Thursday, October 30, 2008

Metric Confusion

The Gartner Group recently held its CRM Summit in Washington, D.C. where the opening theme was managing the customer experience. Ed Thompson, Vice President made the point that focus on CRM has shifted to better managing the customer experience. He provided two interesting statistics; namely,
1. 80% of executives think customer satisfaction is more important than it was three years ago.
2. 95% of business leaders see customer satisfaction as the next competitive battleground.
3. Most companies have an average of seven metrics.
4. Most companies have their own derivative of the net promoter score.

He pointed out that everything else a company does is easy to copy - such as price, product and delivery.

The big question at the Summit "How do you measure it?"

Ed Thompson pointed out that there is no one measurement of the customer experience. Customer loyalty provides an incomplete picture. There are two types of loyalty; namely rational and emotional loyalty. While rational loyalty seems to be the more common measure of loyalty, emotional loyalty is the kind of loyalty that really needs to be measured. Emotional loyalty, according to Thompson, convinces customers to "get tattoos of your brand". "The problem is that emotions change quickly and demand different sorts of questions in surveys which need to be conducted very frequently".

Again Thompson made the point that NPS, while a popular metric, is good for causal analytics but not for B2B companies. He noted that NPS captures some emotional loyalty and some benchmark information "but most important it is simple and appeals to the board of your company."

I think the key point that I got out of Ed Thompson's remarks is that organizations have many measurements of the customer experience of which customer satisfaction and customer loyalty are just two. The metrics include:
1. The brand is measured by marketing communications and includes product and service design.
2. Quality is measured by process improvement and process engineering.
3. Customer satisfaction is measured in sales, service or market research.
4. Customer loyalty is measured by customer churn, retention, referrals or loyalty management.

Most people would agree that companies have a lot of information about their customers but do not take the time and effort to integrate that information into a composite picture. The customer measurements noted above demonstrate this point particularly well.

This ties in well with an article in the Harvard Business Review issue of February, 2007 by Meyer and Schwager titled "Understanding Customer Experience" that makes the argument that measuring customer experience is the preferable measure to any CRM measurement. I will review this article in a later blog.

The bottom line is that too many companies do not take the time or utilize their internal resources to integrate the multiple dimensions of the customer experiences that have been documented and lie within their internal data bases.

1 comment:

Richard Owen said...

I would certainly agree that companies are using multiple versions of NPS; worse, they frequently miss the core elements of an effective Net Promoter program. The root cause is a limited view of what business processes are really required to create an effective program.
On the other hand, there are many very successful implementations in B2B of the Net Promoter approach. It requires some specific techniques but a properly implemented Net Promoter program requires many of those techniques anyway. I recommend you visit to get a perspective on the activity amongst practitioners in the Net Promoter community.

Richard Owen
CEO, Satmetrix


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