Customer Experience Governance: Do This, Not That

Governance doesn’t get much airtime in customer experience management conversations and writings. It's not as exciting and it's harder to wrap your mind around than customer engagement and VoC (voice-of-the-customer) and CX (customer experience) technologies. Just what is it, anyway?

The Business Dictionary clarifies governance as "establishment of policies, and continuous monitoring of their proper implementation, by the members of the governing body of an organization. It includes the mechanisms required to balance the powers of the members (with the associated accountability), and their primary duty of enhancing the prosperity and validity of the organization." To summarize as it applies to CX management:

1. The company leaders establish and monitor CX policies.
2. People are empowered and accountable to drive CX success.
3. Mechanisms are put in place to drive CX contribution to the company’s validity and prosperity.

Customer experience governance is essential to ongoing success, especially in terms of enduring CX ROI (return on investment). It's the "glue" that holds all the pieces together, the standards, and most importantly, the mojo of CX progress.

Here are 3 keys to getting it right: CXM infrastructure, CX champions, and CX momentum.

1. CXM Infrastructure: An organization accomplishes precisely what it is designed to do. Organizational design must support — not stand in the way of — CX excellence goals.

DO THIS: Define the structure, roles, and processes for CX facilitation at the beginning of your whole effort, and before deploying any tool, technology, or process. Create processes for CX excellence facilitation and set expectations across the organization for involvement and follow-through. Set up processes to coordinate the managers of the various CX management endeavors across the company: VoC, customer references, retention, escalation, business intelligence, front-line management, UX (user experience), and so on. Work through existing structure, roles and processes as much as possible, weaving CX facilitation into your organization’s fabric. Set standards of performance and determine how you will balance strategic and tactical needs of CX management oversight.

NOT THAT: Do not wait until something gets rolling for a while to start thinking about governance of it. Upfront planning will pay exponentially in comparison to shoring up support and sorting out processes retroactively. Even a pilot (test case) should incorporate planning for follow-through. Don't silo-ize CX management, especially not at the start! Broad-brush consistency organizationally and with processes and analyses will help you see the opportunities for synergy and meeting bigger opportunities for cost savings and revenue growth.

Don't forget about those you rely upon: suppliers, alliance partners, channel partners, distributors, and so forth. Create processes that build their consciousness of customers' realities and what they need to do toward your CX excellence goals.

2. CX Champions: Localized ownership of CX success, deeply and broadly across employees, is key to making customer experience excellence a way of life in your company. (And that's more cost-effective than investing in remedial efforts to make up for what wasn't done right the first time.)

DO THIS: Set up C-team customer experience leadership roles and processes. Determine selection criteria for CX champions in every business unit, region and functional area. Make CX championing a significant part of their other duties, and strengthen their skills for facilitation, story-telling, and influence. Teach champions how to motivate action on root cause issue resolution. Enable grass-roots ideas for CX improvement and innovation to be piloted by CX leaders. And wallpaper employees' world with customer-centered messaging and opportunities.

NOT THAT: Don't assign CX management to a department or rely on tribal knowledge. Avoid underestimating the dynamic skill set needed to influence others without authority over them, and to drive progress over the long haul. Refrain from keeping CX champions separate from active roles specific to their organization. Don't assume executive sponsors automatically know how to be effective in their role. If you can see that the company#39;s money comes from customers#39; choices to do business with you, then don't give CX championing short-shrift!

This is especially important in appointing an overall leader who should work with the C-team as their agent for facilitating all CX management. Warm bodies, bright minds, or a stellar specialized career path might initially seem like a good fit for this role, but you're better off to appoint someone who already knows a lot about CX, holistically (not siloed), and who has a rich career background in overall business management, process improvement methods, systems thinking, change management, and driving momentum in large initiatives through influence.

3. CX Momentum: Keep executives and employees motivated to see their jobs in a customer-centered context, and to actively contribute to the company's CX excellence goals.

DO THIS: Establish accountability processes for CX excellence. Involve executives in reviewing and providing constructive feedback to teams#39; strides in improving CX. Create closed-loop processes for issue originators to prevent recurrence, and drive action and closed-loop communication to resolve customer issues systemically. Incentivize cross-organizational collaboration for customer experience breakthroughs. Enable grass-roots ideas for customer experience improvement and innovation to be piloted by CX leaders. Set up organizational learning capabilities for customer experience excellence.

NOT THAT: Don't rely on the HR department to do all this: their career background and frame of reference usually make this assignment a stretch. Instead, create collaborative arrangements between your CX leader and various HR leaders to re-work what#39;s already going on from a customer-centered perspective. Don't resort to escalation and shaming rather than prevention and organizational learning. Refrain from touting heroes and retroactive heroics, in favor of rewarding cross-organizational collaboration and teams' proactive achievements. Don't create busy-work for employees for the sake of “engaging” them. Instead, make sure employee engagementcontributes to CX excellence in terms of making improvements and using creativity for novel ways to increase mutual value for the company and customers.

