How Palo Alto Software Used Metrics to Improve Service

A question posted on the Inside Customer Service LinkedIn group recently caught my attention. Celeste Peterson, a Customer Advocacy Supervisor at Palo Alto Software, asked:

What do you think are the most important metrics to track for a small customer service team?

There were a few nice responses. Celeste's question intrigued me personally because I've heard it a lot recently and even wrote this blog post about it. So I reached out to her and we eventually set up a call that included Sean Serrels, Palo Alto Software's Director of Customer Advocacy

During our conversation, we discussed what the company's executives were most concerned about when it came to customers. I learned that company leaders were particularly concerned with reducing customer churn for its LivePlan online business planning software.

LivePlan is a subscription-based software as a service product, so customer churn (when a customer cancels their subscription) represents a loss of recurring revenue. 

I gave them a few suggestions and Celeste promised to follow-up and let me know how things went. Here's their update.

Palo Alto Software's Customer Advocacy Team

Palo Alto Software's Customer Advocacy Team

Jeff: What's new since we had our conversation?

Celeste: "Since we talked, we did some brainstorming, particularly about reducing churn for LivePlan. Our Development team informed us of data they've collected about groups who churn more than others, and we've made some changes to try to reach out to those groups and give them more attention.

"For instance, we noticed that a lot of the churners seemed to feel like they had to get in, complete their plan in the first day, and then not come back. Those that came back a second, or third day in the first week, were way more likely to stay for at least 90 days. 

"I wondered, do new users who communicate with CA in the first week churn less than new users who don't? If so, how can we reach more of those users?"


Jeff: It's a smart idea to start with a few questions and then dig into your data to find the answer. What did you learn?

Celeste: "Sean added live chat triggers to the page in the app where people are setting up their business plan the first time they log into their new account. [Editor's note: this means customers are invited to start a live chat session with a customer advocacy agent when they reach this page.]

"We've been getting lots of questions from users via those chats. Many request help changing their account settings, or finding the features they’re interested in, and we have been able to help them with that instantaneously, which produces satisfied customers. We also use the information gathered from those chatters to create or edit our Help Center content. If a few users have questions about a feature, others probably do, too. 

"We've also added a chat trigger on the cancellation page of the app to see if we can resolve anything someone is frustrated about before they click the cancellation button! Those chats have been very active, too. 

"Another purpose for these chats is to try to get more feedback from users who are canceling so we can learn more about what causes churn. We share that feedback with our development team. Sharing data and customer feedback with other departments is an important part of what our Customer Advocacy department does. The data we received from the Development team about churn helped us decide where to best implement new chat triggers, and the feedback we receive from those users helps the Development team decide what changes to implement in the app."


Jeff: Connecting with customers right when they need you is a great idea! Has this made an impact on customer churn?

Celeste: "We have to have patience to wait and follow cohorts to track how it's affecting churn, but we'll take a look at those users down the road and see if they are staying longer than people who didn't chat with us when they started. Overall, our churn has recently decreased, so we are excited to stay the course.

"We are discussing ways to change our delivery or framing of responses to maintain a positive user experience, even if a feature was not what that user expected.

"For instance, we discussed better ways to respond to people who were confused about the annual pricing. The site explains the lower monthly price and that it's 'billed annually,' but sometimes a customer complains they weren't expecting the 12 months of charges to hit their bank account at one time. 

"In the past our customer advocates apologized for the confusion and offered to convert the account to a monthly one. Now, rather than immediately addressing their confusion and apologizing, giving a negative impression, we empathize, and focus on the positive, that the annual subscription provides the benefit of a 40% discount by collecting for 12 months in advance. We also let the customer know that we're happy to convert it to the monthly option or cancel and refund if they prefer, since we have a 60 day money back guarantee. With that positive framing, along with collaboration with the marketing team to test various wording on the sign up page, we’ve been seeing a decrease in churn and refunds of annual subscriptions."


Jeff: You mentioned earlier that it will take awhile to see if your overall churn rate improves. Are there any other metrics that are giving you more immediate feedback?

