What to measure?  Why understanding the relationships between various performance measures is a primary objective of benchmarking.

Simplistically, understanding the relationships between various performance measures means measuring the right things and making certain that a focus on those things measured does not negatively impact performance against other important metrics.

Regardless of industry or area of focus (the areas we have the greatest experience in include branding, customer experience and marketing performance), it’s critical to be clear on what you’re trying to accomplish, and why. You don’t need to (nor should you) measure everything. Just the right things.

To benchmark performance against competitive industry leaders dictates a certain approach. If you wish to benchmark functional performance against non-competitive functional leaders (e.g. mortgage broker experience and satisfaction at a financial services institution vs. meeting planner experience and satisfaction with Ritz-Carlton) it dictates another.

If you are interested in measuring your performance (e.g. importance vs. importance on key experience or perceptual attributes) you’ll need to understand which segments to measure against. For instance: is the benchmarked opinion of an entire industry (e.g. 50,000 plus brokers) the measure you should be tracking and improving? Or is it the opinion of the top 20% of the segment that are the most profitable? How do your customers deviate from the industry overall?

If you improve performance against key metrics industry-wide (let’s say – just for example – speed to negotiated quote and commitment letter for commercial mortgage brokers), will that make you more profitable? Or, should you focus on improving the experience on the metrics that matter to the segment that represents your most profitable customers?

In our opinion, benchmarking is relevant only in so far as the metrics you benchmark are linked to key financial, business and customer objectives, and the metrics that define success for your business in these areas.

Although linking various metrics can be difficult to do, it is critically important for several reasons. If the cause-and-effect relationships are identified and understood, then these measures begin to provide the ability to serve as predictors of future organizational and financial performance.

Understanding the cause-and-effect relationship is relatively easy. Identifying leading and lagging indicators is typically more difficult, though critical.

We were asked an interesting question during a new business pitch the other day. In the middle of our discussion of the “Touchpoint Performance Dashboard” and our ability to help clients both understand key metrics and develop benchmarks for ongoing performance measurement, a senior marketing exec piped in: “What is benchmarking?”

After a (very brief) pause to see if they were serious, I quickly dove in. But the question was illuminating. How many marketers – in this age of management focus on ROI and performance measurement – wonder what to track to prove how well they’re doing?

Our definition of benchmarking is the act of comparing a specific measurement (or set of measurements) to a benchmark. External benchmarking compares internal measurements to measurements from external sources (prospects, competitors, non-competitive functional leaders). Internal benchmarking compares internal measurements (typically by division, process, unit, customer or segment) against other internal measures.

A recent engagement on the process of identifying, codifying and transferring internal best practices fell into the internal benchmarking category. The question we answered was, “How can we (organizationally) find out what we (individually or at the business unit level) already know?”

Once they got it, this client was really interested in external benchmarking, followed by a dialogue around what they’re trying to accomplish: Would you like to benchmark yourselves against best practices in your industry? Or would you like to benchmark yourselves against perceptions of the ideal? Or do you want to benchmark performance against the ideal as perceived by the most profitable, loyal customers you have, and others like them?

The answers, unsurprisingly, were yes, yes, yes and yes.

But we’ve been able to narrow this down somewhat to those metrics that really matter, with the objectives of helping our clients adopt best practices and increasing performance. But benchmarking should be treated as a continuous process in which organizations continually seek to challenge their practices and improve upon them. While many organizations benchmark on weekly or monthly performance data, we’ve found that quarterly measures are most manageable, while still occurring often enough to incent positive change.

The approach you’ll take is driven by exactly what you’re trying to accomplish, and what you plan to with the data once it’s been gathered and analyzed.

There are many things that you could choose to benchmark against. But do you need to benchmark against all of them? Probably not. Read part 2 of this series, for our perspective on what you should measure (vs. what you can), and why understanding the relationships between various performance measures is a primary objective of benchmarking.

Where does your organization fit? Maybe you have it nailed. A leader, you know who your customers are and what they want – and they love you for giving it to them.

An inspiration, you set the standards in your industry for customer experience management. Your customers experience excellence at just about every touchpoint they encounter, and outstanding talent is clamoring to work for you.  You excel in comparison to your competitors, increasing sales and boosting retention for your best customers and employees.