Customer experience governance is one of the FIRST things you should tackle in setting up your CX endeavors — or overhauling them, or updating them for the new fiscal year or quarter. It's actually a quite exciting component of CX management, one that requires a lot of strategic thinking and creative solutions.

Notes:

1. 1. Customer Experience Governance is part of Organizational Adoption and Accountability, one of the six domains in the body of knowledge advocated by the Customer Experience Professionals Association (CXPA). (ClearAction offers a CCXP Exam Prep Course.)
2. 2. The concept of "Do This, Not That" is borrowed from the popular book "Eat This, Not That", where the weaknesses of common practices and myths are brought to light and sensible replacements are recommended.

https://clearactioncx.com/customer-experience-governance-do-this-not-that/

Measuring customer effort: Is it time we moved on from Net Promoter Score?

CORMAC TWOMEY 

If customer satisfaction is directly linked to minismising effort, is NPS still a valid metric?

For many years, Net Promoter Score (NPS) has been a core metric for businesses, to quantify and monitor customer satisfaction levels and understand how this affects future behaviour. However, as with any metric the measurement is, by itself, just a means to an end. It is vital that brands are using NPS in the right way in order to deliver the most value to the business.

Ultimately, NPS measures brand loyalty, and is based on the fundamental perspective that every company’s customers can be divided into three categories: Promoters, Passives, and Detractors.  The percentage of detractors is then deducted from the percentage of promoters to give the organisation its Net Promoter Score.

Effort equals experience

It is important to remember, in many scenarios, customers end up calling contact centres after failing to get the resolution they seek in-store, online or through other self-service options. This leaves the contact centre staff to face the brunt of the customers’ dissatisfaction, and having to rely on their professionalism, systems and efficiency to allay customer frustrations before turning a challenging situation into a positive experience.

NPS is undoubtedly a useful metric, but by its very nature, leads organisations into focusing their resources on delighting the customer by exceeding their expectations. This message has been emphasised for years: delight the customer and they will become your brand advocate and an asset that will help to secure potential future customers and growth. While this may be true, investing all your resources on creating more promoters could leave you vulnerable to the negative effects detractors can have on your brand.

Recent studies have shown that the impact of promoters and detractors is not equal, suggesting that one promoter will not make up for the damage one detractor can cause. A recent Convergys study found that eight in ten dissatisfied customers told others about their recent interaction, compared with just five in ten extremely satisfied customers. 

With many contact centres now measuring Transactional Net Promoter Score (tNPS), whereby customers are invited to rate their last interaction or transaction and not the whole brand experience, a wealth of valuable data is being captured that can be transformed into actionable insight to pinpoint root causes and drive improvements that will help to minimise the number of detractors.

When customers are asked why they are not satisfied with a recent interaction, the biggest drivers of their dissatisfaction were related to effort: had to repeat myself; had to call multiple times; took too long to resolve, etc. And the majority of top answers to what is important when receiving customer service also relate to customer effort – that is, how easy is it to resolve a question or issue or conduct a transaction using a service channel. This begs the question, are we using the right metrics in order to drive the improvements that will minimise customer effort?

Expectations are rising

This damage that detractors can do to your business is increasing as consumer expectations around customer service continue to rise, making the margin for creating dissatisfied customers larger. The increased use of technology and social media is a key factor. Customers now expect a different type of service and quite often organisations are falling short. In the Convergys survey, 20% of consumers reported that they started on a company’s website, but were dissatisfied and abandoned it, with 38% trying the web again and 23% switching to the phone. When digital deployment is dysfunctional, consumers often switch channels to get resolution, which could increase the number of interactions without reducing effort or improving satisfaction.

This means that service is expected through multiple channels and traditional channels such as the call centre are now being avoided. In fact, 47% of customers say they will do anything to avoid calling a contact centre.People are looking for a seamless service experience and brands that can solve their problems quickly with a minimum of fuss.

The focus for brands should therefore be on ‘closing-the-loop’ and identifying where the root causes of customer dissatisfaction lie. Often, the real drivers of customer effort sit upstream from the agents in poorly optimised self-service channels, policies that make it hard to do business, and siloed technology.  It is important that organisations have the technology and skills to deliver an efficient personalised experience, as this is critical to minimising effort by resolving customer issues as quickly and efficiently as possible in their channel of choice.

Prioritise to maximise ROI

While NPS will remain an essential tool for measuring loyalty, brands should consider how they are allocating resources in order to have the best possible impact on the bottom line. Given the ever-increasing expectation for multichannel communication and the larger influence of the detractor, a smarter approach to NPS might be required.