Celeste: "An important metric for Customer Advocacy and preventing churn is our customer satisfaction rate. Our average rate has been a wonderful 97% this year, but I did notice, by looking at metrics for satisfaction and first reply time simultaneously, that there is a strong relation between the two. 

"We are often at 100% satisfaction when our first reply time is below 8 hours. Most of the unsatisfied ratings happen around Monday when we have a larger email queue built up over the weekend when we're closed. I have adjusted our schedules and workflow to try to keep the first reply time low on Sunday and Monday, and we achieved a complete week of 100% positive satisfaction survey results, recently."

Jeff: In Chapter Six of The Service Culture Handbook, we learn how customer-focused leaders use metrics differently than most managers. Celeste, Sean, and the rest of the Customer Advocacy Team at Palo Alto Software provide a great example.

They are learning more from customers by going beyond the numbers to see what story the data is telling. This, in turn, gives them actionable insights they can use to improve service and ultimately drive more revenue.

How to Choose the Right Customer Service Metrics

"What are the best metrics for my customer service team?"

It's a question I'm frequently asked. In some environments, like contact centers, leaders have access to so much data it can be overwhelming. In other situations, customer service leaders don't feel they have enough data.

So let's settle one question right here: there's no single metric that's best for every situation.

The trick is to figure out which metrics will be most useful for you, your team, and your business. It's like being a detective who is looking for clues to solve a mystery. The clues themselves only make sense when they help you crack the case. (Now is a good time to think about exactly what case you're trying to solve!)

Here's a guide to help you pick the right metrics along with a few caveats.

Ask Questions, Then Find Data

The biggest mistake customer service managers make when selecting metrics is they think about metrics first without considering what problem they're trying to solve.

You'll be much better off by asking a few questions and then finding metrics that provide an answer. Here are three questions that can help:

1. What does your boss care about? By boss, I really mean the executive that the customer service function reports to. Executives usually have a hot button issue that they're very concerned about. For example, I recently had the metrics conversation with a customer service leader when he showed me an email from his company's president discussing a customer retention problem.

I advised this leader to look for metrics that were directly connected to retention. Were customers more likely to defect if they experienced a particular issue, contacted the company a certain number of times, or had to wait a certain period of time for service? It will take some digging to find the answer, but when he does, this leader will be able to help solve a problem his company's president cares about.

Find a business issue your boss really cares about and then find a metric that describes how your team can help. 


2. What is your customer service vision? Elite customer service teams have a shared definition of outstanding service called a customer service vision. (If you don't have one yet, create one with this handy guide.) 

It's helpful to have a metric that tells you how well your service is meeting your vision. This is often a customer service survey (here's a guide for that), but it doesn't have to be. A wholesaler client of mine uses order accuracy as a key metric because of the headaches that inaccurate orders cause its retail customers. Mistakes on orders also cost the company money to fix, so there's a direct financial incentive to improve as well.


3. How do you evaluate individual contribution? At some point, you'll need to decide how you'll evaluate individual performance. The counterintuitive trend is to find metrics that evaluate behaviors rather than outcomes.


Let's say you want to evaluate employees by their average customer service survey score, which is an outcome of a service interaction. The challenge is you may find employees doing things you don't want them to do to make their metrics look good. One of the worst behaviors is survey begging, where an employee pleads with a customer to give a good survey score.

A better approach is to focus on the behaviors that drive good survey scores. For example, perhaps you notice an employee doesn't offer a warm greeting 37 percent of the time. You know first impressions are key to customer satisfaction, so you have a coaching discussion about greeting customers the right way. Help the employee improve their performance and you'll see survey scores go up.


A Few Caveats

Here are a few lessons about goal-setting that I've learned the hard way.

  1. Fewer is better. The more metrics you track, the harder it is to focus on any one thing. Here's a short video that demonstrates how difficult it is to focus on multiple items.
  2. Existing data is better than new data. It generally takes a lot of effort to collect new data to feed your metrics, so you can be more efficient if you first try to use the data you already have.
  3. Set good goals, not bad ones. We often set goals around key metrics. That's OK, but make sure your goals fit the good goal criteria if you want to drive the right behaviors.

