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Is it Wise to Ignore Correlations Between Customer Experience and Creation of Wealth?

Is it wise to ignoreMany academic studies were published over the last two decades that examined the correlations between improvements in customer satisfaction/advocacy/experience and increase in sales, profits, market share or share value. Below are some examples


Advocacy Drives Growth Across Industries


Customer Satisfaction Heterogeneity and Shareholder Value


Customer Satisfaction, Market Share and Profitability



If there was a debate, by now it is over. Yet, customer experience management practitioners often fail to convince their bosses and clients to take decisive actions that can measurably improve the experience of their customers.


I think the primary reason for this frustrating situation is the cultural divide:


  • CXM practitioners are often focused too much on the complexities of methodologies for measuring, and statistics. Our clients and bosses are often too focused on quarterly financial results.
  •  CXM practitioners often lack the business domain knowledge required for the translation of market research findings into specific recommendations that our bosses and clients can embed into their strategy and process.
  • When we do amass the knowledge and courage to make the recommendations, our bosses and clients want us to predict their outcomes. Since they do not appreciate differences between correlations and causations they are frustrated with our lack of confidence in our own recommendations.


These cultural differences drive many CXM professionals into endless selection of “better” methodologies for measuring customer experience and pursuit of poorly defined accuracies of vanity metrics. In other words they retreat into their comfort zone and relinquish their ambitions of contributing to improve their employer’s ability to win in the market place. I can confidently predict that such surrender will not enhance their value to their employer.

Here are a few tips for bridging this cultural divide:

1. Start to think more as an economist than a statistician. Focus more on problems and processes that impact customer experience, and less on data, metrics and technologies.

2. Stop debating which methodology is better (CSAT/NPS/CES, etc). Your customers do not care how you measure their experience. They only care if your product, service, brand or company delivers a better experience to them than your competition.

3. Stop asking your customers the “on the scale from A to Z…” questions and pretending that to be the Voice of Customer. These scores rarely tell you WHY your customers chose a competing offer. The research is about discovery of new knowledge, not about tabulating survey scores into neat piles.

4. Model your recommendations extensively before you present them to your boss or client. They know how to assess and manage uncertainties in their own fields (sales forecasting, etc.). You need to frame your predictions similarly so your boss or client can assess risk/reward ratios and start acting.

“Be the change you want to see in the world” and if you don’t like the change, you will like irrelevancy even less.

Why Your Investment in Analytics is Likely to be a Complete Waste of Money

Big Data DashboardPresumably, analysis of data holds the promise of increase in growth and profitability of any business. This presumption leads to wide adoption of any technology that has “big data” or “analytics” in its name, as well as massive venture capital investment in the sector.

The number of companies that sell services and tools to aggregate, store and process very large volumes of data is astonishing. In addition, there is a dazzling number of companies  offering “free” analytics and data visualization tools. Yet, there are very few companies that can claim success of achieving growth and profitability goals after investing a lot of money, efforts and political capital.

Let me make it clear – I sell customer experience analytics services and I am not in a position to throw stones at technology providers or data scientists. My beef is with the upside-down approach taken by many organizations in attempts to leverage data analysis into the production of profitable decisions.

Those who believe that bigger data possesses unreasonable effectiveness will invariably be disappointed. Many believe the more data you have, the more unexpected insights will rise from it, and the more previously unseen patterns will emerge. This is the religion of big data that promises to defy the gravity of management science. While I do believe in miracles, I am very skeptical about being able to buy them from third parties.

Miracle in step two

 “Big data is like counting grains of rice in front of a hungry man. He doesn’t care about the number of grains. He just wants a bowl of cooked rice.”  Stephen Yu, Willow Data Strategy

One is not likely to make sound management decisions without knowledge of the specific domain of business.  When the domain knowledge meets data analytics many good things start to happen:

  1. Cultural biases and beliefs, that often act as barnacles impeding your progress, will be challenged;
  2. Departmental impacts on a business process, that are often overlooked, will get exposed;
  3. New hypothesis (model) for better business decisions can be created. More data can be identified to test these hypothesis. Better testing produces better, more accurate, models and better models support better decisions: the decisions that make your business grow faster and more profitable.