Delighting customers will always be the ideal, however, with detractors 60% more likely to talk about your brand than promoters, the penalty for not meeting expectations is greater – and is only likely to increase.  Often, the best way to add value to the business will be to focus on minimising customer effort, which should lead to a drop in the number of detractors. Conversely, placing a greater emphasis on the number of detractors will enable you to gauge how well you are achieving this

As brands and customer service teams look to adapt to the new realities of this multichannel world, they must make sure they are factoring these trends into their metrics. After all, as the saying goes, what gets measured gets done!

How to build a data-driven marketing strategy

CHRIS WARD
Deputy Editor of MyCustomer.com Sift

Having a data strategy is by no means a new discipline for marketers. Even back in the 1960s, pioneers such as Robert Kestnbaum were outlining new and imaginative ways to collect and analyse customer data to deliver more relevant marketing campaigns.

But while database marketing was for so long seen as a specific type of marketing in the subsequent years that followed Kestnbaums’ innovative work, the relatively recent advent of Big Data means that data analysis is now no longer just viewed as critical to one marketing function, but every marketing function.

American professor of psychology Dan Ariely famously described Big Data as being “like teenage sex – everyone talks about it, nobody really knows how to do it, everyone thinks everyone else is doing it, so everyone claims they are doing it” - a statement germane to what marketers were experiencing in the 2000s, when consumer data levels first truly exploded. However, in the last five years a seismic shift has occurred that makes this less and less representative.

Marketing is now predominantly a data science operation, and what’s more, the technology is there to assist this – a fact that consumers are well aware of. 100% of marketers state that successful brands must use customer data to drive marketing decisions, while IBM research shows that 75% of consumers now “expect organisations to understand their individual needs”. Brands are constantly referred to the need to turn their marketing operations from art to science. Subsequently, marketers must have a robust data-driven marketing strategy in place to ensure they not only capitalise on the Big Data opportunities, but also satisfy customer requirements that are frequently being made a larger part of their remit.

Strategic importance

A key factor driving this need is customer engagement. A 2014 study from Yankee Group found 64% of consumers said they needed to be connected to the internet at all times, a number that is rapidly increasing as more devices surface. With a separate study from Shopper Sciences stating the average number of sources of information people use to make a purchasing decision through their customer journey is up from 5.3 in 2010 to 10.4 in 2014, using data to understand when and what to target and engage prospective customers with is becoming more vital. It’s the combination of being proactive and reactive.  

“Businesses and brands must be able to engage effectively with customers to market successfully to them.  This may seem obvious, but harnessing rich customer data and using it to drive a marketing strategy is the best, if not, the only way to do this well,” says Jason Lark, managing director at Celerity Information Services.

“A purely reactive marketing approach is not enough. Cultivating great customer relationships takes time and planning and rich data is a key component. Data enables you to reach out to your customers in a targeted and meaningful manner, ensuring that the age-old marketing adage is fulfilled – allowing you to get the right message to the right people at the right time.”

And Kate Cooper, CEO of Bloom Worldwide agrees, stating that marketing without a data strategy is now too hazardous for targeting the modern-day consumer:

“Tactical marketing carries risk – it’s short-term and there’s no guarantee on results. However, a data-driven marketing strategy is formed by data such as sales stats, audience profile segments, customer loyalty, competitor performance and previous marketing campaign stats which allows businesses to base their strategy on what is really needed for both the customer and the business, rather than simply relying on guesswork/short-term fixes.”

However, such strategies are not commonplace. As Axel Schaefer, senior manager, strategic marketing EMEA at Adobe Systems, notes: “Today’s marketing leaders are expected to strategically use data, and activating programs based in the insights derived from what customer or visitors share with them. Although there is plenty of data available (data on customers, prospects, competitors, product lines, and others), very few marketing organisations truly understand what to do with it.”

So how can you build a data-driven marketing strategy?

Determine how data-driven you are as an organisation at present

As a first step on the way, companies should conduct a self-assessment in order to define the status quo.

Schaefer explains: “It’s essential to identify the areas of strength and those where your organisation needs to put more focus in order to achieve a sustainable organisation. Examples could be getting aware of the available data sources, understanding the goal setting across channels that may lead to common strategic goals, etc.

“As an organisation that wants to execute on data-driven marketing, all involved need to be very aware of the available resources, the restraints, requirements and needs, in order to develop actionable steps to a data-driven strategy roadmap.”

Determine what drives your decision-making

“Before any data can be collected, before any analysis can begin, and before any results can be sought you must first decide what the key driving factor is for any decisions you make,” advises Kentico’s Stephen Griffin.

What are your KPIs? Are you solely looking at revenue or income? Do you want to create an exceptional customer experience for your current customers? Are you only interested in attracting new customers or would you like to re-engage with old ones? Knowing what you really want to achieve sets you on your way to finding out how to achieve it.

Establish what data you need to collect to support your decision-making process

“Collecting the right data is what could make or break the entire process,” notes Griffin. “Having the wrong data will send you spinning into markets you just can’t handle or will just leave you scratching your head about where to go next.”

Divide your search criteria into quantitative (what happened? – number of site visits, number of downloads, etc.) and qualitative (why it happened? – customised landing page, customer specific offers, etc.).

