Retail KPIs Get Worked Over For Customer Experience

Retailers may be focused on the wrong metrics. That’s one of the conclusions from a poll of top marketers from Duke University’s Fuqua School of Business.

While retailers have to be concerned about comparative sales, consumer spend and ticket size, Christine Moorman, a Fuqua marketing professor and director of the prestigious annual CMO Survey, believes those should be only part of – not all of – the series of KPIs that drive any eCommerce or brick-and-mortar retail business.

According to Moorman, marketers look at traditional accounting metrics, such as sales or profits. But a survey of 265 senior marketers found that those KPIs miss “forward-looking indicators,” including the total amount of revenue a customer will afford the company over time (customer lifetime value, or CLV).

“The very best metrics to use in marketing are the forward-looking ones,” Moorman said. “Profits and sales growth tell you about what a customer is worth today, but what really matters is a customer’s value to your future growth. These forward-looking metrics tell the company something much more valuable about its effectiveness over time, so it was surprising to see the stronger focus on sales or profits.”

Year-over-year growth, even though it should be supplemented by CLV, was the most important KPI across all sectors surveyed. Banking and retail put the most emphasis on return on investment (ROI). Moorman believes that CLV – and even the net promoter score – provide more value.

The poll also put a great deal of emphasis on customer experience (CX), as have many different reports of late. Spending on CX is up 71 percent over the past three years, and now comprises more than 15 percent of marketing budgets compared to about 9 percent in 2017. Companies will increase spend on customer experience over the next three years, bringing it to 20 percent of overall marketing budgets.

“The stakes will be higher for companies that provide services to other businesses, which expect customer experience to make up one-fourth of their total marketing budgets over the next three years,” the report says.

“Companies are realizing customer experience is where they can stand out relative to their competitors,” noted Moorman. “It’s not just about the product or service, but the entire customer journey from beginning to end, and it’s something companies should be explicitly managing.”

Moorman’s views on appointing C-level personnel to manage the customer experience are somewhat at odds with other prevailing retail approaches.

“A lot of companies aren’t getting what they could out of it,” said Moorman. “They haven’t really thought about building their capabilities throughout the customer journey. They also often forget the importance of a customer-focused culture as an essential ingredient in getting the entire company to focus on creating and delivering an outstanding customer experience.”

The survey also found that social media won’t add much to any KPIs. It was rated as contributing only moderate value to company performance figures, and has been flat since 2016. One explanation? KPIs. Thirty percent of marketers now report the ability to prove the impact of social media on company performance, up from 18 percent in 2017.