Are you measuring customer value?
Before you can measure anything, you need to know what you want to measure. The first question to ask when attempting to measure customer value is, therefore: what is customer value?
This is not a trick question: do you know what you mean when you think about customer value? What is the literal and measurable meaning?
In my experience organizations haven’t yet defined what they mean by customer value only that it should be measured. This results in any measure being used to do the job.
Unsurprisingly therefore, the first step is to discuss and decide what customer value is.
I define customer value as:
a valuable outcome to the customer measured from the perspective of the customer.
This definition relies on a combination of sources: Jobs-to-be-done (1), the outcome economy (2) and outcome-driven-innovation (3).
It suggests that what is important to the organization is to know and measure what the customer is trying to achieve that leads them to hire/use your offering and how successful are you at helping them — importantly successfulness is measured from the perspective of the customer.
Examples of valuable outcomes to the customer:
How do you find your measurable customer value?:
A good way for the team to discuss and identify customer value is to first use a Jobs-to-be-done statement(6) articulating what they think the customer is trying to achieve that their offering can have an influence on — and then discuss: how would the customer herself measure her progress / achievement?
e.g.. If I am buying a pack of gum because I have bad breadth the job-to-be-done statement would be something like:
I want to reduce the perceived uncomfortable odour from my mouth in order to not create discomfort when engaging with other people.I would use my perceived experience of no longer having an uncomfortable odour from my mouth as the measure.
I could hire a range of products for this job (gum, pastils, tooth paste), and you could ask me at any point in the day if I feel I was achieving or made progress toward the goal (no odour).
There is a suggested structure to the jobs-to-be-done statement, you can read more about it here (6) and the image below.
You are not measuring the customer you are measuring yourself
When it comes to customer value I assume that most companies aren’t measuring what is valuable to the customer, but something else — most often they are measuring themselves.
If an organization or team hasn’t been clear on what customer value is they can be measuring anything as a proxy for customer value. I see two commonly used proxies:
Engagement metrics (7) — these are not measures of value, they are measures of engagement (don’t over market your metrics!). Personally I break engagement metrics down into three categories: did we (efficiently and effectively) reach the right people, did they react (attention) and did they spend time with us (awareness). Engagement metrics are essential to make better decisions in order to improve experiences, but they are not measures of customer value.
Net-promoter-score (NPS)(8) or customer satisfaction score (CSAT)(9) — two very common proxies with the first being a proven (and challenged) simple customer loyalty measure suggested to indicate future growth for the company. The second is a measure to identify if the customer is satisfied. Neither are measures of customer value.
Remember: customer value is about the customer. Asking if they are loyal to us or if they are satisfied with something we did only asks them about us. These are self-centric measures.
Let’s use these measures to perform a simple yet important and insightful test: is the measure about the customer or about us?
Exercise: Draw a horizontal line with “about us” on the left and “about them/customer” on the right. Discuss and position your measures accordingly — remember no proxies — you have to be literal when it comes to what event the metric is actually measuring and what certain insights could be drawn from that.
I would argue that engagement metrics measures the effectiveness of our own designs: how is our targeting, messaging and user experience design performing? These measures don’t care about the customer they only care about our own marketing performance.
NPS and CSAT are likewise. They don’t care about the customer or what the customer wants — to be honest they are oblivious to both of these facts. These two measures only care about us and that is why they essentially only ask: did we do a good job or not?
Customer value is contextual
According to anthropologist Thomas Hylland Eriksen important motivators of human behavior are context, relationships, environment and culture (10).
While Christian Madsbjerg suggests that without the connection to customers’ individual and cultural subjective experience business leaders won’t be able to understand [and therefore not act on] the complexities of the world (11)
There are two important elements to these arguments:
- Human motivation is complex while most metrics are simple. Simple and complex are not the same and not compatible — meaning you can’t reduce complexity and at one point it becomes simple. Simple and complex are two separate decision making domains demanding different approaches to understanding and decision making(12).
e.g. according to Dave Snowden(12) in a simple domain you could use a best practice approach as there is usually only a few answers and people agree on them. While in a complex environment there are many answers, they keep changing all the time and there is no best practice. In a complex environment a more recommended approach is continuous experimentation and improvement.
Both NPS, CSAT and engagement metrics attempt to make the world simple because if the world is simple, repeatable and predictable standardizations work.
But a large part of our markets are not simple, predictable or repeatable. So using a simple measurement framework makes no sense. Or worse it creates a tangible picture (data) about the world that is nothing more than a reflection of the opinions of its creators (13). There are ways around this challenge as I am suggesting here (14).
Strangely we have been given data, analytics and computer super powers and we are using them to perform the dumbest processes. Instead of standardizing one question for all customers to answer ignorant of the context they are in we should be building methods and models that preserve complexity by using the computer to do the hard stuff for us. - When it comes to measuring customer value I find focusing on what the customer wants in one specific context to be the most powerful and easiest approach. Especially as jobs-to-be-done (15) already cleverly and clearly translates context into a business friendly framework.
In our current work we are using jobs-to-be-done or Outcome-driven-innovation as the mental model and then use qualitative research to identify any quantifiable metric that could be used as a Customer Performance Indicator (16) in order to measure customer value at scale and in real-time.
