As companies pour resources into CX projects and initiatives they want to know the success of their efforts. The use of NPS (Net Promoter Score), CES (Customer Effort Score) and CSAT (Customer Satisfaction) to measure CX have come to dominate. Many business leaders, however, have come to question this over reliance on these metrics and their usefulness to help improve revenue and profitability.
Over the last two decades, NPS has become the go to customer metric for many organisations. Libby Dale, co-founder of SmartMeasures, comments, “NPS’s popularity is due to the fact that it is an easy question to ask as well as being a somewhat easy metric to analyse – how likely are you to recommend us?”
“The problem, however, is that it has huge limitations when assessing the sentiment and opinion of all your customers as it only assesses one customer interaction from a limited range of customers over a given period of time. And like CSAT and CES scores, NPS lacks the ability to fully identify the driving factor’s behind customers’ responses or predict their future purchasing behaviour.”
Linking customer metrics to business outcomes
According to David Lambert, Experience Management Principal at Medallia, NPS, CSAT and CES all have important roles to play in delivering ROI and real benefits to the organisation from its CX program. The problems occur when the focus is primarily on improving those scores rather than using those scores as part of a management system to drive action. He comments, “To execute your CX vision, you need a reliable metric, but you also need to drive action from it. If you’re focused on those scores and not focused on driving customer improvement actions then your business isn’t going to change.”
Lambert highlights the example of an insurance company who wanted to increase customer retention from 87 to 89% over a three year period. “One way that helped them do that was to use the net promoter score, though they could have used customer effort or customer scores or any other metric for that matter. By measuring the likelihood for customers to recommend to others the company could track their performance but they then used the gold-mine of data sitting in verbatims to uncover and take action on 431 improvements actions that their customers were telling them consistently to improve. Improving their NPS score was not the goal, it was a tool to help them achieve a future business outcome”, says Lambert.
“Their ROI from all the customer focused actions they took was 7% growth in their existing customer base, 196k less support contacts and an incremental 3.5% in revenues!”
To be truly useful and effective, customer metrics need to link to business outcomes. Dr Robert Dew, partner CapFeather Global, raises the question, “Does lowering CES or increasing CSAT translate to acquiring more customers or more revenue from each customer? If it does and you can show the linkage, what you should then be able to do is prove is how every $ spent on a CX initiative translates to money saved or money generated.”
Show us the money
The ultimate measure of success for the senior executives and board members of an organisation is money. Yet, many CX leaders fail to demonstrate the financial benefits and ROI of their CX Programs. Dew relates, “Recently we surveyed 40 chief customer officers and heads of customer experience on their CX journey and CX maturity. Everyone had done their journey mapping, implemented their VOC program and implemented their NPS and CSAT metrics. None of them, however, had linked what they were doing to a business result”.
This will likely place the future of a number of CX projects as well as the careers of people involved at great risk, as Dew warns, “To maintain senior executive support of their projects, CX leaders need to demonstrate how the customer metrics they choose are linked to achieving actual business and financial goals. Otherwise customer experience may become a passing fad no longer taken seriously at the executive level of an organisation.”
Calculating CX ROI
Lambert highlights five business goals that companies need to look at to cost justify their investment in CX:
- More revenue per customer (cross-sell and up-sell)
- Lower cost per customer to serve
- Reduce customer churn / increase future transactions
- Reduce customer acquisition costs
- Increase the number of customers (net positive word of mouth)
“In deciding what customer metric you use to track CX ROI you need to understand how it links to achieving a business outcome. You also need to be sure you are focused on the right business outcome or range of outcomes
“I remember an example of a European telco using satisfaction and NPS metrics to improve revenue. What they found was that their biggest detractors were the customers that generated the most revenues. This is because their least satisfied customers, their detractors, were locked into their most expensive and least flexible yearly contracts. What they should’ve been looking at to refocus their ROI efforts was the future churn rate of their customers, not current revenues.”
Surveys don’t capture the drivers behind the responses
NPS and CSAT scores aim to provide an ‘outside-looking in’ view of the organisation and its CX strategy. They are calculated based on responses to surveys conducted at the end of an interaction between the brand and the customer. Dew comments, “These surveys, traditionally, have been very contact centre focused where poor and lengthy design have contributed to survey fatigue. But the current trend in customer experience, for a while now, has been to deliver omnichannel experiences, via the web, email, SMS, social media, mobile app and so on”.
He adds, “It’s very easy to ask customers to complete a short survey at the end of each touchpoint. What you need is one question relating their experience, which can be rated from 1 – 10. But you need another question which asks why. It’s from the answers to the why question that a driver model can be developed to analyse the behavioural drivers behind the customers’ sentiments.”
Other ways to find insights about your customers
Organisations collect vast amounts of transactional, behavioural and historical data about their customers. There have been widespread developments in AI and analytics to make use of this data to analyse and predict customer behaviour and future purchasing decisions.
Libby Dale explains, “NPS and CSAT only provides a picture of what’s happening with people who have completed a survey. But most customers don’t provide feedback. Most customers who are frustrated with an experience do not complain. They just leave and tell others about their experience.”
“Advances in AI and predictive analytics allows organisations to leverage this data to find out what’s happening with the customers that don’t complain or complete a survey. Analysing this data can allow you to identify the points of friction that are causing customers to churn”, says Dale.
According to Bruce Temkin from Qualtrics, by combining this operational data with survey data you can examine what types of products and service interactions lead to promoters and detractors, and use this data to calculate the NPS or CSAT for large portions of your customer base–—even for customers who never responded to a survey.
Don’t focus on the scores, focus on the business goals
NPS, CSAT, and CES scores are going to be with us for quite some time. Despite their limitations they have an important role in helping organisations manage their CX projects. But they need to be linked to real business outcomes and used to drive action and change. Lambert advises, “Don’t focus on the scores, focus on the future business outcomes you want to achieve. ROI is delivered by actions, not analysis.”