What is a lagging indicator?

A lagging indicator is a metric that measures past performance and is "output-oriented." It confirms a pattern that has already occurred. The Net Promoter Score (NPS) is a classic example of a lagging indicator because it measures customer loyalty and satisfaction based on their past experiences with a product or service. An increase in NPS indicates that previous efforts to improve the customer experience were successful, thus reflecting a historical outcome rather than predicting a future one.

A. An increase in the number of trained users is a leading indicator, as it measures an activity that is expected to predict future success, such as higher adoption or satisfaction.
B. Adoption of a product is typically considered a leading or concurrent indicator. It measures current customer engagement, which predicts future outcomes like retention and expansion.
C. The development of a new product is a business process or input, not a customer-facing performance metric that measures a past outcome.

1. Cisco, "Customer Success Manager (CSM) 820-605 Exam Topics (v1.0)," Section 3.3, "Describe the key metrics to measure success." This section covers the distinction between metrics that track progress (leading) and those that measure results (lagging), with satisfaction scores like NPS falling into the latter category.

2. Blanchard, O. (2021). Macroeconomics (8th ed.). Pearson. Chapter 2, "A Tour of the Book," introduces the concepts of leading, lagging, and coincident indicators in an economic context, which provides the foundational definition. Lagging indicators, like the unemployment rate, follow an economic change, just as NPS follows a change in customer experience.

3. Kaplan, R. S., & Norton, D. P. (1996). The Balanced Scorecard: Translating Strategy into Action. Harvard Business Press. In Chapter 5, "Measuring the Customer's Perspective," the authors differentiate between leading indicators (performance drivers) and lagging indicators (outcome measures), classifying customer satisfaction as a core lagging outcome measure.