The role of analytics is to provide support for building predictive models. Predictive modeling is about knowledge of domain and scientific method. Big data can provide and store a lot of additional content for mining, but not much more.

“As for the modeling… it’s like any other science. You learn the domain, then you make the model, then you learn some more. There’s no magic. It does help to learn plain old ordinary statistics, and if you want to do it like Nate Silver you learn a lot of statistics.”

Analytics without domain knowledge, is as likely to provide you with actionable decisions, as a pile of bricks without blueprints is to help you construct a house.

3 Critical Shortfalls of Surveying Customers

Stupid surveyI am not a big fan of using survey methodology for research into customer experience. I think it is a great tool for hypothesis validation, which is a part of customer experience research, but it is a very poor tool for learning about customers’ perceptions of dealing with a product or a company. You can never learn anything fundamentally new by asking closed ended questions. Surely, this point of view is not shared by most companies that pretend they want to know the opinions of their customers because they don’t want to learn anything that does not support their established beliefs.

However, if your tool’s box is limited to basics, at the very least you should learn how to use them well. I would argue it is better not to send out a poorly executed survey at all than to aggravate your customers with poorly timed and executed ones.

Here are the most common shortfalls of using surveys

  1. Timing – Practitioners often complain about the challenges of engaging customers to share their experiences. That is because 9 out of 10 attempts to engage (in a form of survey) are viewed by customers to be disruptive or poorly timed*. In other words, customers were asked to share their experience before they had an opportunity to sufficiently experience a product/service in question. The time and channel of engagement was determined by a company without considering the perspective or convenience of the customers. Advertising the self-centered nature of your company in the world of socially connected consumers, will not likely improve your brand equity, market share or whatever else you measure to get bonuses.
  2. Asking to quantify an experience a customer may not have experienced – The other day I got a survey from a company I like to do business with. This survey contains 30 questions, which is abusive in my opinion. 28 of them start with “On the scale from X to Y….”, while only 2 questions start with “Why…” and “How…”. About 40% of the questions asked me to quantify my experience with parts of the company’s service which I never had a reason or an opportunity to experience yet, but no provision is made in the survey to indicate this fact. So, such survey design leaves a customer with two options – to provide intentionally wrong answers or to ignore the request of participation in the survey. Which of these two outcomes would suit your survey design goals? This customer now does not feel as good about doing business with the company as he did before receiving the survey.
  3. Limit the number of words a customer can use for commentary – I do appreciate that an enterprise cannot “digest” unstructured data and you need to tabulate all responses into metrics. However, if you really want to authentically engage your customers you need to understand that the enterprise “digestion” issues are not very high on your customers’ pyramid of emotional needs. Humans share their experiences with stories, not numbers. If you limit their ability to tell their stories, you may never learn a critical insight that would lead to a dramatic business improvement. There are methods, techniques and technologies that can help to mine customer comments and quantify their sentiments without “outsourcing” your operational challenges to your customers.

The common theme of this post is simple – If you want to improve your customer engagement rate, be mindful and respectful of how your customers experience your attempts to engage with them.

* the results of a client sponsored research conducted by mining opinions of 12,783 customer comments.

Two major threats to superior customer experience

  1. ROI becomes IOYInadequacy of connection between customer experience investment and financial benefits.


It is very hard to provide direct, causal, linear connections between investment into customer experience management and growth of revenue, reduction in operating cost or improvement of profit margins. To be fair, there is plenty of evidence that uses correlations to illustrate the impact of customer experience improvements on:

However, none of the evidence demonstrates an indisputable cause and effect relationship that could be attributed by non-believers to other variables like successful marketing campaign or state of economy. The certainty of money outflow to fund customer experience improvements is hard to overcome by uncertainty of outcome and time horizon.


