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How to measure customer experience

How to measure customer experience

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By Howard Lax, principal director of customer experience consulting, Confirmit

As we kick off 2020, many businesses are re-evaluating their customer experience programs. This isn't just a start-of-year sense check, though. Many CX programs are failing to deliver the results that executives expected and now need to prove they are still worth the investment.

To do this, it's worth going back to the basics to put things in perspective. Why did you start? What were the core reasons that you invested in CX in the first place? Was it to improve things like customer retention, cross-selling/upselling, getting customer referrals and recommendations? Or to capture a larger share of customer spend? Or something else that creates value for your business? Is your program doing these things? Any of them? And more importantly, are you measuring the success and demonstrating ROI?

Unfortunately, there isn't just one simple answer for everyone, but I can tell you this: the best CX metric is that which best explains the customer behaviors you are trying to motivate and the business outcomes you want to drive — so in retail, the goal is to make your customers brand loyal and continuously coming back to you. Your best CX metric can only be determined by testing what explains or predicts the outcomes that create value for your business.

Sounds great, but where to begin? Everyone wants measurements that matter, but it can be tough figuring out how to determine and then how to measure. Measuring the wrong thing is a waste of resources and can lead to poor decisions that don't help achieve corporate objectives. The best CX metric for you depends solely on how a company creates and measures value — which depends on business model, customers, marketplace, distribution channels and competitors — and should be readily tested to ensure accuracy.

Here are three simple steps to determine the optimum metric for your program:
1.    Identify the outcome(s) that are the most important to your business
2.    Link the outcomes to customer survey and behavioral data
3.    Test which metric does the best job of explaining those outcomes

Seems simple, but of course, we must acknowledge a few caveats. First, it's important to prioritize the outcomes you want to drive. You cannot maximize every objective at once (as nice as that may sound) Pick objectives that are most important for your business, keeping in mind that some outcomes are more difficult to quantify than others. You will likely need to be creative or rely on indirect measures.

Second, determine how important retention is for your business — this is often a huge focus for businesses across the board, but doesn't necessarily need to be. For most businesses, 90% or more  of revenues next year will come from existing customers. However, if your business model is based on infrequent large ticket sales — say engagement rings or items to furnish a home — retention is less important, as you might starve before a customer comes back to buy another fancy diamond or dining room table. Determining how important retention is will help keep your priorities in check and ensure you focus on what matters.

Lastly, the lag time between stimulus and response also needs to be considered — i.e. how long after a positive/negative experience does a customer respond? There is no "right" answer, but it's important to acknowledge that reaction isn't usually immediate and there might be a lag of days, weeks or even a year.

These additional caveats will help lead your team to the answer of what drives the business forward — and help you determine the best CX metric for your business. Many companies skip this step and blindly follow a metric that they inherited, assumed was “right” or was imposed on them by someone more senior. This can lead to more head-scratching when the metrics aren't explaining any meaningful business outcomes or, worse yet, the metric moves in one direction and the business in the other. Some may blame measurement process or inaccuracies, but it's likely not that the measurement is wrong, but the wrong metric is being measured.

But don't let all these guidelines and steps drive you to become immobile or unsure of where to begin. Keep in mind that the metric is not the objective, but an indicator of the objective. None of the popular CX measurements are fundamentally bad: they all are intercorrelated and will point in the same general direction. None of them will lead you to shoot in a direction that misses the mark entirely, but some will just get you closer to the target than others.

CX measurement helps businesses make better-informed decisions as quickly as possible, but CX teams are looking to prove it in 2020. So before measuring anything, acknowledge these simple facts: customer experiences matter, these experiences influence subsequent buying behavior and this behavior can either create or wreck company value — especially in an increasingly competitive retail environment. Once everyone understands and believes these facts, then you can determine which CX metric best explains the behaviors that create value for your business. That, after all, is the best CX metric for you.

Topics: Customer Experience, Retail

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