Customer Experience

Strategy

Research and Measurement

 Agenda

Topic Learning Outcomes

Prepare activity
Summary
Break
Apply Task Group Activity
Next steps
 Topic Learning Outcomes

• Identify and propose CX performance metrics

• Evaluate the nature and importance of the CX metrics

as part of the strategic process

• Analyse best practices and propose relevant metrics

Summary
Research and Measurement in Customer Experience

Investment ROI CX Metrics

• Providing a good • Senior decision • Customer

customer makers need to experience
experience see return for metrics (CX
requires investments metrics) shows
significant (ROI) in increase in
investment to improving loyalty
create trust with customer (investment), and
customers to experience. the return on
increase loyalty. investment (ROI).
Challenge for CX Research and Measurement

“…many companies focus exclusively on

current sales and profit and then struggle
primarily because they are focused
exclusively on current sales and profit.”
Peppers and Rogers, 2017, p366.
Metrics to Measure to Achieve Business Goals

• Acquire more customers

• Acquire customers who are more valuable to begin with (i.e. higher lifetime value – match
consumer persona)
• Increase profit per customer
• Reduce servicing costs per customer
• Sell customers additional products or services
• Reduce the rate of customer defection
• Increase the propensity of customers to refer other customers
• Add social and influence value - willingness to rate products and services, participation in
social media, etc.
• Improve willingness to recommend (Net Promoter Score [NPS])
Challenges to investing in Customer Experience
Investment Returns

• Short term, typically within a year.

Traditional metrics

• Focused on short-term goals; 30-60-90 day sales cycles, not long-term loyalty increase. Financial
statements do not include customers as an asset.

Multi-year implementation

• Implementing a customer experience strategy is a multi-year project.

Business-as-usual

• Customer experience strategy needs to be incorporated into ‘business-as-usual’ operations.

Ongoing Innovation and Change

• Customer experience strategy needs continual improvements and changes based on consumer
preferences and business environment.
Research and Measurement in Customer Experience

Company’s
Returning
reputation Increased customer
customers buy Referrals Additional sales
generates new loyalty
more
business

How much How much How much is

How many How much
more do they new business loyalty
referrals? more in $?
buy? is generated? increased by?
2 Types of Customer Experience Metrics (CX metrics)
1. Customer Generated

• Net Promoter Score (NPS), Customer Effort

Score (CES)

2. Indicators of Customer Experience

• Lifetime Value (LTV), Customer Equity (CE),

Return on Customer (ROC), Retention Rate
(RR) and Customer Churn (CC)
2 Types of Customer Experience Metrics (CX metrics)

1. Customer Generated

• Net Promoter Score (NPS)

• Customer Effort Score (CES)
Net Promoter Score (NPS)
A measure of loyalty.

NPS has two

questions:

1. Likelihood to
recommend to
friends or family
(rate from 0-10)?

2. Why you rated it

as you did, i.e. 0-
10?
(Macquarie Telecom Group, 2017)
Net Promoter Score (NPS)
A company reviews its latest customer responses to a question asking how likely they
would be to recommend their company, service or product:
Respondent #1 gave 9
Respondent #2 gave 8
Respondent #3 gave 3
Respondent #4 gave 6

1. Calculate their Net Promoter Score (NPS).

2. Identify what the company’s next steps should be
regarding these responses.
Source: Lumoa (2020)

1. % Detractors = 2/4 = 50 % (respondent #3 and # 4)

% Promoters = 1/4 = 25 % (respondent # 1)
➢ NPS: 25-50 = -25
2. Identify reason for the score
➢ The company should react to the assive comments to try and turn these people into promoters
(Respondent #2).
➢ The detractors’ issues need to be taken seriously (Respondents #3 and #4).
Customer Effort Score (CES)
The perception of the effort a customer takes to interact and get service from a
company.

CES = count of 5, 6, 7 - / - # of responses

E.g.

BPP makes it easy to register for its MSc programme.

1 = Strongly Disagree
2 = Disagree
3 = Somewhat Disagree
4 = Neither Disagree nor Agree
5 = Somewhat Agree
6 = Agree
7 = Strongly Agree
2 Types of Customer Experience Metrics (CX metrics)

2. Indicators of Customer Experience

• Lifetime Value (LTV)

• Customer Equity (CE)
• Return on Customer (ROC)
• Retention Rate (RR) and Customer
Churn (CC)
Lifetime Value (LTV)
Prediction of the net profit attributed to the entire future relationship with a
customer.

A predictive modelling process involving two basic steps:

1. Go back through customer records to calculate actual LTV for as many

individual customers as possible.
2. Identify most predictive available variables from step 1 and then use currently
available data to predict an individual customer’s LTV.
Review Starbucks LTV calculation:
Kissmetrics. n.d. Calculating Lifetime Value [online pdf] Available at:
https://blog.kissmetrics.com/wp-content/uploads/2011/08/calculating-ltv.pdf
[Date accessed 03 November 2022]
Four general variables of changing LTV

Lifetime value drivers

• These are the elements of the LTV equation itself - the actual components that determine how much value
the customer creates for the company over time. These could include cross-selling rate, share of
customers, and influence on other customers (word of mouth).

