Do You Manage CX Metrics Like Concentric Circles?

By Lynn Hunsaker, CCXP posted 01-11-2023 10:39 AM


Why are customer experience metrics our Number 1 challenge, year after year?

When you understand how experience management metrics build upon one another, you can clearly see where you should focus. Like concentric circles, or a Russian doll, start with Earnings per Share and work backward.

Customers' expectations are established by what's done in Marketing and Sales. This starts with identifying your Ideal Customer Profile, emphasizing acquisition of ideal customers, and setting realistic expectations. If any of these factors is weak, you're not set up for efficient and effective CXM. 

Costs to Serve include delivering everything you sold to the customer, along with onboarding and maintaining your relationship with the customer. Unfortunately, it also includes costs of handling mis-steps, misunderstandings, concerns, negative word-of-mouth, refunds, remedies, incentives, escalations, churn, and so on.

Customer experience metrics
 revolve around the unfortunate aspects of Cost to Serve. They track the efficiency and effectiveness of making up for things going wrong.

  • Customer Acquisition Costs (CAC) are influenced by Net Promoter Score (NPS), Health Score, and Satisfaction ratings.

  • Churn Rate is affected by First Contact Resolution (FCR), Effort Score, and Satisfaction.

Although these CX metrics are popular, they are LAGGING indicators. This means you cannot see them until customers do something or tell you something.

Health Score, CAC, NPS, SAT, Effort Score, and FCR are results of realities (positive + defects) relative to expectations. Therefore, all actions are reactive regarding typical CX metrics. 

Furthermore, these are INDEXES, which are not actionable (except the satisfaction ratings). They can be combined as a super index. For example, the Secure Customer Index combines likely to recommend + likely to rebuy + overall satisfaction. Similarly, Health Score combines NPS + overall satisfaction + Service inquiries + product usage. Indexes are most useful for
correlation analysis (key driver analysis; KDA).  You must also collect other data about CX+EX+PX expectations and realities. This data can be collected via surveys or text/voice mining or operational data. When you correlate expectations and realities data versus your index, you can identify key drivers.

What’s missing in experience management metrics are the 2 core dolls in your concentric circles of Russian dolls: Realities (aka absence/presence of expectation defects) versus Expectations. CX success is when customers' realities match or exceed their expectations. When you achieve a 1:1 ratio between their realities and expectations, there is no pain. Accordingly, Costs to Serve are minimized. Therefore, you need strong focus on expectation management and realities (defects) management. This is the heart of experience management!

When you create a Pareto chart for each key driver, you rank order the contributing elements of that key driver. The 80/20 rule indicates the Vital Few elements to solve. You want to focus on the Vital Few, to prevent recurrence of customer / employee / partner pain for the key driver.

When you prevent recurrence of CX pain for the key driver, you’re creating CX Annuities! An annuity is a fund that provides ongoing returns. Preventing recurrence (a) frees-up your Cost to Serve expenses that would otherwise be needed forever in the future — those expenses are no longer needed! — and (b) re-allocates that money to growth opportunities.

Examples of CX Leading Indicators are shown in the chart above. These are achievements of cross-functional teams at Applied Materials where I led CX company-wide. These strides are the result of CX index key driver analysis, followed by Pareto analysis and 5 Why’s analysis, action plans addressing the 5th why, and huge focus on the action plan’s internal progress metric as CX Leading Indicator.

  • Arrows indicate which Leading Indicators improved Profit Margin Expansion and Sales Velocity.

  • Value Quotient is a tally of value deliveries in the numerator and value failures in the denominator. This can be tracked by every work group in your firm, for both internal and external CX. It’s instrumental in shaping a preventive mindset.

  • Sales Velocity and Value Quotient contribute to Return on Assets.

  • Profit Margin Expansion and Lifetime Value and ROA contribute to Earnings per Share.

  • When you connect the dots between (1) defects/expectations Leading Indicators and (2) Value Quotient, (3) Sales Velocity, (4) Profit Margin Expansion, and (5) Lifetime Value, it’s easy for executives to see how you are shaping ROA and EPS.

This is an excerpt  -- see my full article at 5 Best Experience Management Metrics.

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