As the vision of XM proliferates across companies, there is little question that it provides essential value to firms in competitive markets. However, XM competes for attention and resources, so XM professionals must elevate experience management such that – of all the important investments – the C-suite is placing increasing bets to infuse their strategies with experience management. 

Even so, many initiatives lack sufficient funding and the likely culprit is a crystallized ROI case which is so strong that it warrants defunding alternative initiatives in order to further buttress and proliferate XM.

KYM: Know Your Metrics

For many practitioners, it is difficult to organize metrics that simultaneously serve experience management and provide the financial linkage C-suites rely on for calibrating investments. The path to curating the right metrics starts with understanding what ROI levers to aim at and, ultimately, what the bevy of XM metrics being deployed can (and cannot) actually do.

ROI Metric Groupings

Every C-suite leader cares about growth and profitability. And because both of these outcomes can be influenced by activity in our customer and prospect bases, ROI-generating activities can be numerous. Calculating ROI must therefore be hierarchical and simple.

It’s worth noting that most of these metrics can (and should) be represented in dollars and cents.

XM Metric Classification

Just as  XM professional’s work must be embedded into the fabric of a company, metrics and objectives must be translated into company goals. Regardless of the context, all XM metrics fit into 3 simple classes.

Vanity Metrics

Vanity metrics cannot be used to estimate either the direction or magnitude of outcomes when used alone. Common vanity metrics include NPS, CSAT, and others. This metric class is exceptional as an absolute quality indicator, valuable for daily operations of XM programs (e.g. general effort, closed-loop triggers), and useful in culture-building initiatives (e.g. rewards and recognition). 

Changes in vanity metric scores, on their own, cannot be correctly interpreted without at least one other metric to contextualize them. For example, customer satisfaction may rise as a result of improved performance or because all unhappy customers defected; alternatively, customer satisfaction may decline as a customer base expands and the product or service is less-tailored to new, secondary buyers. Even holding the customer base constant, improving CSAT doesn’t always result in financial gain.

Vanity metrics on their own are not as useful for ROI calculations as the two other metrics classes. However, by adding certain data ingredients a vanity metric can be transformed into something more useful for ROI, such as relative measures.

Performance Metrics

Performance metrics indicate the direction of outcomes but, alone, cannot estimate the magnitude of outcomes. Common performance metrics include churn rate, usage set size, and others. These metrics are reliable indicators of discrete, objective outcomes, and are also valuable for managing team success and progress toward larger initiatives.

For example, lower churn rates are always better than higher churn rates. As a result, performance metrics are very good for inputs for advanced analytics. They are also strong foundational evidence in ROI models.

Forensic Metrics

Forensic metrics indicate both the direction and the magnitude of outcomes. Common forensic metrics include things like customer lifetime value. These metrics are strong absolute and relative indicators, are valuable for projecting firm health, and are helpful in prioritizing investments and initiatives.

Forensic metrics are equivalent to (or highly approximate) ROI. If correctly calculating for things like a customer’s spend as well as their influence on the spend of others, a firm should seek to have higher-value customers. The most significant draw-back to forensic metrics is that they are not everyday frontline metrics, are not easily understood at every level of the company, and are used almost situationally, rather than managerially. 

The Right Metric Recipe

XM professionals must adopt metric strategies that serve both short-term operational needs and long-term strategic needs. All three classes of XM metrics are capable of contributing to ROI, but delivering ROI across a range of financial levers – while simultaneously maintaining the operational and cultural aspects of an XM program – requires an efficient assemblage of operating metrics. 

To make the most out of your metric ecosystem, follow some simple tips.

• Connect to ROI explicitly. A common trap is the belief that the value of XM metrics is self-evident. It’s not. If the value we intuitively garner from XM is not clear to non-XM colleagues, it’s essential to draw your value demonstration to a strong conclusion. In many cases, XM professionals also benefit from this as it spurs further analysis and understanding as they go through the process of translating metrics in terms of dollars. 
• Be transparent at all levels. Perhaps the most critical aspect of your metrics recipe is that metrics must be easy to understand. Although XM professionals may need complex metrics to do their work, complexity is the enemy of transparency required to work with people across different departments and roles. Be willing to work in a language that your colleagues and staff can easily understand and use. 
• Make your ROI claim legit. There is nothing that diffuses your ROI argument faster than double-counting other people’s money. When 4 different departments each claim to be adding $15mm then the CFOs expectation is that it should result in $60mm… and not 4 departments counting the same $15mm four times. Be sure your ROI is unique to your efforts. 
• Compartmentalize your metrics. At some level, all senior leaders communicate via rhetoric because their roles are simply too big to be in the weeds of the business every day. Therefore, don’t be afraid to give your leadership the metrics they need and the frontline the metrics they need. As the “translation layer” in the firm, XM professionals need them both. In short: lead with rhetoric, but manage the specific.

The bottom line: Aligning XM metrics to ROI requires a deep understanding of the metric’s classification, it’s value for  ROI calculations, and how to use the right metrics in the right combinations to win investments required for XM success. 

Luke Williams is an XM Catalyst with the Qualtrics XM Institute