  1. The practice of estimating operational ROI without evaluation of impact on customer experience.


Utilization of this methodology is too common and often constitutes the triumph of efficiency over effectiveness. While it simplifies estimation and measurement of isolated results for a specific business unit, it completely ignores the effects of the proposed investment on the overall goal of any business:

“The purpose of business is to create and keep a customer” Peter F. Drucker

Applications of this methodology are responsible for:

  • cutting costs of customer support labor at the expense of an increase in customer churn rate. While it could be profit margin positive for the next few quarters, this investment threatens the long term viability of the entire business.
  • cutting costs of market research at the expense of increasing the product return rate and poor market adoption.
  • paying minimum wage plus commission on the retail floor to the detriment of customer experience and destruction of loyalty.

Customer experience management is a holistic discipline which means that a variety of factors, internal and external, can influence the perception of your customers at any given period of time. Top level customer experience metrics cannot deliver definitive proof that cx investment into specific improvement generates factual return within a specific period of time. Detailed analysis that identifies and measures components or attributes that influence the top level customer experience metric, can enable direct association with specific operational KPIs. The correlations between a department KPI and the associated CX attribute trends should be monitored monthly or quarterly for possible diversions that serve as alerts. Most importantly, no operational investment ROI should be estimated without thorough examination of its potential impact on customer experience.

Top 5 Warnings to Customer Experience Marketers

Never try to sell a meteor

  1. Stop designing products. Customers do not want to experience products and they care very little about product’s features and functions. Customers do not buy products, they hire products to do a “job”. Ultimately, you need to learn what is the “job” your customers would hire your products to deliver, i.e. what is a desired outcome. That learning is difficult as the customers can rarely articulate their desired outcomes in a way that is useful for writing standard market requirements document. That is why lesser marketers like to declare themselves visionaries, quote Steve Jobs out of context, and rely on advertising to deliver mediocre products.

“Making it easier and cheaper for customers to do things that they are not trying to do rarely leads to success. The job, not the customer, is the fundamental unit of analysis for a marketer who hopes to develop products that customers will buy”

  1. While designing for customer experience, it helps to think in terms of delivering the customer’s desired outcome. Customers yearn for simplicity on every step of their journey, from clarity of realization that your product is the best path to the outcome they desire, to simple and trustworthy ways of sharing their experiences with others.
  2. “Clever” messages are entertaining. Honest communications, in the language that resonates with your potential customers’ experiences, are selling your products and services. Do not try to engage with people you cannot help, because that reveals a lack of competence or authenticity. Both compromise your reputation and undermine trust.


 “Without trust, a business cannot grow. Without reputation a business cannot be trusted.”


Every few months I get an invitation to participate in Customer Experience survey from one of the best known consultancy in the field. Every time I am disqualified because my firm cannot be their customer. Every time the new invitation is received I lose a bit of trust that this provider can really help his customers, if they can’t help themselves to do it right.


  1. Technology can be a very powerful ally in supporting your customer experience marketing strategy. It cannot replace strategy. Regardless of what you hear from your technology vendors. Technology provides efficiency and scale, but most of us are challenged by effectiveness.


“The difference between efficient and effective is that efficiency refers to how well you do something, whereas effectiveness refers to how useful it is.”


If we don’t have the solution to the challenges faced by our best probable customers, technology will help us to damage our trustworthiness at a very low cost per unit.


  1. Don’t try to control the experience of your customers. Not only is it impossible to do, as customer experience is their perception of doing business with you and cannot be controlled, it is damaging to your reputation to try. The less friction customers experience on their path to realize the outcome they desire, the better is their perception of doing business with the company. From that perspective, removal of any unnecessary steps, keystrokes, questions, interactions, etc. from the customer’s path provides the best return on customer experience management investment.

You have to be good at something

A few weeks ago my partner suggested that we should start using a CRM system to help us synchronize our efforts. Since I had nearly two decades of experience implementing various CRM systems for large and small businesses, he wanted me to select the “right” one for us. I like simplicity and ease of adoption, but these are not easy to assess without actual trial. Of course every vendor claims to deliver these qualities, regardless of the fact that different people and organizations may perceive them in a very dissimilar ways.

Given the number of offerings advertised,  and the explicitness of our requirements, I focused on products with a large number of positive user reviews. The second filter was the ability to try a product without disclosure of credit card information to companies that have not earn my trust yet. There is too much hacking going on to risk my private information during the shopping process.

