To effectively use CES for customer segmentation with CES, it's vital to first grasp its core principles and implications for growth.
Customer Effort Score (CES) is the percentage of customers who report that it is difficult to satisfy a given step in their Job-to-be-Done. We use our proprietary and patented Jobs to be Done (JTBD) method to assess the speed and accuracy with which customers can execute their jobs. A high CES indicates significant customer struggle, pointing to unmet customer needs.
At thrv, we define customer needs as direct action/variable pairs. For example, a customer trying to manage their investments might need to "determine the current market value" of an asset or "calculate potential tax implications." CES helps us quantify how difficult it is for them to accomplish these needs.
Reducing customer effort is directly linked to loyalty and increased spending. Our AI-powered platform enables our portfolio companies to identify where customers struggle most, creating clear pathways for product innovation. For our portfolio companies, lowering CES is a direct path to enhanced customer retention and increased equity value. High effort not only drives customers away but also inflates service costs.
We measure CES by surveying customers about the difficulty they experience when trying to satisfy specific needs in their Job-to-be-Done. Our approach focuses on three measurable criteria:
We calculate CES as the percentage of customers who report difficulty satisfying each need. This quantitative measure allows our portfolio companies to track improvements in speed and accuracy over time, directly linking customer struggle to product development priorities.
A high CES (indicating a high percentage of customers experiencing difficulty) is a clear signal of customer struggle. This isn't just a problem; it's a significant opportunity. High CES scores pinpoint exactly where product innovation or process improvements are most needed. These are the areas where customers are experiencing friction in getting their job done, and often, where they are most willing to pay for a better solution.
Our proprietary Jobs-to-be-Done (JTBD) methodology, powered by our AI platform, enables our portfolio companies to move beyond generic CES scores to insightful CES segmentation.
We guide our portfolio companies to categorize customers based on their CES scores related to critical job steps:
Low-Effort Segments: These customers can execute their job steps quickly and accurately. They represent efficiency and are likely loyal.
Moderate-Effort Segments: These customers encounter some friction or delays in getting their job done. There's room for improvement in their experience.
High-Effort Segments: These customers face significant challenges, frustration, and difficulty in executing their job steps. They are at high risk of churn but also represent a prime opportunity for innovation.
Crucially, we integrate CES data with an understanding of the value associated with the Job-to-be-Done. This leads to more powerful segments:
Once segments are identified, we work with portfolio company teams to profile them by pinpointing the specific unmet customer needs causing high effort. For instance, a High-Effort Segment attempting to "manage a software development project" might struggle with needs like:
Understanding these specific needs, formatted as action/variable pairs, is fundamental to developing targeted solutions. Learn more about thrv's JTBD methodology.
CES segmentation allows our portfolio companies to focus resources where they will generate the highest returns.
This segment is pivotal for driving growth and increasing equity value. Customers in this group are trying to accomplish something important to them but are finding it difficult with current solutions.
Identifying Unmet Needs: Our JTBD process precisely identifies the job steps where they struggle, such as the need to "ensure data accuracy" or "locate critical information."
The Willingness to Pay Signal: High effort is a strong indicator of unmet needs, and unmet needs often correlate with a willingness to pay for a superior solution that executes the job quickly and accurately. These customers are implicitly signaling a demand for innovation.
Product Innovation: We guide portfolio companies to develop product features or new offerings that directly address these high-effort needs, transforming customer struggle into a competitive advantage. This is central to our approach to product innovation.
For customers who find it easy to get their high-value jobs done:
Reinforce Loyalty: Continue to provide effortless experiences to maintain their business.
Identify New Opportunities: Explore adjacent Jobs-to-be-Done or new features that could provide additional value with minimal effort.
For customers experiencing some difficulty:
Targeted Improvements: Implement specific enhancements to product features or processes that are causing moderate effort.
Proactive Communication: Offer guidance or support for known points of friction to improve their speed and accuracy.
Customer segmentation with CES provides the foundation for highly relevant personalization of product roadmaps and customer interactions.