Using Strategyn’s job map (17) and / or Vendbridge’s (21) method of identifying unresolved and important outcomes for the customer (18) you would be able to break down the situation you want to serve into smaller more tangible situations and then identify measurable contexts for the customer in each of these:
In the example given above about bad breadth there could be three low altitude examples of contexts with different valuable outcomes for the customer and different measures. One would be the buying experience for a the desired product to use, the second the consumption experience and the third could be having a water cooler conversation at work with odourless breadth.
I recommend these three sources for finding your own way to do this (17)(18)(16).
Nobody needs metrics, what we need are insights and better decisions
Metrics are just numbers. Nobody needs them or their dashboards on their own. There should be no one on the organization measured on their ability to produce dashboards. They should be measured on their ability to serve better decisions.
Measures can help us learn and understand things better / new things in order to make better decisions.
A measure therefore needs to be conscious of the organizations opportunity to learn, to gain insights and focus our attention to something that might not be as present today as it needs to be.
Measurements are an excellent opportunity to change the organizations focus to where and how we need to act.
This means that the measure of a good measure is not the measure itself, but if it focuses the organization towards the best way to interpret the world (the mental model (22)) leading to better and more impactful decisions.
Given the lack of customer attention and focus in organizations therefore the customer value measure could be an important guide to steer the attention and focus of the organization towards the customer.
Make it simple, but not too simple — A. Einstein
The purpose of customer experience is not to produce valuable outcomes to the customer, it’s the production of customer value that leads to business value. Customer experience believes that the most effective relationship between the customer and the business is one where there is a mutual exchange of value.
For this mutuality to become a part of business culture the customer needs to be understood, the organization needs to be empathetic to what the customer is trying to achieve and there needs to be a direct line of sight so that teams can see how their efforts are having a direct impact on the customers’ valuable outcomes(19).
We won’t get there if our measures and therefore also our insights and mental models are mirrors we hold up to look at ourselves.
Self-centric metrics don’t make us better at our customers they make us worse. Self-centric proxies make us worse.
We need to use the technology and data at hand not to dumb down the world we are a part of convincing us that we are at the center of our own echo-system (20).
We need to use the sophistication to make the complex manageable, to capture the richness of the insights in ways that help us understand, learn and make better decisions to the benefit of both the customer and the business.
We need to stop pretending and get real when it comes to customer value.
Sources:
(1) Alan Klement on Jobs-to-be-done theory, https://jtbd.info/2-what-is-jobs-to-be-done-jtbd-796b82081cca
(2)https://www.techtarget.com/searchcio/definition/outcome-economy
(3)Tony Ulwick, Strategyn, introducing Outcome-driven-innovation, https://jobs-to-be-done.com/outcome-driven-innovation-odi-is-jobs-to-be-done-theory-in-practice-2944c6ebc40e
(4)Jeff Immelt, GE ex. CEO introducing Predix, https://www.youtube.com/watch?v=djB6BmBda6Q
(5)Market research / insight from chocolate manufacturer aprox. 2009.
(6)The author on Business Experimentation, https://medium.com/everything-new-is-dangerous/business-experimentation-f5620919f209
(7)Wikipedia on customer engagement, https://en.wikipedia.org/wiki/Customer_engagement
(8) Hotjar on Net Promoter Score, https://www.hotjar.com/net-promoter-score/
(9) Qualtrix on Customer Satisfaction Score, https://www.qualtrics.com/uk/experience-management/customer/what-is-csat/?rid=ip&prevsite=en&newsite=uk&geo=NO&geomatch=uk
(10)Thomas Hylland Eriksen writes the first article in the book Why The World Needs Anthropologists, https://www.routledge.com/Why-the-World-Needs-Anthropologists/Podjed-Gorup-Borecky-Montero/p/book/9781350147133?gclid=Cj0KCQjw54iXBhCXARIsADWpsG-XSK-QTMuCnC5slOPB0c0uWtrlC9tQHynaXUEXrIO73eDfhe9SjxoaAkTiEALw_wcB
(11) Christian Madsbjerg, Sensemaking, https://www.redassociates.com/sensemaking-1
(12)Dave Snowden introduces Cynefin, https://www.youtube.com/watch?v=N7oz366X0-8&t=45s
(13) Cathy O’Neil, Weapons of Math Destruction, https://everythingnewisdangerous.medium.com/models-are-opinions-reflected-in-mathematics-oneil-a93ad607f893
(14) The author on measuring customer experience, https://everythingnewisdangerous.medium.com/how-do-you-measure-customer-experience-14ef428f15d5
(15) Clayton Christensen, Jobs-to-be-done, https://www.youtube.com/watch?v=sfGtw2C95Ms&t=3s
(16) Gene Cornfield, The Most Important Metrics You’re Not Measuring Yet, https://hbr.org/2020/04/the-most-important-metrics-youre-not-tracking-yet
(17) Lance A. Bettencourt and Anthony W. Ulwick, The Customer-Centered Innovation Map, https://hbr.org/2008/05/the-customer-centered-innovation-map
(18) Vendbridge’s method is featured in this article by Digital Leadership, https://digitalleadership.com/blog/jobs-to-be-done/
(19)Steve Denning, the law of the customer is featured in this article, https://www.forbes.com/sites/stevedenning/2016/09/08/explaining-agile/
(20) The author on the difference between ecosystems and echo-systems, https://everythingnewisdangerous.medium.com/are-you-seeing-an-ecosystem-or-an-echo-system-abaeac3c5616
(21) Vendbridge, https://www.vendbridge.com
(22) Farnam Street on Mental Models, https://fs.blog/mental-models/
