Customer experience (CX) metrics have been a hot topic of discussion for businesses working to determine how best to measure the impact of their CX programs. Unfortunately, there isn't just one simple answer for everyone. Read closely: the best CX metric best explains the customer behaviors you are trying to motivate and the business outcomes you want to drive. That can only be determined by testing what explains or predicts the outcomes that create value for your business.
Seems obvious, right? It's actually not so simple. Everyone wants measurements that matter, but how to determine and then how to measure can sometimes feel like a guessing game. But we can all agree on one thing: measuring the wrong things is both a waste of resources and can lead to misguided decisions that challenge corporate objectives.
The best CX metric depends on how your company creates and measures value, which will depend on your business model, customers, marketplace, distribution channels, and competitors. The metric that does this best is something that can (and should) be readily tested.
First, let's discuss the core value proposition for investing in CX. Simply put, it helps businesses sell more stuff. Programs typically focus on the following:
- Customer retention (to continue to sell stuff to existing customers);
- Cross-selling and upselling (to sell more/other/more expensive stuff to existing customers);
- Getting customer referrals and recommendations (to have current customers help motivate others to buy your stuff);
- Capturing a larger share of customer spend; and
- Whatever else creates value for your business.
The steps for determining the optimum metric are straight-forward and include the following:
- Identify the outcome(s) that are the most important to your business;
- Link the outcomes to customer survey and behavioral data; and
- Test which metric does the best job of explaining those outcomes.
Before we dive deeper, it's important to note that there are some caveats:
- You will need to prioritize the outcomes you want to drive, as you statistically cannot simultaneously maximize every objective. Pick the ones 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.
- Most businesses tend to focus on retention, and for good reason. For most businesses, 90+ percent of their revenue next year will come from existing customers. This places a huge premium on retention. For businesses that focus on customer lifetime value (CLTV), what better way is there to boost lifetime value than to extend the lifetime of the customer? If your business model is based on infrequent large-ticket sales, like vehicles or real estate, retention is less important, as you might starve before a customer comes back to buy another mid-size SUV or house. In the former case, cross-selling other products might make more sense as a metric, while the real estate model is more likely driven by referrals.
- The time lag between stimulus and response also is a factor. That is, how long after a great/lousy experience does the customer respond? There is no simple answer here, but be aware that the experience/reaction dynamic usually isn't instant and there might be a lag of three or six months or a year or even longer, especially if there are contracts in place and in B2B settings.
These steps will lead you to the answer of what drives the business forward, and connecting experiential data with operational data will help you determine the best CX metric for your business. Many companies skip this step and blindly follow a CX 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 might blame measurement process or inaccuracies, but it's likely not that the measurement is wrong, but you have been measuring the wrong thing.
Speaking of inaccuracies, there isn't much point in aiming for anything less than accurate measurement. Otherwise, why measure at all? The metric, keep in mind, 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 be closer to the target than others.
CX measurement helps businesses make better-informed decisions as quickly as possible. But before measuring anything, it's critical to first acknowledge these simple facts: Customer experiences matter; these experiences influence subsequent buying behavior; and this behavior can either create or wreck company value. Once everyone understands and believes these facts, then it's clear that you should determine which CX metric best explains the behaviors that create value for your business. That, after all, is the best CX metric for you.
Howard Lax is principal director of customer experience consulting at Confirmit, where he helps clients design, develop, and implement their customer experience (CX) visions. Lax brings more than 20 years of consulting experience to the company, with deep background in CX, market research, and employee engagement strategy. Prior to joining Confirmit, Lax served as vice president and customer experience practice lead at Directions Research and held consulting roles with Kantar TNS, Harris Interactive, ORC and GfK Custom Research.