There is a myriad of information that can be collected. You need to decide if you want information on a person’s buying habits, what pages they like to visit, what do they interact with most, etc., or their personal info such as email, address, age, etc.

Griffin continues: “Decide on the right info to give you the correct view of the customer to allow your decision making to become simpler.”

Collect the data

Determining how to get data in a nonintrusive manner should be a marketer’s first objective, because while a glut of customer data may be available to marketers, consumers are becoming less patient with brands that encroach on privacy, and have more power to cut brands loose when they do overstep the mark.

According to findings from the Aimia Institute, the data company that oversees customer loyalty schemes including Sainsbury’s Nectar card, over half (57%) of consumers are already taking steps to actively avoid companies, with a variety of methods including unfollowing brands on social channels (69%), closing accounts and subscriptions because individuals don't like the communications they are receiving (69%) and opting out from the majority of company email communications (58%).

Part of a marketer’s data collection remit must be to identify what data can be collected from first and third party sources without disrupting a positive customer experience. Only then can marketers start asking the following questions in the data collection process:

• Are we going to use contact information forms on your website?
• Will we have surveys available at certain touchpoints on the customer journey?
• Do we require the collection of geographical locations based on IP addresses?
• Does the number of page visits on the “About Us” page of our site have a bearing on buying habits, and if so do we collect that information?
• Do we have club membership forms?
• Are we carrying out in-store surveys?

This particular step “should also be a continuous one even as you move through the entire process”, says Griffin. The moments evolve. Buying habits differ, new trends emerge, technology advances, and people change. It is important for data collection points to remain open to change.

Analyse the data and create buyer personas

The key aim of data collection is to glean a detailed level of insight that will drive future marketing campaigns. “Data alone is not going to form the best marketing strategy,” says Kate Cooper. “Data driven marketing requires a top layer to be added. Insight. This is when the marketing team uses the data analysed to form a hypothesis, vision and ongoing strategy.

One core objective for many marketers is to develop buying personas from the data, with the Holy Grail being to create a single customer view (SCV), based on what information is gleaned about who each customer is, what they like to search, what they like to buy, what interests them and what influences them.

“All of this accumulated, highly valuable qualitative data must be well managed, and scored and used to inform a single customer view (SCV),” says Jason Lark. “Information can be scored on the importance and relevancy of different attributes and then used to inform the marketing strategy – how you will use this knowledge to reach your end goals. For example, this might help you make decisions as to what technologies can be used to support this process.”

Roll out your customer-focused information

With the groundwork done, you should now know what you’re trying to achieve, collected the data that is needed to achieve it and conducted analysis on it to find insights and build personas. Now it is time to build your content around your personas and put the right information in front of the right people at the right time.

Griffin says: “You want to ‘WOW’ your customers with how well you know them and delight them with the fantastic ‘personal’ offers you have for them. Show them new items and trends that match their persona that they may never have seen without you. In every channel and through all stages of the buying process, provide an experience akin to a personal shopper in a top boutique and keep your customer coming back for more.”

It is also at this point that marketers are able to incorporate technology such as marketing automation to ensure their content is also highly personalised. And while this might be the point that makes a data marketing campaign most susceptible to customers potentially opting-out of communications as mentioned earlier, it is also becoming increasingly expected among certain sections of technology-savvy consumer.

According to a survey from 3radical, 45% of consumers state they are unlikely to buy or engage with brands if they don’t make things relevant and personalised. And 30% of consumers say they will simply ignore communications from even their favourite brands if the marketing isn’t bespoke and targeted, even potentially leading to them ending a brand relationship altogether. Only with a robust data marketing strategy can these elements be achieved.

Measure ROI

Measuring ROI provides marketers with an opportunity to assess where analysis and insight is leading to a genuine return, but is often the hardest thing to monitor, as the statistic from a recent Kentico survey which states that only 17% online marketers constantly measure effectiveness, clearly highlights.  

You need to highlight the importance of the marketing team in the overall business value. Use the answers you generated when you determining what drives your decision-making, and use data to show the influence the process has had. Do you now have more customers? Are older customers returning? Have page visits or downloads increased on your site? All these things can point towards a successful data-driven strategy helping to improve the business value.

Repeat and improve

Remember: the process should be ongoing. As Schaefer notes: “Data-driven marketing needs to be a continuous and sustainable effort.” 

Customer experience ROI building blocks

There's a natural flow to generating customer experience ROI. In laws of nature, short-circuiting the flow is self-defeating.
The building-blocks formula for sustained customer experience ROI is C5 + I2 + E2 = CX ROI.

1) Set the stage for CX ROI	C5 =	Customer voice Customer experience strategy Customer-centric culture Customer intelligence Customer lifetime value
2) Adapt your company to customers	I2 =	Improving customer experience Innovating customer experience
3) Engage employees and customers	E2 =	Engaging internally Engaging externally

C5

Customer retention and loyalty are outcomes of a system that has a distinct natural flow.