Maybe you’re a “fast follower”, and your organization is benefiting from being slightly ahead of the curve. While you may be doing well, you’re finding it difficult to compete with the customer service leaders in your industry.

Maybe you’re a laggard –  you wish you could establish yourselves as customer service leaders… but are having troubles getting your hands around what this means (much less how to accomplish this). All the places where it interacts with customers? (“Touchpoints”)

Wherever you are on this continuum, there are some basic questions you can ask to help figure out where you stand.  Without getting too complex, answer these questions honestly on the 5 point scale (see below) and see how you’re doing.

Recognize that if your average score is 4 or better, you’re doing great by any measure. And if you’re not doing so well, know that if you focus on improving your performance on these questions, you’ll be a leader in no time.

The 6-Question Customer Experience Audit

How well is your organization doing at understanding…

1. Which customers are your most valuable, and why?
2. Which interactions (or “touchpoints”) these key customers most value, and why?
3. Your key customers’ needs, in each lifecycle stage with your organization?
4. The most common sequence of “pre-purchase” touchpoints, as prospects (or repeat purchasers) progress from awareness of your offerings to selection?
5. The influence of “post-purchase” touchpoints on satisfaction, loyalty and advocacy?
6. Whether your key customers are dissatisfied, satisfied, or loyal? And who your advocates are?

You can answer the 6-Question Customer Experience Audit using this scale

5 = Extremely Well (We have it nailed.)

4 = Moderately Well

3 = Just OK

2 = Not that well

1 = Not well at all (We have no idea!)

In Proving ROI on Customer Experience Part 2, we presented four “experience investment” lenses to help you plan, measure and improve interactions with your customers, and prove significant ROI before you invest.

Job number one in improving customer experience is to identify the touchpoints you have, and create a map of where you are today.

Touchpoints are the places where companies interact with and “touch” customers, delivering value or driving customers away.

Experiences are defined at these touchpoints, and the opportunity for mapping ROI is based on finding out which touchpoints work, which don’t, and why. Then, improving them. In fact, most companies don’t even have a complete picture of existing touchpoints —even the ones they control. So where do you start?

A typical process for experience improvement can include these steps:

1. Audit individual customer touchpoints across the Customer Relationship Lifecycle stages (from awareness through to advocacy).
2. Map out the key processes for each of the lifecycle stages.
3. Understand how individual touchpoints work—in sequence or alone—to move customers through the lifecycle and closer to your company:
   1. Gaps where touchpoints should exist—and don’t
   2. Redundancies—where touchpoints do exist, and shouldn’t
4. Identify the specific interactions where touchpoints drive value across different segments, with regards to:
   1. Customer loyalty
   2. Value to your business, and to your customers
   3. Revenue generation (or cost savings)
5. Determine the gap between desired and actual experience, and desired and actual results at these points.
6. Construct a specific plan for moving forward – one that sets priorities, maps out the costs and benefits, and provides specific metrics for measuring the results.
7. Codify the optimal experience, and begin the process of operationalizing it.

Building an ROI case: Measuring Customer Experience
There is no doubt that improving customer experience is important. Whatever approach you take, knowing where to focus limited resources, and how to use experience as a competitive differentiator is key to justifying—and prioritizing—investment.

This understanding is at the core of our business and it’s why we’ve developed our suite of Customer Experience Mapping tools. Our perspective is that improving experience starts with an understanding of customer touchpoints and the emotions they drive. We identify, understand, measure, and improve the experiences that drive your customer relationships, with statistically precise approaches for gathering, listening to and acting on the voices of your customers.

This is why you must focus on what can be directly measured. There are many less tangible benefits (ranging from brand affinity and preference to employee satisfaction, to name but a few), but the case for Experience ROI should be made with a clear understanding of which measurable monetary and value levers can be moved—and how.

In Proving ROI on Customer Experience Part 1, we discussed the background of Customer Experience, as well its critical nature of in business today.

Because the process of improving customer experience has the potential to be both involved and resource intensive, most businesses wonder how they can prove ROI before they start. To assist you in this initial assessment, we have developed 4 “Experience ROI Lenses” to help you begin.