Lifestyle changes

• When a customer takes a new job, or gets pregnant, or retires, or gets married or divorced - when his or
her lifestyle or personal situation undergoes a substantial change, the LTV may also be affected.

Behavioural cues

• The number of contacts initiated, the services or products contracted, the number of complaints or
comments submitted and payments made or not made are all examples of behavioural cues.

Customer attitudes

• These include aspects such as satisfaction level, willingness to recommend your company or products,
and likelihood of buying from you again. A customer’s attitudes have a strong influence on his or her future
behaviour (Peppers and Rogers, 2017).
Customer Equity
Total combined customer lifetime values of all of the company’s customers (LTV
x #customers).

Customer Equity = LTV x # of customers

E.g.

Customer LTV: 10,000

Customer count: 5,000

Customer Equity = 50,000,000

Return on Customer (ROC)
Revenue generated by customers against the costs of acquiring and
retaining those customers.

ROC = revenue – cost acquire and retain

Retention and Churn

The proportion of customers retained and lost in a given period.

E.g.
Important to understand the
Customer count at 1 Jan 2021 10 reason for the loss of any
customer:
Customer Count at 31 December 2021 9 ➢ Attrition (moved, no longer
need baby clothes)
Retention = 90% ➢ Defection – poor customer
Churn = 10% experience

➢ Much more expensive to find a new customer than to keep one.

Quiz – Topic

True or False?

The best metric to measure customer loyalty is NPS.

TRUE
Quiz – Topic

True or False?

Senior decision makers don’t need to know the ROI of customer

experience strategy investments.

FALSE
Quiz – Topic

True or False?

Companies typically have a short-term outlook for return on

investment.

TRUE
Quiz – Topic

True or False?

The best metric to compare the value of improving the customer

experience with return on investment is customer equity.

TRUE
Quiz – Topic

True or False?

The best metric to measure the effort customers have to take to

do business with a company is CES.

TRUE
Break
Group activity
Activity – Group discuss and present
1. Choose four CS performance metrics.
a) Define the purpose of each one.
b) Explain how each one is calculated.
c) Explain the benefit of using each one.

Rules:

• Write your answers in plain English – so your grandmother would understand.

• Do not use Google!
• Use class material on the HUB > CXS Forum > Announcements > Week 7 Topic
6 – class material.
• Use e-book Peppers & Rogers (2017).
Feedback

Daily Pulse Survey for Dr Raewyn Sleeman – Scan QR code to answer 2

questions before you leave
Recap

• Identify and propose CX performance metrics

• Evaluate the nature and importance of the CX metrics

as part of the strategic process

• Analyse best practices and propose relevant metrics

Thank you for your
participation
Next steps: Consolidate
• Topic roundup
References
Bain & Company. (2015). The ‘inner loop’ of the Net Promoter
System®. [online] Available at: https://youtu.be/ufdCUO6ZHPI [Accessed 2
Nov. 2022].

Chaffey, D. and Ellis-Chadwick, F., (2016). Digital Marketing. Strategy,

Implementation and Practice. 6th ed. Harlow: Pearson.

Lumoa. (2020). Customer Experience Metrics and KPIs. Available at

https://lumoa.me//blog/customer-experience-metrics-and-kpis [Accessed
08.10.2020]

Lumoa. (2020). Net Promoter Score. Available at https://lumoa.me/blog/net-

promoter-score-definition-infographic [Accessed 08.10.2020]

Lumoa. (2020). Measuring Customer Loyalty. Available at

https://lumoa.me/blog/measuring-customer-loyalty [Accessed 08.10.2020]
References
Macquarie Telecom Group. (2017). What is Net Promoter Score? (NPS).
[online] Available at: https://www.youtube.com/watch?v=qWKipJefrN8.
[Accessed: 02.11.2022].

Peppers, D. and Rogers, M., 2017. Managing Customer Experience and

Relationships. 3rd ed. [e-book] New Jersey: Wiley. Available via:
https://online.vitalsource.com/#/books/9781119239819/cfi/6/20!/4/2/2/2/6@0:0

Talkwalker. (2020). Metrics to Monitor. Available at

https://www.talkwalker.com/marketing-essentials/metrics-to-monitor

Watkinson, M., 2013. The Ten Principles Behind Great Customer

Experiences. Harlow: Pearson.
Metrics, KPIs, CSFs

Category Definition
Metric Standards that companies can use to
evaluate success.
Key Performance A way of measuring performance, and
Indicator operational achievements
Critical Success Things that are vital for an organisation or
Factor project to achieve its mission.
(Bain & Company, 2015)
Customer Analytics
Technology-enabled statistical models that continuously develop real-time
insights into the nature of individual customers
➢ The right marketing campaign can be created and launched in real time

Enable company to classify, estimate, predict, cluster, and more accurately

describe data about customers, using mathematical models and algorithms.

• Reasonably accurate using a large data pool

• For smaller groups, one-to-one contact always better than predictions

Benefits:
1. Improved customer satisfaction and loyalty
2. Increased profitability through cross-sell and up-sell
3. Reduced cost-to-serve and higher ROI