Are You Prepared to Include CX Metrics In Earnings Calls?
Hardly any of the executives who include customer experience (CX) metrics in their quarterly earnings calls do it well. Forrester recommends avoiding CX metrics entirely. Stick to metrics that describe key business results and reflect the strategic goals of the organization — such as revenue, profit, or customer retention — at least until you’re sure that your CX measurement program has enough rigor to directly link customers’ experiences with business outcomes. Otherwise, CX metrics may misrepresent your company’s performance. When you do include CX metrics in your earnings calls, be prepared to face pointed questions from analysts who want to understand how they relate to your company’s financial performance.
If you are an executive, be ready to explain:
- Why you include CX metrics in earnings calls. Savvy listeners will detect attempts to tout impressive CX metrics as a way to distract from positive financial outcomes. If you can’t fully describe the metrics’ development and relationship to financial performance, you risk causing uncertainty and skepticism during the call.
- Why scores on these metrics have changed. Changes within your organization and broader environmental factors (e.g., fluctuations in the stock market, social issues) can influence customer perceptions of their experiences. So arm yourself with deeper analysis and insights that will help you explain changes in credible ways.
- How you’ve set CX metric goals. Many companies set arbitrary, inaccurate, or unrealistic CX metric goals. This breaks the connection among scores, customers’ experiences, and business performance. It also puts you at risk of reporting a miss in CX metric goals that has no effect on business performance. Use Forrester’s research on setting CX metric goals to ensure that your goals are appropriate.
- Why you selected certain CX beacon metrics over others. Whether your company uses Net Promoter Score℠ (NPS), customer satisfaction, customer effort score, CX Index™, or perhaps a custom metric, choosing the best one can be daunting. Use Forrester’s research on selecting a beacon metric to build your rationale for selecting the metric you’re reporting on.
- Why you might not use the same CX beacon metric for all customer segments (it’s OK if you don’t). Articulate the different customer strategies that warrant different CX beacon metrics. This is common with larger companies that may have different goals and customer needs by region, client size, or line of business.
- Why your CX metric scores are different from those of your competitors. A mature CX measurement program includes benchmarking to key competitors, the overall industry, and sometimes other brands in your company’s aspirational set. Having these comparisons ready if you’re asked for them will show that you take CX competition seriously.
If you are an investor or analyst, keep in mind the following:
- CX metrics aren’t subject to SEC regulations or GAAP (generally accepted accounting principles) standards like financial statements are. This means that companies can report a variety of scores based on any number of methodologies — and even put their thumbs on the scale to inflate their scores. Watch for leaders who place too much emphasis on rosy CX performance measures — they may want to distract you from other issues.
- Data gathering methods can vary widely and affect CX metric scores. Companies normally report metrics generated through internal survey programs rather than independent, comparative third-party benchmarks. This approach is open to variation and manipulation. Ask executives to detail how they collect and analyze customer feedback. Have them describe what part and percentage of their business that their score represents. Be suspicious of sketchy details behind how the score is derived and what it represents.
- CX metrics performance should correspond to financial results (or other key business metrics). Movement in key CX metrics should reflect changes in other key business metrics that the company reports, although the relationship isn’t always perfect. Be skeptical about the actual effect of CX metrics results on shareholder value.