a company is performing in particular aspects of customer and to identify areas for improvement. If you re only benchmarking to see how you compare against your competitors, that can be counter-productive, particularly in industries that historically have had low customer scores, Temkin warns. You can fall into a trap of believing that your company is performing better than it is and not act on opportunities to make improvements. How would you rate the overall customer that your organization currently delivers? = better than all companies in any industry = the best in our industry = average = worse than most companies in our industry = worse than most companies in any industry... 26.8%.... a v e r a g e 5 3.5% 9.9 %... w o r s e b e t t e r 2.8% 7.0 % 10 volume 6 issue 3 www.customerstrategistjournal.com Reprinted from Customer Strategist, Volume 6 Issue 3. 2014 TeleTech Holdings, Inc. All rights protected and reserved. www.customerstrategistjournal.com 5 CSV6v3_Bechmark_0918final.indd 10 9/18/14 12:12 PM
How is it to correlate changes in customer with changes in business performance (revenue, operating margins, customer lifetime value)? = One of the key considerations for customer and business leaders is that a great (or sets of s) received by a single customer or multiple customers won t be reflected in the company s current sales period. When a customer has a frictionless customer, she becomes more likely to buy the brand again and more likely to tell others about the brand, says Don Peppers, founding partner at Peppers & Rogers Group. But the cash effect of these benefits won t be realized until some financial period in the future. They represent an increase in the customer s current lifetime value, but not in her current purchasing. extremely Moderately Somewhat Not at all Haven t tried 32.4% 2 8.2% 2 3.9 % 7.0 % 8.5% The most challenging aspects of measuring the Roi of customer 1. Building a model that connects CX metrics with changes in business results 2. Agreeing on the correct customer metrics to use 3 (tie). Presenting the information in a way that resonates with senior management 3 (tie). obtaining CX measurements across channels, products, etc 4. obtaining business and customer data from across the enterprise 5. Having the staff with the right background to do the analysis volume 6 issue 3 11 Reprinted from Customer Strategist, Volume 6 Issue 3. 2014 TeleTech Holdings, Inc. All rights protected and reserved. www.customerstrategistjournal.com 6 CSV6v3_Bechmark_0918final.indd 11 9/18/14 12:13 PM