Customer Experience Management: Don't Just Measure, Measure What Matters

Customer Experience Management

The old management adage says “You can’t manage what you don’t measure,”–i.e., if you don’t track performance, how can you improve?

When it comes to customer experience, traditional contact center operational metrics simply are not sufficient to tell the whole story. Instead, it’s imperative to measure what really matters, which is any activity that impacts the customer experience.

Related article: Maximize Customer Lifetime Value by Improving all 360 Degrees of a Customer’s Experience

With so many variables in today’s hyperconnected enterprises, it’s important to align customer experience-specific metrics with your business objectives so you can effectively target improvement activities, and avoid missing important signs of needed improvement.

Take customer lifetime value (CLV) as an example. To truly understand CLV is to know that every part of the business influences customer experience and, ultimately, the value of that customer to your business–from strategic planning at the highest levels, to marketing, sales, operations and customer service. That’s a lot of ground to cover if you’re trying to measure performance.

To simplify CLV, focus on its  four core elements: revenue, cost of support, the length of the customer relationship and customer acquisition cost:

  • For revenue, use annual revenue times gross margin on a per-customer or average customer basis.
  • For costs, use the per-customer or average customer cost of support for the year.
  • For customer relationship, use the number of years that an average customer does business with you.

For customer acquisition cost, use total acquisition costs divided by the number of new customers acquired.

The Customer Lifetime Value Equation:

Customer Lifetime Value equation

What key performance indicators should you measure to understand those elements? Strategic KPIs like retention rates, margin-per-sale, Net Promoter Scores® and referral rates are all pretty straightforward indicators of revenue performance. Other important indicators include cost indicators like customer service interactions, average handle time, first-contact resolution, the mix of self-service vs. agent-assisted interactions, and the like.

Successful companies also know that cost-related metrics, like first-contact resolution or contacts per event also impact the top line because these factors affect customer retention. A business can use CLV “math” to test how a combination of factors would affect Customer Lifetime Value. Two simple examples are:

  • A proposed policy change would reduce support costs, raising Customer Lifetime Value. How much loss in customer retention would wipe out the savings?
  • An investment in service and support should reduce customer effort and therefore increase retention. How much does retention need to increase to justify the project?

It’s imperative that all employees understand CLV, their own personal relationship to it, and how their actions either help nurture and support CLV or chip away at it and tear it down. That’s what really matters, so it really must be measured. And because no successful company is static, it must be measured consistently and regularly.

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Robin Foster

This blog entry was a guest post, written by Robin Harris Foster.

Robin is the Practice Leader for ROI Analysis at Avaya. As the Practice Leader, she is responsible for setting the standards and methodology for analysis of a broad range of the Avaya solution portfolio, including Contact Center/Customer Experience Management and Unified Communications and Collaboration. She also develops the tools used by Avaya associates and business partners when cost justifying Avaya solutions and engages directly with account teams and customers to address sales opportunities.

Robin has more than 20 years of experience in Contact Center, in a career spanning both Bell Laboratories (AT&T and Lucent) and Sales (Avaya) and was one of the primary co-inventors of the Business Advocate software available exclusively from Avaya. She holds 28 US Patents related to contact center operations, primarily in the domain of predictive and adaptive algorithms to align operations with business goals for performance and cost optimization.

Robin has a BS in Mechanical Engineering and a Masters of Engineering in Systems Engineering from the School of Engineering and Applied Sciences at the University of Virginia.

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