Hot Off The Press: Forrester’s Customer Experience Index, 2011

How should you measure customer experience? Is it even possible to measure something that feels as squishy as customer experience?

As it turns out, you can measure it, you should measure it, and you even have some decent options for measuring it. Your alternatives range from monitoring the real-world interactions your customers have with your firm (like clicks on a site or the length of a call) to asking your customers for their perceptions of those interactions (the real customer experience) to tracking what your customers do as a result of the experience (like making another purchase or recommending you).

At Forrester, we have our own direct measure of customer experience that we’ve been using since 2007: the Customer Experience Index (CxPi). Today we published the results for 2011, which are based on research conducted at the end of 2010.

To help understand those results, let me explain how the CxPi works. We ask more than 7,000 consumers to identify companies they do business with in 13 different industries. We then ask respondents to tell us how well each firm met their needs, how easy the firm was to work with, and how enjoyable it was to work with (questions that correspond to the three levels of the classic customer experience pyramid). Then for all three questions, we calculate each firm’s CxPi score by subtracting the percentage of its customers who reported a bad experience from the percentage who reported a good experience. The overall CxPi is an average of those three results.

We don’t limit the survey results by just asking about a single channel like a retail location or call center, either. Instead we take an enterprise-level approach and ask about the entire experience, which could span products, services, and business units as well as multiple channels. This gives us the customers’ holistic view of the brands they do business with.

So what did we find this year?

First, we saw that customer experience ranges from just “okay” to “very poor” for almost two-thirds of the brands in our study. We place the cut-off point between “okay” and the next highest rating (“good”) at 75 points on our 100-point scale. This year, 65% of the 154 brands in our report didn’t make it over that 75-point hurdle. In all, 35% of scores fell into the undifferentiated “okay” range from 65 to 74 points our most heavily populated bracket and not a good place to be if you want your brand to stand out from competitors.

Digging a little deeper, we saw that only 6% of firms ended up in the “excellent” category by earning a score of 85 points or higher, down from 10% of the brands in last year’s report.

What this tells us is that mediocre-to-bad customer experience is the norm, and great customer experience is really hard to find. That should bother all those companies in the "okay" to "very poor" ranges because as I pointed out in a previous post, going from a so-so customer experience to a good one can add hundreds of millions of dollars to a large company’s annual revenue.

Where can customers find a great experience? As in past years, we saw that retailers provide the best customer experience of any industry in our study. Retailers collectively earned the highest average score of any industry, and one retailer earned the highest individual score across all 13 industries. What’s more, nine out of the 10 companies that received “excellent” ratings were retailers. The lone nonretailer in the top tier was the credit card business unit of USAA, a diversified financial services firm that was also the top insurance provider and tied with a credit union for top bank. (I don’t know about you, but that achievement sure impresses me.)

Unsurprisingly, the customers of health insurance plans and TV service providers say they have the worst experiences. I say “unsurprisingly” because unlike customers of companies in the highly competitive retail industry, customers of health plans and TV service providers are often trapped by virtue of who they work for or where they live. That will change over time due to external factors that bring real competition to those industries, like national healthcare reform. But in the meantime, you’re relatively lucky if you have access to top performers like the health insurance provider Tricare with its score of 72 or TV service provider Cox, which came in at 69.

But don’t despair! Our data shows that companies aren’t fated to provide a bad customer experience just because of the industry they’re in. We see large spreads between the scores of the best and worst brands in all but one industry (package shipping). And we also see some large improvements from one year to the next. For example, this year nine brands increased their scores by 10 points or more, and another 15 brands saw increases of anywhere from five to nine points.

Looking ahead to 2012, we believe that companies that succeed at improving their CxPi scores will take some specific actions in 2011. Chief among their imperatives: defining a customer experience strategy. Without that foundation, company leaders will struggle with decisions about funding and prioritizing projects meant to improve customer experience at the enterprise level. But with a strategy in hand, executives can focus on activities and processes that will differentiate their companies from competitors.

As always, I welcome your comments.

Comments

Good read

I have used the Forrester CxPi for some time now and find it very useful. In a weird bizarre sort of way its reassuring to know that other companies other than mine are struggling with presenting a good customer experience because it gives me hope that we can do a better job and climb over that barrier faster if we do the right things. I will be at tomms presentation and look forward to it. Thanks!

Customer Experience Strategy

Forrester’s Customer Experience Index raises an important point, companies that succeed at improving their CxPi scores will clearly define their customer experience strategy in 2011. This leads to a critical question, how do companies earn rave reviews for an excellent customer experience? The first step is helping customers help themselves; companies must offer fresh, relevant and accurate information not only on their website, but also on the social web and through online communities and forums. Another key step is ensuring the same user experience across every interaction channel, not just online, via email or on the phone, but also emerging channels like mobile and social. Starting with these steps can improve the customer experience and yield a significant increase in sales. After all, as we noted on our CX blog back in October (http://www.rightnow.com/blog/customer-experience-ideas/701), 85% of consumers are willing to pay 5-25% above the standard price of a good or service to ensure a great customer experience.

Thanks for continuing to champion great customer experience and reminding us that exceptional customer experience creates loyal customers and has the power to impact both a company’s top and bottom lines.

Jason

Customer experience 'strategy' doesn't go far enough

Always great to see the latest update from Forrester. My concern is that too many companies will treat having a 'customer experience strategy' as something to check off the list, and then claim victory before they have really begun to drive meaningful change into their business.

Strategy is great, but without a high commitment to execution, and a serious look at why the company has resisted focus on customer experience in the past, this may become just another flavor of the month. Let's hope not.

I share your concern

> too many companies will treat having a 'customer experience strategy'
> as something to check off the list

Well said and something I also worry about. A strategy is a plan, and what good is a plan that sits in a drawer?

We'll be writing a lot in coming months about companies that execute well and, as a result, improve their Customer Experience Index scores. Hopefully that will show some useful examples of helpful follow through on customer experience strategies.

Customer experience 'strategy' doesn't go far enough

Great, I'll look forward to those posts. In the mean time, please check out my own blog, www.BestCustomerConnection.com, as I frequently address the psychology and organizational dynamics that make it possible or impossible to delight customers.

Beyond the rankings

I agree that one of the more striking patterns in the report has to do with those "unsurprisingly" poor experiences meted out by health insurers and TV service providers. Many of these firms clump together in whole sectors near the bottom of the list. Too bad we've lowered our expectations and allowed some businesses to thrive seemingly beyond the reach of the CxPi.

It's interesting to consider why some industries may be more immune to the effects of delivering poor experiences than others. Business models and the nature of the relationships these firms have with customers may have something to do with it. You may be interested in a post I wrote exploring these ideas for CM's Experience Matters blog: http://experiencematters.criticalmass.com/2011/02/01/treating-customers-....

Forrester's CxPi does a great job whipping the squishy concept of customer experience into shape. Thanks for bringing clarity and helping to push the conversation forward.