How to Measure Customer Experience with Leading vs. Lagging Indicators: CX Mini Masterclass – E32

Welcome to Decoding the Customer, a podcast about customer experience and how to realize customer-centric change in today’s dynamic business world. I’m Julia Ahlfeldt, certified customer experience professional, business advisor, and host of this program. Today’s episode is a rebroadcast of one of my favorite episodes from the archive. I’m currently on a little hiatus from posting new episodes, but I’ll be back soon.

In the meantime, I’ve promised to periodically share some of the best of the 90 episodes I’ve published since starting the podcast back in 2017. I hope that you enjoy the highlight reel. This episode is part of my CX Mini Masterclass series here on Decoding the Customer. These weekly episodes are published each Thursday and designed to be punchy, bite-sized overviews of key customer experience concepts and ideas for how you can help your organization thrive through customer centricity.

Whether you’re new to the field of customer experience, are preparing for the CCXP exam, or are a seasoned professional looking to brush up on a few basics, this series will help you improve your knowledge, skills, and performance to stand out as a CX professional. This is episode 32. For the month of March, my Mini Masterclasses have been exploring CX metrics and measurement. It’s a very important topic for those of us working in the field of customer experience.

Metrics and measures help customer experience professionals demonstrate progress and are a way to tie results back to value within the business. In episode 31, I explained three of the most common CX metrics, CSAT, NPS, and customer effort score. These metrics alone only give us a tiny window into the success or failure of a customer experience. In this episode, we’re going to look into how you can use leading and lagging indicators to create a more balanced and robust view of customer experience.

If you’ve been wondering how to help your leadership team move beyond a one-dimensional obsession with CSAT or NPS, stay tuned. If you happen to be out enjoying the start of spring in the Northern Hemisphere or soaking up the last rays of summer in the Southern Hemisphere, and here’s something that you’d like to remember later, don’t worry about writing it down. As always, you can find an overview of the key concepts that we’ve covered today in the show notes for this episode, which are on my website, juliaahlfeldt.com or decodingthecustomer.com. Right, let’s dive into leading and lagging indicators.

Measuring and evaluating customer experience is like understanding someone’s health or the overall success of a business. It’s unrealistic to assume that we can understand the full picture with just one number. We wouldn’t dream to presume that we could understand someone’s health by just taking their temperature. And we definitely wouldn’t assess a company’s success by just looking at their revenue.

Likewise, with customer experience, we need to understand a variety of performance indicators to assess if an organization is providing experiences that meet customers’ needs and expectations and to keep tabs on what’s working versus what’s not with the way those experiences are managed. I think it’s quite helpful to look at these in terms of leading and lagging indicators, acknowledging that you have to balance both. Leading indicators are the factors that contribute to a good or bad customer experience. These are things that precede or feed into the experience.

So for example, if you’re a grocery store chain and you know that customers don’t like long wait times, you could infer that minimal time spent queuing for checkout would be a leading indicator for the success of an experience. Similarly, the operational factors that dictate wait time, like the number of cash registers that are open or the overall speed of checkout would also be leading indicators, as these precede and contribute to the experience. Leading indicators are important because they help you clarify your recipe for success. Once you know what customers do and don’t like about experiences, which by the way is something you should ask them and not just assume you know, you can use this information to identify the factors that drive experience outcomes.

Leading indicators can then be used to proactively mitigate the impact of negative experiences. For example, an alert to preemptively notify customers of an extended waiting period, or a way for a business to monitor and manage operational workflows before long wait times even become an issue. Leading indicators are often easy to connect back to business operations, so they’re a great way to get the broader organization to think about their contribution to the customer experience, to set department level KPIs that are related back to experiences, and to get people rallied around common goals. Then we have lagging indicators.

These are the outcomes or results of the customer experience, which are usually measured after the fact. Think of it this way. At this point, the cake is baked, but lagging indicators will tell you whether or not the cake was delicious. Some of the most common customer experience metrics, CSAT, NPS, and customer effort score, are all lagging indicators.

If you’re interested in the definitions of these, be sure to check out episode 31. But in a nutshell, these three very popular CX metrics will tell you after the fact, how a consumer perceived the experience or their overall relationship with the brand. If we say with our grocery store example, a customer who experiences an extraordinarily long wait time at checkout might respond to a CSAT survey with a low level of satisfaction. In this case, the lagging indicator would reflect their disappointment with the experience.

And a quick side note on one of those three most popular customer experience metrics, Net Promoter Score. I’m planning an episode fully dedicated to this topic, but it bears mentioning here that Net Promoter Score can be particularly tricky as a lagging indicator to use in correlation with a specific experience. Because a consumer’s response to the NPS survey question, which asks about likelihood to recommend a brand, will normally draw on multiple experiences or interactions. These popular customer experience metrics evaluate customer perception, but there are many other lagging indicators that don’t rely on surveying customers.

In our grocery store example, we could capture the number of customers who abandoned their cart or leave the store without making a purchase. We could also evaluate the frequency of repurchase and other behavior-based measures that tells the result of the experience. The key point here is that these lagging indicators are used to tell you how you did, and we don’t always need to pester the customer with a survey to find this out. Ultimately, we want to see gradual improvement with our lagging indicators, as customer experience initiatives turn into better experiences for customers and make customers happier.

But to get there, we need to understand the recipe for good experiences so that we can help organizations deliver this. If leading indicators are tracked in real-time, organizations can use this information to flag and intervene when it looks like an experience might be going sideways. If you’re a CX professional working in an organization that currently measures customer experience, I’d encourage you to sit down with your team and identify your top five leading and top five lagging indicators. Reflect on what these numbers tell you and if you think they’re providing the complete story.

If not, then grab your journey map, identify your drivers of success or failure, and figure out how to measure both the inputs and outputs of this. To help you through this process, I’ve included a simple visual in the show notes for this episode. This visual clarifies the distinction between leading and lagging indicators and can be used as a reference for a team discussion about your top five. So there you have it, my overview of leading and lagging indicators.

If you’re enjoying the show, please share the program with others who might be interested or head on over to iTunes and rate the podcast. This helps others find the show. I’ll be back next Thursday with another CX Mini Masterclass. We’re sticking with the topic of CX metrics and measures, so tune in then or subscribe to the show for updates when new episodes go live.

And if you’re keen to do some more intensive online training in the field of customer experience, then I’d encourage you to check out CX University. They offer a broad array of e-learning options that you can access anywhere and anytime. Their offering includes practice tests for the CCXP exam, and they’re a Customer Experience Professionals Association accredited resource and training provider, meaning that their materials have been reviewed and vetted by the association for alignment with the six core competencies that are in the exam. And what’s better is that all of this is available on a flexible monthly subscription plan, meaning that you don’t have to fork over hundreds of dollars to get started.

As of the time of publishing this podcast, plans including CX courses and practice exam questions start at just $75 per month. Listeners of this show can use the discount code Podcast10 to get 10% off the first month subscription and help support the show. I’ll catch you next Thursday, but if you’d like to get in touch in the meantime, you can send me an email, tweet, or LinkedIn message. My handle is at Julia Ahlfeldt and my full contact details are also listed on my website, juliaahlfeldt.com or decodingthecustomer.com.