Future revenue is affected—either positively or negatively—at every single touchpoint (or interaction) between your organization and your customers.

While by no means exhaustive, these “Lenses” are all examples of – and point places where you can find – real world ROI. Looking at your organization through them will help you speak the “language of investment return” and should give you ample ammunition to begin thinking about – and planning – your own experience improvements.

Experience ROI Lens No. 1: Increase loyalty (and reduce churn).

Increases in loyalty (and reductions in churn) are some of the most basic ROI models you can use. Armed with Net Promoter® (NPS) as a loyalty metric and Customer Lifetime Value to measure what a customer is worth, you can drive – literally – millions in savings for even a small to mid-size company.

Multiple studies have proven the value of loyalty, with benefits ranging from customer who spend more, cost less to service, and buy more over time. Both Loyalty and NPS are proven (and widely accepted) indicators of future revenue growth. Overall, the goals are to both increase retention, and reduce the cost of keeping the customer.

These are but a few of the ways that experience improvements can drive loyalty:

• By establishing a line of sight between your customer experience and increased Net Promoter® (NPS) scores, you can directly boost satisfaction and loyalty.
• You can pinpoint the individual touchpoints that affect loyalty, investing in those that improve it – and eliminating or modifying those that don’t.
• What if better delivery of “post-purchase” experience could reduce churn by 5% a year? For some companies, this can translate to a 60%+ increase in annual profits.
• Implementing a customer experience feedback loop could allowing you to deal with complaints more effectively, and improve delivery overall. In a $40M Retail Company, this could affect the $8M at risk from customers who have had a poor experience.

Experience ROI Lens No. 2: Reduce the cost of delivery.

Delivery cost can be reduced in several areas, including functional tasks, hard costs, and overhead. Ranging from reduction in marketing costs (or reallocation to more effective channels) to reductions in customer service staff or call center overhead, the potential is significant.

A few examples of the tangible benefits from reducing delivery costs can include:

• Eliminating a redundant marketing tactic or program that is both costly and ineffective. For one client, eliminating a single printed touchpoint saved millions – with over $500,000 in postage alone. Or eliminate an entire series of programs that don’t drive desired results. (Eliminating an ineffective touchpoint = lower cost/higher satisfaction).
• Reduce the cost of touchpoint delivery overall; by eliminating nearly 40% of all touchpoints. For another client, we were able drive up satisfaction and customer re-purchase as a result. (Fewer touchpoints = lower marketing/service costs).
• Migrate customer-facing tasks from the call center to the web; Adding a series of pages to your website could have the direct effect of reducing call center volume overall, decreasing handle time, and increasing first call resolution. (Decreased volume/increased speed = lower costs).

Experience ROI Lens No. 3: Speed movement through your Customer Relationship Lifecycle.

The potential for ROI in this area is huge. By understanding where experience can be improved in the “pre-purchase” stage of your lifecycle, you could boost your pipeline and conversions by 10%, 20%, or more. Improving experience in the “post-purchase” phase boosts satisfaction, loyalty and advocacy.

The benefits from measuring Relationship Lifecycle improvements include:

• See which marketing channels are most effective at driving brand awareness, and which are less effective. By shifting investment to the most effective channels, you boost awareness without increasing costs. (greater awareness = more prospects).
• Understand where your marketing is NOT driving desired behavior, and boost consideration. (more prospects = more sales).
• See where the sales process is bogging down to close more deals. (more customers = more revenue).
• Learn which individual touchpoints are most effective at driving advocacy (or influencing prospects) to boost positive Word-of-Mouth. (greater advocacy = increased awareness/improved loyalty).

Experience ROI Lens No. 4: Increase Customer Value.

Most organizations have a startling lack of knowledge when comes to the economics of individual customers. One study states that 85% of executives lack an understanding of acquisition or service costs, much less overall CLV (Customer Lifetime Value). Yet for virtually all organizations, their enterprise value springs entirely from their customers.

This value is driven by three things: 1.) The amount they spend on any given product or service; 2.) The amount of this budget that they spend with you, and; 3.) What they are willing to pay for your product or service. By looking at experience improvement as a way to boost CLV, you’ll be able to look at experience based on actual customer behavior, vs. intention.