13 Ways To Calculate The True Cost of Customer Service

You've heard the heady numbers.

For example, a 2014 NewVoiceMedia study revealed that U.S. businesses lose $41 billion per year due to poor customer service. You see that number and think, "Wow! Let's get on this customer service thing!"

Your executives aren't as excited. 

They like the idea of good customer service. They're just reluctant to invest in improving it. Things like creating a customer service vision, implementing a more useful survey, or training employees cost time, money, and resources.

New flash - three things executives don't like spending are time, money, and resources.

So, how can you get your executives' attention? General statistics won't do it. You need to put some real numbers on how customer service is affecting your business.

Here are 13 ways you can calculate the true cost of customer service.



Your executives are much more likely to listen if you can convincingly show them that investing in better customer service will generate more revenue.

These examples won't apply to every situation, so try to find one that works for yours:

Repeat Business. Start by identifying your churn rate (the percent of customers who leave). Use your Voice of Customer Program to estimate how many leave due to poor service. Calculate the lost revenue.

Average Order Value (AOV). This statistic works great in environments like retail where service has a direct impact on sales. Determine the average value of a single order. Identify specific ways that improved service could increase that number. Calculate the additional revenue you could gain.

Sales Per Hour. I like this metric even better than AOV for situations where hourly employees are generating sales. You pay employees by the hour, so why not calculate how much revenue they generate per hour? Determine the current rate, identify factors that will improve it, and calculate the potential revenue gain.

Lifetime Value. A customer who spends an average of $50 may not be impressive. But, what if they spent $50 every other week and could reasonably be expected to remain a customer for ten years? That customer is suddenly worth $13,000 to your business. Calculate the average lifetime value for your customers and you'll see exactly how important they are.

Returns. Customer service can prevent products from being returned due to customer error. Better customer education can lead to better customer satisfaction with your product. Estimate the percentage of your returns that could have been prevented. Multiple this percentage by the dollar value of your annual returns. This calculation, known as preventable returns, represents the potential saved revenue due to improved service.

Lost Sales. Poor customer service can cost you sales in a number of ways. Rude employees and long lines might cause customers to abandon a planned purchases. A phantom stockout (where the item is in stock, but can't be found) can also cause customers to leave empty-handed. Calculate the revenue lost to these problems and you might have a case for investing in service.



It stands to reason that better service will reduce costs. The trick is showing your executives exactly how this happens in your business.

Here are a few examples. Try to see if any are relevant to your business.

Service Discounts. Companies often give customers freebies or discounts to compensate for poor service. For example, a restaurant might offer a free dessert when a meal is poorly cooked. Calculate the cost of these discounts and estimate the potential savings you could achieve by reducing the problems that cause them.

Employee Attrition. Customer service employees don't like to play for a losing team. Turnover often improves when employees feel they are empowered to help their customers. Calculate the cost of turnover (including recruitment, training, and lost productivity costs). Estimate the savings you could achieve from reducing turnover by a reasonable amount.

You'll need to know your labor cost per contact for the next few examples. This is your employees' fully loaded salaries (including taxes and benefits) divided by their average contacts per hour. 

For example, if you pay a customer service agent $15 per hour (including taxes and benefits) and they handle an average of 10 calls per hour, then your cost per contact is $1.50.

Contact Reduction. Identify the top reasons why customers contact you. Determine whether there's a problem you can solve that would prevent customers from needing help. Estimate the number of contacts that could be reduced by solving that problem and calculate the potential savings by multiplying the number of contacts saved by your cost per contact.

First Contact Resolution (FCR). Determine the percentage of issues that are resolved on the first contact. (Here's a handy guide from Oracle.) Improving FCR means reducing wasteful contacts. Set a target for FCR improvement and use your cost per contact to calculate the projected savings.

Escalation Rate. Complex contacts often get escalated from a less expensive source to a more expensive source. For example, escalating an issue from chat to phone costs extra money. Start by identifying the number of escalations for a specific time period (week, month, quarter, etc.). Next, multiply this figure times your cost per contact for the more expensive channel. Finally, estimate the potential savings you could achieve from reducing escalations by a reasonable amount.