• Voice of the customer: Informs us about what “the boss” wants.
• Customer experience strategy: Sets the stage for cross-functional collaboration for CX excellence.
• Customer-centric culture: Defines the ways we think and do.

These 3 building-blocks work hand-in-hand, like a 3-legged stool. With any one of them missing, things will be lop-sided. They're the foundation that keeps your company from limping along in your quest for customer retention and loyalty business results.

Customer intelligence and customer lifetime value help you prioritize your efforts, resources, and roadmap components. Don’t fly in the dark! Connect the dots across information from your customers, and quantify the upside of keeping existing customers as well as the downside of losing them.

• Customer intelligence: Paints a picture for accurate actions.
• Customer lifetime value: Motivates & prioritizes action.

E2

Always think about the entire system. "The system" is the only "silver bullet" for CX ROI. Example:

1. While you are setting up a shared vision (CX strategy/culture) . . .
2. You may collect existing customer comments (customer voice) and
3. Connect the comments to operational data (customer intelligence) and
4. Prioritize the comments based on customer revenue or cost (CLV) and
5. Engage some teams in resolving the blaring issues (improvement) and
6. Inspire some teams in creativity around the blaring opportunities (innovation)
7. Share selected comments on your intranet site (engaging internally) and
8. Adapt your customer engagement to be sensitive to the blaring issues/opportunities (engaging externally).

Like any system, removing a component will eventually render it useless. Make sure your customer experience management journey keeps all the system components in top form, and reflects the left-to-right flow of the CX ROI building-blocks model.

 CX ROI Maturity

3 levels of ROI maturity

http://clearactioncx.com/customer-experience-maturity-assessment/

 CX ROI Mini-Assessment

7 keys to breaking through plateaus

http://clearactioncx.com/customer-experience-enablement-mini-assessment/

 Return on CX Investment

"Middleware" is essential to CX ROI

http://clearactioncx.com/return-on-customer-experience-investment/

https://clearactioncx.com/customer-experience-roi-building-blocks/

How to measure content marketing ROI

With content marketing budgets rising rapidly, the onus is on marketing directors to demonstrate that these dollars are being designated to the right discipline.

However, research from the Content Marketing Institute has revealed that less than a third of organisations believe they are successful at measuring the return on investment of their content marketing efforts.

Of course, this problem isn’t unique to content marketing - ROI measurement is problematic across the entire marketing discipline, despite growing demands for measurability. As Richard Armstrong, CEO and co-founder of Kameleon, notes: “Measuring campaigns is a difficult concept. If there was a set of numbers that truly showed marketers how well they were doing in their campaigns it would revolutionise the industry. Revenue may show the short-term impact, but it doesn't take into account the long-term effects such as consumer loyalty.”  

However, there is no question that there are some challenges that are specific to content marketing measurement. And as it is rising in prominence, these need to be addressed.

“Many businesses are using content marketing to raise their profile and build awareness and this has historically been a difficult thing to measure,” says Sarah Gavin, European marketing director at Outbrain. “Despite a huge increase in the volume of content marketing, it still remains a fairly new form of marketing for many brands. As such there are no defined metrics for how to accurately measure the ROI of content. The content marketing industry has also been fairly fragmented, with different tools and technologies making the implementation and tracking of campaigns overly complicated.”

If content marketing is to continue to gain prominence in the marketing mix, businesses will have to get a better grasp of ROI measurement in order to ensure that money is being wisely allocated.

So, with that in mind, what advice can the experts share?

Costs

To accurately evaluate your content marketing ROI, you first have to be able to calculate your costs. Content marketing can be divided into five areas where costs are accrued:

• Planning. These are the strategic costs associated with establishing business goals, identifying business goals and generating personas. These tend to be one-off costs.
• Ideation. These are the costs associated with generating a flow of ideas such as mapping buyer journeys and identifying the kinds of assets that will be required. Again, these are largely one-off costs.
• Production. These are the costs associated with creating the content and the editorial plan. These are recurrent costs that will be incurred on every new content campaign.
• Distribution. These are the costs associated with generating traffic, leads and sales through the promotion and nurturing of the content. Again, these will be recurrent costs.
• Measurement. These are the costs associated with the evaluation and optimisation of the content.

With the production and distribution being the two main contributors to costs, it is worth drilling down into these particular areas.

Stephen Bateman, director and co-founder of Wise Up Media and Concentric Dots, has outlined some useful ways of how to evaluate the costs of producing content.

 “Let’s assume your company decides to invest three solid, 600-900 word, blog posts per week, sourced either from experts, or from members of the senior team. A solid blog post takes an average five hours to research, write, and edit.

“Let’s assume that the average annual earnings of a solid blogger (external or on the senior team) is £45,000 annum. If that person works 45 weeks in the year and 48 hours per week their hourly cost is £45,000/2160 hours = £20.83 per hour.

