Unfortunately, not every KPI is easily linkable to
making or saving
money.
That doesn’t mean non-financial KPIs aren’t important, though, or that we shouldn’t try to measure them. Non-financial objectives like improvements in customer satisfaction or more effective branding can be crucial to a company’s strategy, and can therefore be important outcomes for Garages to pursue. Garages who want to assign a value to non-financial benefits must find concrete, tangible measures for the objectives they represent.
Objectives and business benefits having to do with customer satisfaction,for instance, are extremely important to companies in highly competitive industries. Customer satisfaction can support a broad range of objectives, including:
– Customer retention
– Average order size
– Length of the sales cycle
– Repeat business
– Referral business
– Lower service costs
No one doubts that improvements in these factors lead ultimately to financial gains. Nevertheless, the objective itself—customer satisfaction—is a condition of the customer mind. Because they cannot measure that directly, some label the goal “intangible.”
Tips for linking less obvious financial
KPIs to obvious financial KPIs.
There may or may not be direct and obvious connections between KPI targets on the one hand, and financial value on the other.
Here are some tactics for for making those
connections and attaching financial value to
achieving non-financial targets.
First Tactic
Search for financial gains that can be directly related to reaching the non-financial KPI target.
For example:
– Higher customer satisfaction survey scores (the non-financial
KPI) can link to the financial value of increased sales, repeat
business, and greater market share.
– A higher number of successful employee training offerings (the
non-financial KPI) may link to the financial value of higher
employee productivity, higher quality work, better employee
retention, or fewer workplace disciplinary actions.
– A lower accident rate on the factory floor (the non-financial
KPI) many connect with the financial value of fewer lost workdays,
higher factory throughput, or lower insurance premiums.
Second Tactic
Find costs that follow from not reaching the target.
For example:
– The cost of not reaching a new-product time- to- market or new
product time to manufacturing objective (both important KPIs in
different industries) may link to an easy-to- predict financial
value for loss of sales revenues, shrinking market share, or lower
customer retention.
– The cost of not reaching target levels on customer brand-awareness
surveys (the KPI) may link clearly to financial value loss in market
share, sales revenues, and ability to charge premium prices.
Example KPIs for non-
financial objectives
Organizations typically establish KPI’s and targets for essential goals having to do with such things as:
Image and branding
KPIs may include survey scores for brand awareness, brand recognition, or brand preference.
Employee satisfaction
KPIs may refer to employee satisfaction survey scores, employee productivity measures, turnover rates, absentee rates, or disciplinary data.
Customer satisfaction survey scores
KPIs may include customer satisfaction survey scores, product return rates, or customer complaints. They may also refer to “qualitative” research results (e.g., from customer focus groups).
Employee health, safety, and well being
KPIs may point to employee absenteeism due to illness, on the job accident rates, or using employee services.
Quality of service delivery
KPIs may include direct service performance measures, such as mean time to complete service requests. They may also include customer satisfaction indicators, such as survey scores or numbers of complaints.
Recognition as a “Green” organization
KPIs may include data on warranty requests, customer complaints, or customer survey scores.
Recognition as a “Green” organization
Many professional organizations offer membership and certification to groups or companies that meet certain “green” criteria. These stand as KPIs for green status. Also, demonstrating compliance with environmental laws and standards serves as a credible KPI for green status.
Let’s talk more specifically about customer experience.
Many Garages craft digital solutions that in some way impact the user experience, either for actual customers or for internal employees. Improvements in customer experience are an investment, just like any other budget item, and should be treated that way. It’s the rare executive team that would green-light CX without a defensible ROI and business justification; it is incumbent on you to be able to help them rationalize their value and that of their programs.
Here are some ways you can start to quantify the value of an improved customer experience.
One easy starting place is to look at your entire customer base with two pieces of customer-level information in hand:
You can then calculate average CX scores for the top 20 percent (most valuable) and bottom 20 percent (least valuable) of your customers.
The math from here is simple.
Calculate the differences between the top and bottom 20% in terms of average value, then divide the difference in average value by the difference in average CX score to find out the value of better customer experience.
First,
CXavg.difference = CXavg.Top20% – CXavg.Bottom20X
Then,
CXvalue = CXavg.score / CXavg.difference
Find Top 20 and Bottom 20 averages,
Then, calculate the difference.
Lastly, calculate the increase in value for every additional point increase in CSAT scores:
$140/26 = $5.38 in CXvalue
Conclusion: Each 1 point increase in CSAT drives an increased $5.38 in value—or a 4.5% revenue boost—per customer.
Pain point Tracker
Measuring user value is another key factor in identifying what to work on and quantifying adoption, usage, and value after an initiative is complete.
The Pain Point Tracker identifies all the pain points across the journey and allows Garage squads to weight and prioritize user needs. Once products and services had been created and launched, it is also a way to validate if those identified pain points had been addressed.
The Tracker is a formatted excel used to track, organize, and sort user pain points that Garage squads identify through user research. It allows Garage practitioners to input observations made through research touchpoints into a common database and tag each observation to reveal common trends and insights about their user base.
“
We introduced the pain point tracker, which gave hierarchy to our user research. We had hundreds of observations and distilled a dozen or so major pain points. As we began looking at our backlog, we were able to link those to the user pain points, identified using the pain point tracker tool, to the individual features.
Matt Gierhart
User Centered Design Lead,
Frito-Lay Garage
As these insights form, they can be attributed to value drivers of the business and prioritized to help scope work to be done as well as provide some user-based measures of success.
Additionally, observations may identify baseline data that can be used to measure the impact of the current behaviors and identify the size of an opportunity for the business.
The continuous upkeep of the tracker allows the team to identify which existing workstreams are addressing active pain points and assess whether they were likely to meet user needs. This assessment allows the team to prioritize and groom their backlog by business value and by user needs.
The Pain Point Tracker isn’t just a way to quantify the impact of a new solution or feature. It can also help drive the identification of new opportunities for your Garage. It’s a helpful way to centralize user research, maintain visibility on the research observations of your user base, and see how those observations ladder up to larger needs that should be addressed through a new feature, product, or service.
