Early on in my career I managed a large customer loyalty program. The program was tied directly to executive compensation bonuses. Each quarter when results were due, I would receive a daily phone call from the Chief of Human Resources. The daily check-ins were stressful but what was more stressful was delivering an undesirable result. When the performance fit with the projected goal, it was easy to deliver the message and no one inquired as to what the organization had “done” to improve performance. When the results tipped the other direction, and bonuses would not be as plentiful, the question of what happened, and where did we fall short always landed back on my desk.
To arrive at an acceptable explanation, I would take the next week to consult our library of recent primary research, scour secondary sources and syndicated studies for relative industry benchmarks, reach out to various product owners, the leaders of customer facing departments, key account managers and our strategic planning team. As I searched for a reasonable explanation as to why the loyalty score changed in a way that missed our corporate goal, I often became frustrated with my organizations’ priorities.
What always bothered me was that there was never a business case for moving the loyalty metric in a positive or negative direction. It was as though we would magically make our customers happier by saying that our goal was to increase customer loyalty. Talk about circular reasoning.
The quarterly knot in my stomach that appeared when the score went south or sigh of relief when it headed north remains with me to this day. It is a story I tell and use to shape the way I discuss goal setting with clients and colleagues. The story usually resonates well as many goal setting conversations are still being born out of mandates or edicts from executive leadership disconnected from action plans. All too often these goals are still being set arbitrarily without any relevant historical or business context applied.
CX Goal Setting with a Purpose
Business is supposed to evolve and grow/improve. So, it makes sense that organizations grasp on to existing measures to create what seems like a relatively straightforward, impactful SMART (Specific, Measurable, Achievable, Relevant and Time-based) goal. It is also not surprising that the metric of choice is usually the customer experience rating. After all, why not set a goal that relates to your most important asset, the customer. Yet, as anyone who has been tasked with ensuring their organization reaches its goal can attest, most often a large question mark is placed on the ‘A’. That is, is this goal even achievable?
To answer this question, or the question we prefer, “what is a reasonable target or goal?”, Big Village reviews current and past customer performance ratings. We inquire as to whether any improvement initiatives are in place or planned, and whether there are any anticipated or foreseeable obstacles that may impact performance. Finally, we investigate the broader context of customer experience performance related to overall business objectives.
To be truly impactful, customer experience performance goals require a connection to operational performance metrics, which typically fall in one of three categories: growth, retention, or cost reduction. By connecting changes in customer experience metrics (e.g., NPS©, overall satisfaction, customer effort score, etc.) with operational performance, Big Village links customer experience to business outcomes.
More importantly, Big Village applies predictive analytic modeling to quantify gains or losses in operational metrics (growth/revenue, retention/cost savings). Equipped with appropriate context and Big Village’s ROI simulation tool, we collaboratively agree upon and set SMART goals, that are regarded as “Achievable”, with our clients. Most importantly, the agreed upon goal can be socialized throughout the organization answering the question of why it is important to focus on improving the customer experience rating. For example, the message might be, “Improving our NPS© by five-points over the next two-years is likely to save $250,000 in excessive spend or increase revenue by $400,000.”
Planning for Success
Now that we have placed the end goal in context of business outcomes, we are left with one very important question. How do we improve the customer experience metric (NPS) by five-points over the next two years? The answer is strategic action/improvement planning guided by the original inputs of our predictive model. Just as agreeing on the goal was collaborative, developing SMART action plans requires an understanding of organizational resources and commitment to change and is a joint effort Big Village undertakes with our client partners.
The most effective predictive models attempt to explain as much of the overall variance in our dependent measure as possible. This means that the best models often include a mix of operational metrics from an organizations’ customer relationship management system (CRM) or database and customer experience data obtained directly from customer feedback, which can also be connected to third party behavioral data provided and appended by Big Village. Meaningful guidance and predictive direction are achievable with less data, however. Big Village will work with what is available currently and refresh our models based on planned input enhancements obtained over time.
Starting with the inputs that have the greatest impact on overall performance and/or our end business objectives (growth/revenue gain or retention/cost savings), we determine the amount of improvement required at each individual attribute level or a combination of improvement across several attributes. The simulator allows Big Village and our clients to create multiple scenarios to arrive at the solution that feels most attainable.
Once the aspects of experience in need of improvement are agreed upon, Big Village will work with your organization to develop unique action plans to advance performance on each initiative. Progress will be measured and tracked toward ultimate achievement which is to improve overall customer experience and consequently improve overall business performance.
CX Analysis in Action
Partnering with a large luxury retailer, Big Village was able to identify shortcomings in the customer experience at underperforming locations. Underperformance was defined as lower repeat service visits and declining overall sales volume as well as lower than desired customer experience ratings pertaining to the sales and service experience. Through key driver analysis we connected customer discontent to the perception that a large portion of staff were rude, inattentive, and uncommunicative. This resulted in customers openly stating that they would seek service from nearby locations after one or two poor experiences. Because this client was able to tie customer ratings to individual service and sales staff, we were able to develop and implement targeted training sessions.
Within one quarter of implementing the improvement training and making it mandatory for all new hires, an increase in customer experience ratings was achieved. Most importantly, repeat service visits began to increase resulting in meaningful revenue retention in excess of the cost to create and implement employee training. While more time is required to tell whether customers will remain loyal to the retailer at the time of their next automotive purchase, preliminary additional sales show promise.
Summarizing Big Village’s Best Practice Approach to Effective Target Setting
Customer experience professionals are faced with the task of goal setting and/or managing efforts to achieve a pre-determined/mandated performance target. While it is ideal for the organization to allow the customer experience team to set performance targets, this is not always the case. Big Village’s recommended best practice to target setting is based to the ideal situation but we understand that circumstances are not always ideal. Should you find yourself responsible for a mandated goal that feels out of reach, we are able to provide information and business rationale to challenge and redirect.
Ten steps to SMART target setting:
- Understand current and recent historical KPI performance (go back 2 – 5 years)
- Identify current corporate plans/initiatives that are in process or upcoming
- Determine the aspects of experience that have the greatest impact on overall customer experience ratings
- Include metrics from several sources in your model (i.e., operational, customer response, third party, etc.)
- Connect performance on key drivers (those aspects identified in step 3) to your organization’s chosen KPI
- Connect performance on the KPI to business outcomes of greatest importance (grow revenue, increase retention, reduce costs, etc.)
- Discuss and predict the amount of effort required to improve customer experience on the key drivers to positively impact your KPI and business outcomes
- Quantify the required investment in time, budget and people needed to move performance on individual key drivers and decide whether the effort is worth the anticipated return
- If the effort is worth the anticipated return and the improvement desired is deemed achievable with appropriate intervention, set the target based on this goal
- Create and implement action plans designed to affect change
- Continuously measure progress and be ready to modify to remain on course for improvements in individual aspects of experience and the KPI’
Written by Nicole Garberg, Vice President at Big Village Insights.