Some of the benefits of looking at experience improvements through this lens can lead directly to increased CLV by:

• Reducing the cost of sales leads: By driving down the initial cost of getting customers (lower cost through more effective marketing or sales touchpoints) you boost overall customer value.
• Lowering service costs: By decreasing the cost of servicing customers (through web, call center, in-person or other touchpoints and channels) you increase CLV.
• Reduced cost of acquisition: By having more leads at a lower cost, you indirectly affect the sales metric. If the cost of closing a deal can be reduced as well, you benefit twice over. More efficient contracts, environments, sales pitches and more – all designed around the experience of turning prospects into customers – reduce costs.
• Increased purchase activity: A more efficient experience can be targeted towards getting existing customers to either spend more at each purchase, or purchase more often. The result? You guessed it. Increases in overall revenue (and value) per customer.

• Improved retention: As discussed in Experience ROI Lens No. 1, above, increases in loyalty boost retention. The longer a customer stays with you, the greater their value.

Once you’ve developed a hypothesis around prospective ROI on customer experience, what next? In Part 3 of Proving ROI on Customer Experience we talk about ways to identify the touchpoints you have, and create a map of where you are today – helping you find out which touchpoints work, which don’t, and why. Then, improving them… (Continue to Part 3…)

Even before the “Four Ps” of marketing (Product, Price, Place and Promotion) expanded in the 1980s to reflect the impending shift to a knowledge-based economy (People, Process and Physical Evidence), there was widespread recognition that how someone feels about an organization is driven in large part by how they’ve been treated.

Customer experience is the sum of all experiences a customer has with an organization, over the duration of their relationship with that organization.

Introduced in the late 1990s, the concept of “customer experience” was the perfect framework to begin thinking about ways to plan, measure and improve these. An organization’s ability to cost-effectively deliver an experience that positively differentiates it from the competition in the eyes of its customers boosts top- and bottom-line revenue through increased customer spending, greater loyalty, and reduced costs for service and acquisition. What’s not to love?

Customer experience: The next competitive battleground.

There’s no argument that understanding customer experience is critical. In fact, 95% of senior business leaders identify customer experience as the next competitive battleground. At the same time, over half state that “Lack of measurement is a significant obstacle to improving Customer Experience.”

ROI on improvements to customer experience can be elusive; oftentimes, the discipline and data required to measure and understand what works is short-cut, and investments are made without a clear understanding of return. One executive perspective is shaped by talk about “soft” metrics such as satisfaction and brand preference; another – the financial view – is rooted in profit and loss, short-term expense and cost containment.

That’s why assessment is so critical. Only by looking at experience through the lens of ROI can organizations reach the consensus needed to drive the top-down initiatives critical for driving customer experience change.

Measuring customer experience

At MCorp Consulting, we call this assessment process Customer Experience Mapping. Essentially, we track aspects of the experiential “journey” your customers take through the Customer Relationship Lifecycle unique to your business, and the touchpoints and interactions encountered along the way.

Experiences are defined at those the places where companies interact with and “touch” customers. Their touchpoints.

Future revenue is affected – either positively or negatively – at every single touchpoint (or interaction) between your organization and your customers.

Assessments are typically done through a variety of research and analytical methodologies, including in-person and phone interviews, surveys, and driver analysis to tie experience to actual and desired behaviors. This level rigor of also means that the process has the potential to be both involved and resource intensive.

So how can you assess and prove ROI before you start? In Part 2 of Proving ROI on Customer Experience we present four “experience investment” lenses to help you plan, measure and improve interactions with your customers, and prove significant ROI – before you invest.  (Continue to Part 2…)

Recent survey data published by Knowledge Networks a couple of months ago – and written about in Adweek to some fairly enthusiastic online comments – came to what sounds like a surprising conclusion. It claims that a very low percentage of social media users – under 5 percent – “regularly turn to social media sites for guidance on purchase decisions.”