Hourly expense of solid blogger = £20.83 (NB this includes no charges or overhead). Therefore, the cost of one blog post is equal to £20.83 x 5 = £104.15. The annual cost of blogging at this frequency is £104.15 x 3 blogs week = £312.45 x 45 weeks = £14,060.45 per annum (not including overhead).”

Having produced the content, there is also the matter of promoting and nurturing it, whether this is vial activity on social media or through paid promotion via the likes of Google AdWords. Bateman has the following advice for working out promotion costs.

“For the sake of this costing exercise let’s assume two members of your team spend 90 minutes on content promotion per workday, each. Let’s assume that the average annual earnings of a social media / community manager (internal or agency) is £40,000 per annum

Hourly cost of that person is £40,000/2160 hours = £18.52 per hour (without charges or overhead). Therefore, the cost of promoting content is £18.52 x 1.5 x 2 (people) x 225 days = £12,501 per annum (in this case there is no paid content promotion).”

Using these approaches to evaluating costs in production and promotion, as well as adding in costs for measurement and reporting and so on, you can then arrive at a good idea of what costs you are accruing and what activity you need to produce in terms of leads, sales, etc to ensure that you get a positive return. And this brings us to the next stage.

Setting up analytics to estimate your returns

At its most basic level, the principle behind identifying the value of content marketing is identifying and segmenting users who have viewed particular content, categorising their previous familiarity with your brand, and then understanding that user’s behaviour by comparing it to those who have not been exposed to this content. However, while this sounds straightforward, but this type of analysis can be difficult if you’re not sure what you’re looking for, and how to set up analytics to determine that outcome.

“If you want to measure your content marketing ROI but in a way that gets you the most actionable results, you should plan how you’re going to distinguish the users exposed to your content, then track and compare them with users who haven’t,” advises Tom Wood, director at onebite.

“Google Analytics (GA) can help with this; however, most people believe that GA set up finishes once you have implemented the JavaScript. This is untrue - social media links, campaigns, blog posts and other web collateral on your website needs to be tagged properly or viewers of the content will appear as direct traffic, which does not give you insight into how well a piece of content is going. Additionally, content URLs need to be stripped of parameters otherwise they appear multiple times – making the data much more difficult to collate.”

“To counter this, before beginning any campaign or uploading content onto your site, spend a few hours configuring Google Analytics and ensure that all pages and links are properly tagged and tracked – the results will be well worth the investment of your time.”

By conducting analytics into who is viewing your content, you are able to see not only the quantity of people viewing your content but also make qualitative judgments as to whether you’re targeting the right people. This makes judging the ROI of your content much more reliable, says Wood.

“If you want to make the most out of analytics, use content grouping on GA. This is a fantastic tool that allows you to create buckets of site pages and analyse them together rather than separately – making it quicker and easier to make a judgment. It’s pretty straightforward to set up, but depending on the size of your site you may have to implement some additional coding to get the content grouped properly.

“If you’re an ecommerce site then, on a basic level, you can group category pages, product pages, and content pages rather simply. However, if your content is generated at a campaign level, then this allows you to put together content groups for upcoming campaigns in advance. Grouping categories, landing pages or blog pages that form the basis of your content marketing campaigns means you can single out the performance of the content and measure it across benchmark categories that are not linked to your campaign.”

Wood emphasises that to fully understand the analytics you generate from your content, you must first have a complete understanding of who you are trying to target, and most importantly, all the steps that a user might take before becoming a fully-fledged customer. This means not just measuring the bigger pieces of content but also the smaller content interactions that happen on your site, such as newsletter signups, content engagements or any other user actionable functions on your site.

“Once you’ve started to measure these actions, you are able to set goals and start building a more accurate view of what your user looks like.”

Holistic approach

In terms of a more holistic approach, Danyl Bosomworth has composed a simple matrix of ideas to help set KPIs or metrics, providing a useful framework to help select the best type of KPIs for different markets. This model covers the full range of measures covered from hard sales vs softer engagement metrics.

“Using these different types of measures is even more important for companies with long purchase or repeat purchase cycles, such as automotive, furniture or maybe PCs – and certainly for B2B businesses,” he suggests. “The longer buy cycles require the need to demonstrate ongoing engagement.”

The three measures it covers are:

• Commercial measures: These are the harder business or commercial measures and what usually takes the longest to be demonstrable. These are the measures for the senior managers although they may well also need to know about Likes! Think audience share, sales, leads or at least clear indicators from people such satisfaction ratings or % that fed back. Remember that these need to be incremental and ideally attributable to your content marketing. 
• Tactical measures: These include the views, clicks, interactions with your content – so involves the social shares such as Likes and Tweets. You might also use link shortening tools to help measure. These are hard indicators that your content is visible and worth sharing – so very key.
• Brand measures: These are easier for bigger brands or where there’s less competition, simply because the tools seem to work better in that space. Think brand or key-phrase mentions, sentiment, share of market mentions over competitors and certainly site traffic. These are the bigger needles to get moving and often require a bit more momentum.