This involves tailoring product development and customer touchpoints based on the effort levels identified within different CES segments. The goal is to systematically reduce effort where it's high and maintain ease where it's low, particularly for high-value jobs.
CES data directly informs product strategy within our portfolio companies:
Prioritize by Effort: Features that address customer needs with high CES scores, especially for High-Value, High-Effort segments, are prioritized. For example, if customers struggle to "configure system preferences" (a high CES need), features simplifying this configuration move up the roadmap.
Inform Marketing and Sales: Product teams can communicate to marketing and sales how new features will "reduce time to complete X task" or "improve accuracy of Y calculation," enabling them to target messaging effectively.
Insights from CES segmentation help portfolio companies refine how they interact with customers:
Proactive Support: For segments known to struggle with specific job steps (e.g., onboarding, complex configurations), proactive support, tutorials, or guided flows can be developed.
Process Simplification: Identify and streamline internal processes or customer-facing workflows that contribute to high effort scores.
This strategic application of CES insights is how we create equity value within our investments.
thrv employs a structured process, supported by our proprietary AI-powered platform, to implement CES segmentation within our portfolio companies. Our AI capabilities significantly accelerate data collection and analysis, giving our portfolio companies a critical speed advantage. Explore thrv's software platform.
Focusing on Generic Metrics: Many companies track overall CES without linking it to specific job steps or customer needs. Our JTBD framework ensures CES is tied to actionable insights.
Not Quantifying the 'Why': Simply knowing effort is high isn't enough. Our process identifies which specific needs ("determine eligibility criteria," "calculate total expenses") are causing the effort.
Failing to Act on Data: CES data is only valuable if it drives action. Our operator model ensures insights are translated into product roadmaps and process improvements within portfolio companies.
Q1: How does CES segmentation differ from other segmentation methods?
CES segmentation specifically groups customers based on the effort they expend to get a job done. While demographic or behavioral segmentation provides context, CES directly measures friction and struggle related to specific tasks, offering a clearer path to product innovation aimed at improving speed and accuracy.
Q2: What is a "good" CES score for a portfolio company?
A "good" CES score depends on the industry and the specific Job-to-be-Done. The key is continuous improvement and reducing the percentage of customers reporting high effort. thrv helps portfolio companies benchmark and set realistic improvement targets based on their specific markets and customer needs.
Q3: How often should portfolio companies measure CES?
CES should be measured transactionally (after specific interactions or job steps) and periodically (e.g., quarterly) to track trends. For high-impact job steps, more frequent measurement might be warranted, especially after product changes aimed at reducing effort.
Q4: Can CES segmentation help identify customers willing to pay more?
Yes. Customers in High-Value, High-Effort segments are often prime candidates. Their struggle to complete an important job indicates an unmet need. If a product innovation can significantly reduce their effort (improve speed and accuracy), they are often willing to pay a premium for that improved experience.
Q5: How does thrv's JTBD methodology boost CES segmentation?
Our JTBD methodology provides the crucial framework for CES. Instead of just asking about general effort, we measure effort against clearly defined customer needs (e.g., "identify the root cause," "determine the next step") within specific job steps. This precision makes the CES data far more actionable for product development and marketing, directly linking customer struggle to innovation opportunities.
Customer Effort Score, when integrated into a robust Jobs-to-be-Done framework, transcends being a mere metric. It becomes a strategic compass for customer segmentation with CES, guiding our portfolio companies to identify unmet needs, pinpoint high-potential customer segments (including those willing to pay more for less effort), and drive focused product innovation. By systematically reducing customer effort in getting their jobs done, we help our portfolio companies build stronger customer loyalty, accelerate growth, and achieve superior equity returns.
At thrv, we implement our JTBD method and CES analysis to accelerate growth in our portfolio companies. Our AI-driven approach eliminates guesswork and aligns every initiative with measurable growth objectives. To understand how we can help your technology company achieve superior equity returns, request a consultation.