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Posted by Harley Manning on January 11, 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.