This “lackluster” performance points out that a mere 4 percent (for “travel or travel services” and “banks or financial services” categories) 3 percent (“clothes or shoes,” “eating out or restaurants” and “personal care products”) and 2 percent (“cell/mobile phones and services,” “cars or trucks” and “groceries or food”) of users turn to these kinds of sites for guidance on purchase decisions.

Yet in the same breath, the study notes that 83% of the online population, ages 13 to 54, use social media, with 47% participating weekly.

It’s about influence…

No, I don’t suppose that you’ll see a great number of users “Regularly turn(ing) to these sites for guidance on purchase decisions.” That’s because the social media metrics relevant to brand marketers aren’t related to purchase decisions, but to purchase influence – on attitudes, perceptions, and loyalty. And as a result, yes, on purchase decisions.

This is why those organizations that leverage “social media” are looking at it well beyond its efficacy as just another media channel. It’s why word-of-mouth spending on online communities increased 26.6% in 2008 (in the face of declines in almost every other area) and word-of-mouth spend is projected to grow 14.5% annually between 2008 and 2013.

It’s also why nearly 90% of online shoppers read customer ratings and reviews at least “some of the time” before making a purchase decision.

Pretty influential indeed. Did they click on a banner and buy? Probably not. After all, social media is really word-of-mouth online. And that is massively influential when it comes to guiding purchase decisions. Both online and off, the power of word-of-mouth is well documented.

As the most influential medium, the question is how Social Media affects you.

Of the top ten most influental media, Social Media is number one. In our approach to customer experience research (Brand Mapping, Touchpoint Mapping, Loyalty Mapping), we’re usually charged with helping organizations better understand how to better serve and get “closer” to their audiences. In a nutshell, this means understanding those touchpoints that have influence on desired perception and behavior, and seeing how they fit into the customer relationship lifecycle unique to a particular brand.

As a result, we’ve seen many instances – across sectors, segments and markets – where social media strongly influences purchase decisions, as well as brand perception and customer loyalty.

That’s why research like this Knowledge Networks survey can be problematic. Because data can be misleading if you’re aiming for the wrong target. As with all research, what you get out of it is only as useful as how well you define your research goals going in. So if the goal of this research is to find out how many people go to social media with the express intention of purchasing products, or to find specific products to buy, of course the answer will be “few.”

But if we’re trying to discover how “social media” influences purchase decisions, that’s an entirely different question. And the answer to that is clear: a lot.

It seems self-evident that access to more accurate customer opinion, experience, and needs information will help make improvements to your customer experience, marketing and branding programs. After all, customer insights are a key decision-making factor for virtually all aspects of your business, from product development, acquisition and retention to market strategy.

Here are a few of the questions you can ask, to help you determine if you already have some of the answers…

• Do you have customer listening tools in place?
• Do you where (and why) your prospects and customers engage?
• Do you know what a loyal customer looks like?
• Do you know why customers choose you (or a competitor)?
• Do you know why you lose customers?
• Do you lose any customers you want to keep?

Answering these questions – and others like them – will help inform your strategies. The insights they drive can help focus messaging, address real customer needs, and remove barriers to relationship building – increasing brand loyalty and return on your customers as a result.

Of course, as with any program, the ability to leverage data is based on the systems you have for gathering and analyzing it. And as critical as this data is, the systems can be relatively simple. When it comes to gathering customer insights, the first step is the most important of all.

Just as with financial performance, measurement is critical to customer experience improvement. Creating a culture of measurement-driven customer experience initatives will help executives better understand how to derive the greatest return from their investments.

And moving past the fundamental first step of understanding that customers do have inherent value, a measurement-driven customer culture will maximize the effect on tangible business results in critical areas including brand awareness and preference, customer retention, loyalty, profitability and value.

Moving into these areas in an incremental manner will begin to provide marketers with the baseline data needed to pursue key management support as well. For example, the ability to quantify gaps in organizational alignment behind your brand, or discontinuity in the customer experience, can have a profound impact at the executive level.

This is the kind of data that your “C Suite” can see, understand and react to.  More importantly, it has the potential to drive the types of improvements that can markedly improve your investments, and your overall business performance.

After all, virtually all enterprise value flows from the same source – your customers. Measuring and improving their experience can only benefit your top (and bottom) lines.