Armstrong provides some final brief rules of thumb for ROI measurement.

“In a nutshell, marketers need to put a number on it,” he says. “By clarifying the objectives that need to be achieved prior to planning the creative and distribution, they will ensure that the overall campaign is quantifiable.

“Don’t wait until the end of the campaign, real time insight is vital to optimise and make adjustments whilst the campaign is still live.

“Ensure all communication activity is trackable against the objectives. On social for instance, free tools such as Google, Facebook and Twitter analytics provide a wealth of information on how your content is being consumed and whether those targets are being hit.

“Measurement needs to be tailored according to the objectives of the content. If a content programme targeted at brand awareness is implemented, brands need to be looking beyond content consumption metrics such as video views and page views.”

NEIL DAVEY EditorMyCustomer.com

THURSDAY 5 MAR 2015

Human Capital ROI: Definition, Formula, and Calculation

Posted by Erik van Vulpen

Whether you’re at a dinner table or at a board meeting, the big “V’ word is inevitably brought up when it comes to the topic of Human Capital. In other words, what value does human capital create? After decades of research and debate, there is finally a way to substantially show the value that human capital adds through measuring human capital return on investment (human capital ROI). Advances in good data practices, measurements, and metrics have been able to demonstrate the value of human capital efforts. 

Human capital as a function exists to recruit, develop and retain the very best talent. By this logic, human capital ROI is a fundamental measurement of employee contribution. But what exactly is the definition of Human capital ROI? How do you calculate it, and why should you use this metric? Let’s dive in.

What is human capital?

Human capital (HC) is an intangible asset that is a sum of the economic value of employees’ experience and skills. The ‘capital,’ in this instance, refers to assets such as knowledge, skills, health, education, etc. There is a distinct difference between human resources and human capital. 

Resources often imply that it is a finite source or that it can be exploited (the term has also been associated with materials, manufacturing, etc.). This is obviously not the way ‘human resources’ is seen. However, the association tends to strongly imply the above meaning. On the other hand, human capital implies, for example, wealth that can be invested in. Talentalign created this diagram which shows the various aspects of HR and HC. It illustrates how they are similar but also differ:

What is human capital ROI?

Human capital ROI (HCROI) is a strategic HR metric that reflects the financial value added by the workforce as a result of the money spent on employees (in terms of recruiting, employee compensation, talent management, training, etc.). It shows the value that employees contribute individually or collectively. The metric is a true reflection of the value of the human capital in an organization.

GrowthForce shows an example of HCROI:

The human capital ROI formula

Calculating the return on investment for human capital is complex. It requires you to allocate a financial benefit to a human capital initiative. This is not always as straightforward because how do you actually know that, for example, a learning intervention directly contributed towards an increase in revenue? There are so many variables that could affect the outcome, including market volatility, change in conditions, and even luck. The ROI Institute, however, developed a model that is able to accurately calculate HCROI. Let’s break it down:

Let’s break down each of the main steps: 

• Evaluation planning – This is the part to clearly define the objectives of your human capital initiative. For example: “Hire three IT network developers” or “Implement a talent exchange program in the marketing department” or “Achieve an Employee Net Promoter Score of +20”. 
• Data collection – This is the collection of data pre, during, and after implementing an HC program or action. During this period, you may collect human capital metrics: hard data (which you can do via HC systems) and soft data (which you can gather in employee satisfaction surveys, on-the-job observation, etc.).
• Data analysis – To calculate the ROI of human capital, this is one of the most important steps. You need to analyze data on two fronts:
  • Isolate the effects of the HC initiative or program – This is important because many factors can influence performance, and you want to specifically measure the impact of human capital. There are many ways to do this, including launching a pilot program, using trend lines to show differences, customer input, external stakeholder feedback, and using subject matter experts to analyze effects. 
  • Convert HC data to financial output – This requires the cost of every human capital program to be accounted for and given a value. This is situation-dependent. As an example, due to a training program, an employee might develop an additional product. That additional product is thus converted to a profit or cost-saving, depending on the initiative’s outcome.

Once you have followed the above steps, you will have enough information to calculate the financial return with this formula:

Human capital ROI calculation examples

Let’s use this formula in a few examples of human capital ROI calculation.

Suppose you roll out a health and wellness initiative in the workplace, costing approximately $250,000. Those are your human capital expenses. The savings (reduction in stress, absenteeism, burnout, etc.) you made from this initiative amounts to $750,000. Therefore:

HCROI = ($750,000 – $250,000)/$250,000

             = 2 (represented as a ratio 2:1)

This means that for every $1 you spent on the wellness program, there was a benefit of $2. There are variables you need to consider, of course, when analyzing things in this way (for example, the measurement period of the cost-saving). As long as the data and time frame are consistent, this is a highly effective way to calculate HCROI. 

