“The Winner Takes it All”: The KPIs of Customer Satisfaction
Products are becoming increasingly interchangeable – so what counts now is the special customer experience. That’s why customer satisfaction is becoming the hard currency that businesses in all sectors are using to pay for their ticket to the future. But how do you measure this satisfaction? Which key figures provide objective indications of the success of a company’s Customer Experience Management, and how should that be shaped for the long term?
Just how important customer satisfaction is can be seen, among other places, in the American Customer Satisfaction Index (ACSI) 2017. It emphasizes the significance of customer satisfaction across all sectors as well as its positive impact on share prices and corporate profits. The 2017 United Kingdom CSI corroborates the results from the USA and documents the influence of customer satisfaction on sales growth, gross margin, revenue per employee, loyalty, advocacy, and reputation.
“The winner takes it all”
According to analysts from Gartner, a clear tendency is emerging, where “The winner takes it all”. In other words: the gap between the market leader in each particular sector and the number two is growing all the time. In the luxury car sector in the USA, for instance, this applies between Mercedes Benz and BMW; in the area of consumer goods it’s between Johnson & Johnson and P & G, and in the insurance sector between Pingan and Allianz. This development is partly and above all driven by trends in customer experience. Digital channels, for example, are taking over from personal contact. Consumers are less concerned with the product as such and more with the experience they have in connection with the product and/or the company. Accordingly, businesses no longer focus merely on manufacturing and marketing goods, but also on taking a more active part in shaping the customer experience. And they do this to good effect in at least 50 percent of cases. Half of the respondents in a survey (PwC/SAP, 2017) stated that they had enjoyed very good and consistent experience across all channels. However, 81 percent would have actually been prepared to pay more for a better experience. Customers change supplier in consequence of poor customer service (52%) and don’t go back (68%) (Accenture, 2017). Note well that customers reward businesses disproportionately for good experiences, while punishing them disproportionately for poor experiences.
Hard key figures
As customer satisfaction is so significant for business success, it is important to take control in this area and not rely on gut instinct, which means analyzing every measure in detail and backing up every decision with reliable key figures. Gartner lists over 100 metrics by which customer experience aspects can be categorized, measured, and quantified – from the accuracy of written information to the initial solution rate, from the Net Promoter Score (NPS) to the number of complaints per product, and, of course, the overall customer satisfaction. So what does successful Customer Experience Management (CEM) look like and how can you analyze it using KPIs?
Concerning the KPIs for CEM, “Customer Satisfaction” is by far the most important one (62%). The values tend to remain comparatively stable here. The deviation with individual brands is relatively small and often less than two percent within a decade. The “Net Promoter Score”, popular because it is easy to determine, comes in at 25 percent, but it does have some weaknesses as it does not necessarily correlate with profits. That’s why other, innovative approaches in addition to the NPS should be discussed, such as CES (Customer Effort Score), WoMI (Word of Mouth Index), and BAI (Brand Advocacy Index).
Conditions for measurability
According to Gartner, companies need to meet three conditions if they want to measure customer experience (CX) successfully.
CX measurement across levels of management: Such metrics should be structured hierarchically and data should be collected and analyzed at different company levels. At Level One in Gartner’s four-level model, for instance, the CEO or COO determines the organization’s level of maturity regarding customer focus and derives strategic measures from this. At level 4, on the other hand, the performance of departments, teams, regions, or other organizational units are examined.
Considering key performance indicators from all parts of the organization: the Customer Experience comprises different parameters here that are measured at different places within an organization – so employee engagement is measured at a different place from process and product quality or customer satisfaction. For each of the five categories defined by Gartner (Employee Engagement, Quality Operations, Customer Satisfaction, Loyalty Churn Retention, Advocacy Brand Reputation), there are different key figures and therefore areas where adjustments can be taken to optimize the customer experience.
And these metrics have an influence on each other. One example is that, if employees have better tools available for customer service purposes, internal service quality improves. This in turn increases employee satisfaction and consequently productivity and external service quality. Ultimately, this results in satisfied customers and long-term loyalty to the brand or the company.
Proof of cost-efficiency: measures taken in the different categories are instrumental in producing a number of financial benefits. Greater employee engagement thus ensures less churn and lower recruitment costs, and greater customer satisfaction goes hand in hand with lower costs for complaints and reimbursements. However, projects to put such measures in place frequently take between three and five years to bear fruit.
In summary, Gartner gives the following recommendations:
Do not rely on a single top-level CX metric; to achieve improvements there, improvements in numerous lower-level metrics are also necessary.
Work with the strengths of the NPS and make it clear to employees how this measurement can be improved.
Monitor the metrics in the entire organization, not just in individual departments, and identify how they are calculated, who tracks them, and who is responsible for their improvement.
Define a hierarchy of CX metrics and make the appropriate results available to the managers in the relevant positions.
Do not ignore the frequently neglected categories of quality and employee engagement.
Move from the rational to the emotional factors; if relevant, perform an analysis of customer emotions on a textual and visual basis. Also ask customers how they rate the company.
Demonstrate ROI by ensuring that sufficient time and resources are invested so that the intended improvements are converted into financial results.
Conclusion: Customer satisfaction is no guarantee of brand loyalty, nor is it directly correlated to purchases. That said, the nature of the customer experience will decide the success or failure of brands and companies well into the future.