I eventually selected one of the most popular CRM apps available for our platform (Insightly), judging by the number of positive reviews, that promised everything I deem to be important to us, and more. Registration and installation were very simple and easy indeed, but I immediately stumbled into a basic administration problem – I could not add any users. After checking the plan’s entitlements and searching the Frequently Asked Questions, I contacted Customer Support describing the problem that needed to be resolved. The curt email response, that arrived 26 hours later, contained a link to documentation page that was not very helpful in resolving the problem. The second round of communications convinced me that my expectations of simplicity and ease dot not match the company’s desire or ability to deliver. Hence, the company  has failed at the First Moment of Truth, as far as this probable customer is concerned.  As I had cancelled my trial subscription and unplugged the software from our platform, the company sent me email (right away) that made me feel like I have failed their expectations and somehow am not worthy of their product. Regardless, they were “sorry to see me leave”. I do understand that not every product fits every customer, and happily went on to subscribe to the services of another CRM provider.

Imagine my surprise a few days later to see an email solicitation in my inbox from Insightly, boasting ultimate simplicity and ease of use of their product in addition to unwavering commitment to their customer support. Apparently their marketing does not have access to their customer feedback records or transactions history, or don’t care to use it. When a CRM company displays such a shocking ignorance of basic CRM practices, that catches my attention and makes me want to share my puzzlement with others. At this point the “#1 Online Small Business CRM” company failed at the Ultimate Moment of Truth by denying me an opportunity to share my experience with others as they did not allow me to publish a review of my experience.

“Without trust, a business cannot grow. Without reputation a business cannot be trusted.”
Faking your reputation is a cardinal sin of idiotic marketing that results in a permanent distrust.  From now on any communication from Insightly, goes directly into trash. However, now I cannot refresh my browser without seeing their advertising for no apparent reason. Failing in product design, customer support and marketing did not prevent them from raising enough venture capital to motivate me to write this post.

Fraud Marketing

Do you have enough information to make a sound decision?

Get all information you can findIn business and personal life we all face the challenge of making large and small decisions every day.

Depending on financial and/or emotional impact of our action, we often start to look for information that would help reduce uncertainties associated with a decision we are about to make. The more impactful the outcome of such decision is on your career, key relationship or financial status, the larger your thirst for supporting information.

Many of us experienced desperate attempts to hoard all available data about the subject matter only to find ourselves drowning in detailed, but meaningless to the decision, information. At times the tsunami of data makes us stall for time, paralyzed by lack of clear direction delivered by our analysis efforts.   So, how much information is enough? Considering  that information has a limited “shelf-life”, timeliness is another important criteria when you assess what it means to have “enough” information.

There are many, perhaps too many, technology “solutions” that promise “actionable” information or insight. This post is not about them. In this post I want to share ideas about the framework of  estimating what kind of information would help you reduce the risk of a particular decision and how the timeliness of such information impacts the outcome.

The first step is to ask yourself  – do I seek information:

  1. to form your decision,
  2. to protect yourself in case your decision produces adverse results, or
  3. to buy more time in hope you don’t have to make this decision.

These are all legitimate reasons for gathering information, but depending on your honest answer they would help   you to gather very different kinds of information.

If you believe you already know what decision should be made, you should focus on information that contain social and financial proof that supports your belief. People and organizations have very different approach to uncovering knowledge, but it is in our nature to mitigate risk by looking  for protection in numbers.

The knowledge we seek is subconsciously filtered by our specific goals and core value based belief systems.  So be honest with yourself, acknowledge your position and start to fortify it with facts and evidence to mitigate risk in case you are wrong. The timeliness of such information depends on a timeframe of your decision outcome expectation. If your decision is expected to yield result six month after it is acted upon, you do not really need real-time data feeds to illustrate that such decisions are likely to produce the expected outcome.