Now, let’s say the team decides to invest an additional $10,000 in the program, but it results in an additional saving of $150,000. Your formula would look like this:

HCROI = $900,000 – $260,000/$260,000

= 2.46 or represented as a ratio (2.46:1)

So, for only investing an additional $10,000, that’s an additional benefit of 0.46. Over a long period of time, the value saved is almost insurmountable. Using these formulas is a great way of planning and reflecting. You’re able to see the long-term effects that investing a little bit more into your human capital can have on the financial performance of the organization.

Benefits of using the human capital ROI as a metric and KPI

• Understanding the impact of your human capital initiatives. You can see what results your initiatives bring. That way, all your decisions are data-based, and every dollar spent can be accounted for.
• Showing tangible results of HC initiatives to the leadership. Essentially, you’re able to quantify the business impact of your efforts and show it to the leadership. For example, you’re able to directly translate the results of HC initiatives such as a “talent exchange program” to the financial impact on the business. 
• Identifying and filling the gaps in human capital. The data helps you understand where your organization is excelling and where it lacks in terms of human capital. You’re able to clearly see through data what adding or subtracting human capital will have on the business outcome. 
• Improve your HC processes. Through a variety of feedback mechanisms received as a result of calculating ROI, you’re able to improve your human capital management practices and processes. Along the way, you’re able to make adjustments (in real-time as well) and understand specifically which part of the HC process needs improvements.
• Eliminate ineffective HC processes. You’re also able to close or remove any human capital initiatives that are not effective. If, for example, a talent exchange program is yielding no financial benefits after five years, you’re able to close the program or make adjustments along the way. Either way, you’re able to cut down on costs.

A final word

If you want to measure the tangible impact of your HC efforts, regularly calculating the human capital ROI will be very beneficial. Based on the results, you’ll be able to gain new insights, see opportunities for improvement and bring your HC initiatives to the next level.

https://www.aihr.com/blog/human-capital-roi/

Measuring the return on human capital

Smita Anand, TNN 

The goal for a business is simple: Invest capital so that it maximises shareholder value. But, not so simple are the actions that are needed for a business to achieve this goal.

Successful strategy execution depends on access to intellectual and operational knowhow, customer and supplier relationships, a committed workforce, and other such intangibles. At the heart of making these intangibles come-alive is the firm's investment in human capital.

Capital budgeting and financial planning frameworks offer very little to guide human capital investment decisions; yet manpower costs typically constitute a significant component of operating expenses. However, it is possible to calculate return on human capital with factual analysis, which, in turn, can help develop insights into human capital management and generate sustainable economic returns.

The critical thing is to track critical employees. Our research demonstrates that the flow of pivotal employees in and out of an organisation is a strong predictor of change in CFROI® (Cash Flow Return on Investment).

Talent Quotient (TQ™) is a measure of a company's ability to attract and retain critical employees — those who may be thought of as pivotal to business success. TQ measures two key components, (i) the proportion of pivotal employees joining an organisation as a ratio of all new hires in a given period (TQ-Attract) and, (ii) the proportion of pivotal employees leaving the organisation as a ratio of all employees leaving over a given period (TQ-Retain).

Few organisations understand their employee investments beyond the cost of salary and benefits and fewer still understand the return on their investment in employees. The fact remains that most firms lack a basis for structuring or prioritising human capital investments, and a concrete notion of what return on investment is generated over time.

There are many ways to do it. Let us take a look at a potential area of application, i.e. measuring ROI on talent retention strategies implemented by an organisation.

Measuring ROI on these strategies (e.g. long term incentives, compensation increases, etc.) could appear to be complex, but it actually is a simple task if one de-constructs the key elements that need to be tracked and correlated.

Let us assume that for our purposes 'critical talent' is those employees who are in the top 25% on performance. This would likely translate into these employees also being the top 25% on compensation increases for the time period (this is the investment made by an organisation). The objective should be to ensure that the organisation is able to retain this group of employees better than the rest of the employee population within the organisation (because it has invested more in this segment).

Thus, a way to measure this in a quantifiable manner could be: ROI on talent retention = 1 – (attrition rate of critical talent/attrition rate of all employees). In a market that is constantly witnessing an upsurge in salaries and shortage of skilled workforce, such measurement would enable organisations to invest in human capital in a focused manner. There are other similar simple constructs that explore the viability of talent attraction and other retention investments. The next logical step would be to establish benchmarks and develop predictive tools to help guide organisations make the right investment decisions.

If one were to look beyond the technicalities of any one particular approach, the basic need is for organisations to apply rigor in calculating the returns on the multi-million dollar investments they make each year in their employees and the ways in which they can do so.

Companies need to measure the value that employees bring to the organisation, evaluate their impact on business performance and then align them with the business results. Companies have always measured their investments in more tangible assets such as buildings, equipment and even new products. Why should talent be far behind?