Here are several excerpts from a very good article by Neil Davey, editor of MyCustomer.com, Customer metrics: What should you measure?:
“Be careful what you wish for,” the saying goes… “you might get it!” And this could be particularly apt when it comes to customer data.
There’s been a spike in the demand for customer metrics recently. Firstly, an increasing number of CEOs are recognising that non-financial measures such as customer satisfaction are as important to their investors as traditional financial figures, a fact emphasised in Deloitte’s 2007 study ‘In the Dark’. But equally as significant is the increasing accountability that is being demanded of marketers, with the sector being asked to demonstrate its value now more than ever.
What CEOs and marketers may not have realised until this point, however, is the enormity of the task that faces any firm trying to cut a swathe through the mass of customer data that is at their disposal. Put simply, companies are up to their eyeballs in customer information – and they don’t necessarily know what to do with it.
A broader focusAn oft-quoted problem associated with transactional data – as with focus on similar financial measurements such as profit margins – is that it encourages leaders to drive their firm using ‘the rear view mirror’.
“Purchases, repeat visits, length of call time… many companies track key performance indicators (KPIs) to monitor the successes and failures within the business – including customer satisfaction and churn rates – but the data produced only tells you what has happened and nothing about the underlying drivers of these trends,” says Gary Schwartz, VP of product marketing at Confirmit. “The CRM industry is based on examining historical purchase behaviour in order to unlock the secrets and predict purchase behaviour but more often than not, however, repeat purchases are simply a function of lack of other choices!”
Clearly the quest for a single customer metric that holds the key to success for every company is a futile one. Behavioural metrics and experiential metrics have an important role to play alongside the more traditional ones for the modern business. But different metrics will hold a different value for different firms. So is there a way to establish the most important metrics specific to your firm?
Getting the metrics mix right
One approach is the balanced scorecard. The balanced scorecard, arguably the most widely-used management framework of the last 50 years, allows firms to take all the potential metrics available and weight them and then track them over time. The process would, for instance, involve firms drawing up a list of key customer goals – perhaps customer satisfaction, new customer acquisition, customer retention, customer loyalty, fast response, efficiency, reliability or image – and then creating a number of metrics to measure success in the fields – which could consist of a focus on customer satisfaction index, repeat purchases, market share, on-time deliveries, returned orders, new customer acquisitions or perceived value for money.
Certainly firms need to take some action to wrestle control of their customer data – a problem that has been especially exacerbated by the internet. “There are a few hundred new metrics available to firms that they can capture that they didn’t have a few years ago,” agrees Neil Morgan, VP marketing EMEA, Omniture. “It’s the biggest change I’ve seen in consumer marketing. Most traditional business people are struggling to interpret it or action it. The big requirement is to be able to raid this, adapt these metrics and make them useful in a business.”
But Shaw insists that there is a dawning realisation amongst some firms that the focus should be on quality – not quantity.
“We used to get a bucket load of data, now it is like having a fire hose pointed at us – and firms don’t know what to do with it,” he concludes. “A radical rethink is needed. Companies need to take an axe to research and cut the stuff that is not illuminating the decision-making process. The enlightened companies are already doing this. They are asking themselves what decisions they are taking – whether it is to do with direct marketing, or pricing, or how much they advertise, or product/service quality. And then they are asking themselves what they can actually do about something like service quality and how they can measure if that has an effect which ultimately finds its way back to the financial results of the company. And unless it throws some light on the way that service or price or whatever hits the bottom line, then these enlightened companies simply won’t be interested in that research.”
The rest of the market, however, may yet be rueing the day they wished for more customer data…
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