If you truly want a well-informed decision or to question your beliefs,  remember that the most difficult time to generate new ideas is when you think you already have the answer. For example, if you are a “visionary” marketer who “knows” your customers needs, do not waste your time, money and effort on market research. Just get enough “new” data to do validation, described in a previous paragraph, make your bet and hope for the best. However, if you have the ambition to create a new category or a category killer product, you are best advised to gather information about why people buy such products (i.e. what job do they hire such products to do), how they use them and what are the opportunities to simplify these people’s experience. One does not need a very high volume of such experiential information to discover unmet customer needs, but its timeliness cannot exceed the lifetime of current products on the market. There are technologies available to assist in aggregation and primary analysis of such data, but discovery and interpretation of experiential, i.e. anecdotal, evidence into product marketing requirements, requires true vision and an open mind.

The important thing to remember – it is impossible to eliminate risk, but there are practical methods to mitigate it by use of carefully selected information to reduce uncertainties.  According to Aristotle – “There  is only one way to avoid criticism: do nothing, say nothing & be nothing”.  However, even the avoidance of making decisions does not eliminate risk.

Bad News For Customer Centricity As Amazon Misses Earnings

market madnessThe earnings season circus is in town! Who doesn’t enjoy the thrill and drama of corporate giants’ shares rising and falling on commentaries of financial analysts?  This season’s main attraction is the downfall of mighty Amazon who yet again disappointed expectations of  financial wizards.  Headlines full of words like “meltdown” and “collapse” abound and the price of the stock dropped over 10% on the first trading day after the earnings call.

Investment analysis is not my area of expertise and the only reason I write about Amazon’s “investors” annoyance is because the company is the poster child for customer centricity, which is my area of expertise.  Amazon missing earning targets two quarters in a row causes some people to question whether their customer centricity strategy conflicts with the profitability growth desired by the investment community.Amazon chart

I wrote before that customer centricity starts with a clear understanding of who are your best customers and why they choose to do business with you. Then you do whatever it takes to keep them, and get more customers like them PROFITABLY. The challenge is, it is not always possible to do both every quarter and one has to choose the target which aligns best with their overall business strategy. That does not mean the sacrifice of profitability on the altar of customer centricity. In the words of Jonathan Salem Baskin

Baskin Tweet



I completely agree with Jonathan. I simply suggest that earning per share metric (EPS) is not the best financial metric for customer centric company, or for shareholders who are interested in a long term, sustainable growth of their investment.


Jeff Bezos famously stated in his letter to Amazon’s investors that “Take a long-term view, and the interests of customers and shareholders align”.  I do not know Mr. Bezos personally, but I get the impression that he usually chooses his words very carefully. People, who trade company shares based on quarterly swings of EPS, cannot really be described with the word “shareholders”. They are better described as traders, which means their interests are not aligned with the long-term interests of company’s stakeholders – customers/employees/investors.


Personally, I think that any financial metric, as a data point, is an oversimplification which is dangerous for a sound investment or sound management decision making. The world is not likely to come to an end at 5PM EST on the day a company reports and provides guidance for the next quarter. A combination of financial  and operational metric trends would be much more predictive of the future performance of a company than a short-term data points comparison. For example, in the Amazon case, trending of Cash Flow From Operations (OCF) vs changes in Customer Experience or Customer Satisfaction rates would help to focus attention on how well the company grows its customer base without losing its edge in delivery of superior customer experience. In other words, this would show the investor how well the company executes on its stated, long-term strategy.


Common denominators for measuring economic performance of multiple companies, that have very different business strategies, may be a very convenient tool for a day trader. However, for an investor or for a manager, it is a fool’s errand. Sometimes common denominators are just too common to be useful.

Vanity Metrics – How Is This Still A Thing?

vanity metricsI’d like to borrow this line from John Oliver, host of the popular HBO show “Last Week Tonight”, to address the endless and pointless argument about the ultimate customer experience metric. For a very funny video showing an example of how he uses this phrase, please click here.

One would think that by now everybody who cares to measure anything about customers and markets would know that an ounce of insight is worth a ton of research. Unfortunately, neither of the most commonly used top-line metrics – CSAT, NPS or CES – help to provide any insight by itself. The only utility they provide is to benchmark one product, category or brand against another. They are also valuable for tracking trends in the changes over time.