You can also acquire more new customers through better customer service. See if either of these examples will work for your business.

Referrals. Track the number of new customers you gain via referrals from existing customers. (You can also use a Net Promoter Score survey to gauge your customers' likelihood to refer.) Calculate the value of these new customers using Average Lifetime Value or a similar statistic. Estimate the revenue gain from improving your referral rate.

Online Rating. Your business's ratings on online review sites like Yelp and Trip Advisor directly correlate to new customers. One study estimated that a one-star increase in a restaurant's Yelp rating leads to increased revenue of 5 - 9 percent. You can put together a business case for improvement by making some reasonable assumptions about the value of enhancing your company's online reputation.



I realized I've covered these metrics at a very high level. You might be looking for some additional guidance. Here are a few resources to help you out:

  • Check out this case study on sharing KPIs with executives.

  • Leave a question in the comment box and I'll do my best to answer it.

  • You may also contact me directly with your questions about performing these calculations.

Finally, this post is part of an on-going series about the connection between operational excellence and customer service. You can read the other posts here.

How to Share KPIs with Executives

This post was originally published on the ICMI blog.

A busy contact center needed to hire more agents.

The manager presented her case to the executive team. Her proposal focused on key performance indicators (KPIs) that indicated the contact center was short staffed:

  • Long hold times
  • High abandon rates
  • Poor service levels

The manager was disappointed when the executive team rejected her proposal. She thought she had put together a strong case based on compelling data.

So, what went wrong?

The short answer is the contact manager focused on the wrong KPIs. Here's how to identify KPIs that executives truly care about.

Step 1: Target Hot Buttons

The first step is to figure out what issues executives care about the most. I call these "hot buttons."

There's no single answer here. Take the time to ask them directly. Listen carefully to the types of questions they consistently ask you.

Let's go back to the busy contact center. Executives there cared most about cost containment. They had recently invested in some new marketing initiatives and needed to rein in spending in other areas.

The manager's hiring proposal was rejected because she didn't directly address cost containment. In fact, it raised a red flag because hiring more people would increase costs in the short run.

A more successful strategy would have been to illustrate how hiring more agents would save the company money over time. For example, adding staff might improve first contact resolution, reduce discounts given for poor service, and cut down on customer churn.


Step 2: Link Executive Hot Buttons to KPIs

The next step is to link KPIs to the issues your executive team cares most about.

Here's how a different contact center leader successfully pitched hiring new agents to the company's CEO.

The manager started by recognizing that cost containment was the CEO's hot button issue. In particular, the CEO often asked about the volume of overflow calls sent to an outsourced contact center. (This was because calls sent to the outsourcer were more expensive than those kept in house.)

So, the contact center manager focused on the percentage of calls kept in house as a KPI.

Using this KPI, the contact manager was able to show that hiring more agents would reduce costs. Saving money was music to the CEO's ears and he quickly approved the plan.


Step 3: Create Clear Reports

Executives don't have a lot of time to read dense reports. They need clear reports that are easy to read. 

A great example comes from Lupe Zepeda, Customer Service Manager at CSA Travel Protection. 

She met with her executive team to identify and agree upon the KPIs they were most interested in seeing. Zepeda then created a report that was easy to skim and scan, but also contained additional information.

Here's the format: 


The report is shared with executives on a monthly basis. (That's their preferred time frame.) It provides a clear snapshot of the contact center's performance and allows executives to quickly identify any areas of concern.

The smiley column on the right hand side is a best practice. Some people worry that a simple, color-coded smiley graphic is too silly for an executive report. Executives actually like it because it tells them at a glance whether or not the KPI is on target.


Getting Started

Sharing KPIs with executives doesn't have to be difficult. Just keep in mind their primary purpose. They're called Key Performance Indicators because they're designed to provide a quick snapshot of performance.

You'll do well if you can use KPIs to show executives how your contact center is contributing to organizational goals and the specific issues they care about most.