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How do you measure customer experience?

In order to measure something we first need to agree on what we are measuring. If not any measure will do the job.

What is customer experience?:

Customer experience is the design and improvement of any process in the organization (organizational, way-of-working, strategy, planning, execution, continuous improvement etc.) that leads to value for the customer that drives value for the business. Or to put it simpler in the words of former Merck CEO Kevin Frazer: ‘Customer value is business value’.

In this article I will only focus on the measurement of customer experience marketing activities (and not as much e.g. organizational design or ways-of-working).

The OUTPUT of customer experience is essentially better experiences for the customer, but the OUTCOME is increased value for the customer AND the business.

When we measure customer experience we want to measure the outputs and the outcomes.

The reason for this is that they are inherently linked. The design of the output will enable or inhibit the outcomes. Also, and this should be critical to any measurement in a complex world: your customer experience design is not the only thing having an influence on neither the output nor the outcome and so measuring only an end-state will set you up with a lot of blind spots as to what actually happened; if you did a good job or just got lucky ..

The solution is to set up a chain of measurements — not a single KPI (the only thing you’ll likely to get with a single KPI is the Cobra Effect (1)).

A final point before I get to the chain of measurement: remember, nobody needs to measure customer experience — what they need are better decisions(6). So let’s keep our eyes on the prize:

what leads to better decisions that enable better outputs and outcomes for the customer and the business?

A chain of measurement

There is a simple chain of measurement for customer experience, it goes like this:

engagement — customer value — customer response — business value

Customer experience chain of measurement (end-2-end measurement)

Also, I am not going to go into details here, mostly because I believe the chain is solid but the details of the chain depends on your environment (e.g. if you are retail or insurance, digital, physical or hybrid there is always nuance and differences. Also depending on your team, technologies, analytics etc.)

Engagement

This is the first step(s) — are you creating an experience for the customer that is able to:

  1. Reach the right people
  2. Capture their first reaction (attention)
  3. Create a decent amount of engagement (awareness)

IMPORTANT: engagement metrics are not indications of value — they are indications of engagement. Engagement does NOT equal value! Don’t over-market your proxies (as proxies are often make-belief (2)).

The team needs to know: before we even get to the creation of value are we able to create an experience where value can be created and exchanged? Are we reaching the right people? Are they reacting or spending time with us? We need to have the right quality of engagement before we even try to produce value.

This is why we need a chain of measurement: if your car doesn’t work you are not going to scrap your whole car. You are going to look for signals that tell you why it’s not working so you can improve it. The same with customer experience. Break it down into a chain so that when it is or isn’t working you are getting the signals that tell you where and what is performing.

Customer Value

The next part of the chain is the customer value itself: is the successful engagement leading to something that is valuable to the customer?

Why measure customer value?

I believe that marketing includes technologies, targeting and messaging, but the purpose of marketing is not technologies, targeting or messaging — the purpose of marketing is motivation and influence. And to motivate a human being you need to know what is valuable to them (what their need is) and then leverage that to drive a response.

With customer value we are going to rely on our hypothesis for what is valuable to the customer (the reason they are engaging with us in the first place is because they want something for themselves) and measure if we are able to produce that value.

There might be many ways to measure customer value (and it’s not NPS or CSAT as these are not about the customer at all, but only about asking if WE did a good job or not). I prefer to use Jobs-to-be-done or Outcome Driven Innovation (3)(4)(5) as a basis for identifying and finding how to measure customer value, but you might have your own preferences?

(I will go a bit deeper on customer value measurements in a later article)

Customer Response

Assuming that both the engagement and production of valuable outcomes to the customer has been successful, does it lead to a response that is valuable to the business?

The production of customer value is NOT the goal of customer experience — the goal is the production of customer value that drives business value.

And to do that we need to know if the production of value to the customer motivates them to a response that produces value to the business.

This is where the marketing strategy comes in. As it should have defined what customer responses are valuable to the business.

A customer response can be anything from the customer learning something essential (how many calories in your falaffel), to performing a call-to-action in your app (sign up for youtube premium) or something else.

These responses can be minute, but over time build towards a behaviour change, or they can be the sale itself (like e.g. the muffin in the supermarket). The customer response is always contextual and environment dependent.

Sometimes the strategy is at a lower altitude and tangible, sometimes the strategy is at a high altitude and you need to break it down into concrete and measurable responses (and sometimes you need to plan a sequence of smaller responses leading to your desired bigger change). This is usually not a problem, but needs to be done.

To quote a Norwegian statistician pointing out that we sometimes try to measure what’s big an not measurable — instead of measuring a chain of something smaller and precise:

“Companies try to measure the value of their marketing like throwing a rock of an oil rig in the middle of the Nordic ocean and then measuring the change in wave height on the shore of Norway 200 km away”.

If your strategy is at a very high level (there is nothing wrong with that), you need to break it down in this step so that we can identify the measurable responses we are hoping our marketing leads to.

Business Value

We need to hold our strategies accountable!

This last step is a check on our overall strategies. We have so far measured if our engagements are engaging the right people at the right quality of experience, if we have been able to produce the right value to the customer and if this value has produced the desired response as described by our strategy. We have assumed that these customer responses will produce value to the business. Now we need to check if this is correct.

This last measure is to see if the perfect execution of the strategy actually leads to the desired business value — whilst making sure we can isolate the effect.

If it does we are all good. We have measured our entire customer experience end-2-end chain and can now start to make better decisions at the right places to continue to improve the valuable outcomes to both the customer and the business.

If it does not, we at least know that the engagement, customer value and customer response are good — and we can make better decisions about the business value itself (maybe we are looking at the wrong customer values, responses or desired business outcomes?)

In summary:

This has been a quick and dirty look at how to measure customer experience as a chain of measurements and why.

The engagement metrics are dependent on the environment and the experiences you are creating (so no need to go into the details in this article, but I do think targeting-attention-awareness is a good framework).

The customer value depends on what your customers want. Which is contextual. E.g. what is valuable to a doctor discussing treatment with a patient will be different from when that same person is in the super market impulse buying a muffin.

The customer response should be a break down of your marketing strategy (make it tangible) and the business value should hold your strategy accountable.

But, remember! It’s NOT about the measurements!

With this chain the team should be able to identify what decisions needs to be made at each leg of the chain — and then find the measures to inform those decisions.

The goal is not a metric, but to support the best possible decisions leading to improvements for both the customer and the business.

Good luck!

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Helge Tennø

Helge Tennø

Founder and Principal at Jokull AS