To uncover any insights you would have to ask questions which start with the word “WHY”. So why is it still a thing to debate relative advantages of one vanity metric over another? The language used in these arguments is reminiscent of religious debates over the practice of breaking eggs, described by Jonathan Swift:

“Traditionally, Lilliputians broke boiled eggs on the larger end; a few generations ago, an Emperor of Lilliput, the Present Emperor’s great-grandfather, had decreed that all eggs be broken on the smaller end after he cut himself breaking the egg on the larger end. The differences between Big-Endians (those who broke their eggs at the larger end) and Little-Endians had given rise to “six rebellions… wherein one Emperor lost his life, and another his crown”. The Lilliputian religion says an egg should be broken on the convenient end, which is now interpreted by the Lilliputians as the smaller end.”

So if you have the inclination to measure anything associated with customer experience in hopes of unearthing actionable insight, consider these steps:
1. Identify the desired business outcome
2. Collect data that provides history of measurements for this outcome
3. Select the top-line metric that correlates best with the trends of that outcome because it may become a likely predictor
4. Find a way to link this metric to financial results. If you cannot link it to operational/financial results, it is not worth measuring.

On the other hand, if you are more interested in the continuation of the “ultimate metric” debate, the only argument that would make a dent in my position is called “Show Me The Money” – a well documented example where a choice of one metric over another has resulted in a meaningful financial result.

How to get (and keep) a customer-centric reputation

How to get CX reputationI admit to spending more time reading books, blogs and articles about customer experience, as well as analyzing customer feedback, than most people on the planet. As a result, my personal experiences  often fall short of my expectations dealing with companies unfortunate enough to have me as a customer. Even those companies that are most highly regarded as models of customer centricity by the customer experience management community often miss the mark.

I am well aware of the fact that my own experience could be just a momentary slip in customer experience delivery, and does not diminish a company reputation as a whole. On the other hand, I wonder how uncommon is my experience dealing with some of these high reputation companies. In other words, do companies that are known for their customer centricity deserve their reputation?

USAA tops every list of the most customer centric companies based on institutional surveys results and well orchestrated publicity of these results. The company’s own customer reviews site indicates that 91% of customers are satisfied enough to recommend their services. Yet, there are hundreds of others on the same site who are enraged about their experience with the company. If you look at the customer reviews and complains sites outside of the company’s control, the satisfaction numbers are much lower than the levels expected of the leader in customer centricity. In fact, they are only marginally higher than the satisfaction scores of their competitors. However, apparently it is good enough to keep USAA on top.  I understand that no company can satisfy every customer. I just want to illustrate that you don’t have to be the best to earn the top spot, you just have to be the best option available. Particularly, if you operate in regulated markets and your customers have to buy the products you sell (auto insurance).

Amazon is another poster child of customer centricity. This company competes in the markets where consumers have plenty of choice, unlike the previous example. Based on the ratio of customer praise and complains on the independent customer reviews sites, Amazon’s social reputation is much higher than most retailers. Bed, Bath and Beyond is the only other retail company that earned similar customer experience scores from non institutional sources. Analysis of the employees’ feedback available online, shows substantially more positive perception of the BBB than of Amazon’s. Yet, I’ve never seen Bed, Bath and Beyond mentioned as a positive example of a customer centric company.

So what helps a company to get a reputation that incites consumers to do business with them?

  • Passionate, visionary leaders committed to excellence in product design (Steve Jobs or Elon Musk) or customer experience (Jeff Bezos or Tony Hsieh);
  • Smart use of the customer satisfaction measurement industry (institutional) to get publicity;
  • Don’t suck more than your competitors.

How to keep this reputation? Here are a few suggestions

  1. Understand who are your best customers and why they choose to do business with you
  2. Recruit, evangelize and empower the best team to make your best customers happy
  3. Do not promise more than you are ready to deliver consistently across all steps of the customer journey
  4. Execute your business processes consistently and transparently

Every company should work hard to deliver better experience to its customers than it currently does …before competitors do. The major cause of company failure is company success.