Customer experience management (CEM) programs involve the collection, analysis and dissemination of customer feedback. These customer feedback data are extremely valuable to businesses. Customer feedback data are used to help senior executives identify and improve key drivers of customer loyalty. They help call center staff immediately address specific customer issues.  They help managers understand how their business unit compares with other business units. Finally, customer feedback data can help your marketing and research departments uncover deep customer insights through more sophisticated analyses of the data and linking customer feedback data to other sources of enterprise data (e.g., employee data, operational data, financial data).

Let’s say you set out to improve your company’s customer experience to drive better organization performance (kudos to you). What will be more important in attaining that goal: exceeding customer expectations, or solving customers’ problems?

That’s the question that came to my mind after reading Robert Passikoff’s recent article on Forbes.com, “The Final Frontier: Customer Expectations.” Passikoff points to a shift in the past 15 years: customer expectations have increased significantly, rising 24 percent in all categories. That number has increased even more in the technology sector. An entire book could be written (and probably has been) on why customers’ expectations are on a sharp upward trajectory.

But my question is not the focus of Passikoff’s article. He notes that measuring customer expectations is a tricky business and turns to customer loyalty as a correlating metric. After explaining how customer loyalty is measured and providing an example from the wireless carrier industry, Passikoff concludes, “… brands that are able to better meet – even exceed – growing customer expectations always end up on the top of the list.”

What does a company get by investing in a high-quality customer experience?

That was the central question behind Watermark Consulting’s very first Customer Experience Stock Performance Analysis, conducted back in 2009 and described in the article “Yes, Virginia, There Is A Return On Customer Experience.”

Each year since, we’ve refreshed the analysis with the latest data, watching to see if customer experience Leaders would continue to outperform customer experience Laggards. Now it’s time to reveal this year’s results…

The Methodology
For those unfamiliar with our earlier studies, here’s how the analysis works:

This post is part of the Social ROI Blog Carnival at Think Customers: the 1to1 Media blog. Visit the blog carnival post at the link above to check out the full list of posts from numerous well-known social media thought leaders.

There are many ways to measure the success of social media at an organization. Some of these metrics are often focused only on tactical results (ex: number of followers or fans). Other metrics tie directly back to the bottom line (ex: value of sales coming directly from Twitter). On occasion, we see true ROI calculated from social media initiatives.

Most companies, however, view social media ROI in the same way they view the legendary pot of gold. They believe that it is there, and they keep looking for it even though it eludes them. Finding ROI in your social media initiatives doesn’t have to be imaginary. As we move into 2012, I fully believe this will be the year that executives begin asking the difficult questions to their social media teams, including what kind of returns they are getting on their social media investment. In order to answer this question, one must consider the true cost of managing a social media program.

I come across many marketing organisations that seem to believe that the more leads they generate, the better they are doing. They may even be measured and rewarded by their management on the basis of the number of leads marketing generates. But I want to show you why why focusing on quantity rather than quality is a really, really bad idea.

Take a simple but all too common example: offering an iPad in a prize draw at a trade show or exhibition in order to encourage the visitors to leave their business cards. Do you know what the single common characteristic of the people that drop their cards in the goldfish bowl is? Do you imagine it indicates any interest in your product or company? No: all you are doing is collecting a list of people who are interested in winning an iPad.

Where is that prospect hiding?

There may be a few genuine prospects lurking in that pile. But you are never going to know, because in all likelihood your sales team is going to take one look at the list and declare that they will never have the time, energy or inclination to contact them all. And in the next breath they will probably complain about how awful marketing’s “leads” always are. But in next months marketing report to the board, the fact that the show generated 2,300 leads will be judged a measure of marketing’s success. And so it goes on.

“A business that makes nothing but money is a poor business.” – Henry Ford

Converting prospects into leads and leads into opportunities are topics of many a marketing and sales meeting. Many companies that offer outsourced marketing tactics try to stay clear of this discussion, perhaps for fear of having their performance measured. They are also topics that many who offer search engine optimization or pay-per-click campaigns avoid discussing. These techno companies are in the business of bringing qualified visitors to the website. It’s the job of the company that owns the website to convert the prospects into leads and the leads into opportunities.

Measuring a campaign’s performance is not difficult. Getting the desired positive results from the campaign takes talent.

If you come across anyone that is not convinced about the efficacy of CX initiatives, the best way to remove any ambiguity is to measure satisfaction metrics against key financial outcomes. For a customer experience manager, failing to map customer experience performance against key the financial outcomes, is like a financial controller trying to run a business without a managing cash flow.

You cannot gauge CX performance without requisite analysis of results against key outcomes. It is hugely important to gather and analyse feedback, but very difficult to drive key decisions and assess progress without charting performance against key financial outcomes.

If you can grow the number of customers that are satisfied and delighted you will see a positive correlation with the key outcome. The key outcome depends largely on the industry in question, but it is often best advised to get buy-in form the finance department, as these are the guys that will have access to the key financial outcome data.

2 Tips for successful ROI analysis

For years, contact center managers have been measuring operational metrics like average handle time, average hold time, turnover, sales per representative, average time to respond, and so on. But are these the most important metrics to measure?

What’s important to measure depends on who you are

Customer service and support managers want to measure the operational metrics listed above along with others like transfer rates and queue length to help them run an efficient organization.

Executives, on the other hand, want to measure customer satisfaction, customer loyalty, market share, and profitability by product or service line so they can see how effective the company is at maximizing the shareholder’s return on investment. The two do not always jive.

The disconnect between efficient and effective

A company could go out of business if their only concern is having happy customers at all costs. So while it’s important to be cost-effective, this doesn’t always mean seeking the lowest cost. Take for example, the usual focus on average handle time. Of course, customers want to keep a call as short as possible, too. But they care more about getting their questions answered accurately and getting their problems resolved.

What Customer Metrics Do You Use?

A successful customer experience management (CEM) program requires the collection, synthesis, analysis and dissemination of different types of business metrics, including operational, financial, constituency and customer metrics (see Figure 1).  The quality of customer metrics necessarily impacts your understanding of how to best manage customer relationships to improve the customer experience, increase customer loyalty and grow your business. Using the wrong customer metrics could lead to sub-optimal decisions while using the right customer metrics can lead to good decisions that give you a competitive edge.  How do you know if you are using the right customer metrics in your CEM program? This post will help formalize a set of standards you can use to evaluate your customer metrics.