This blog is written to add value for business leaders, who are responsible for operations and financial outcomes. Benefits this blog will give you are an understanding of linking operational metrics to financial outcomes through customer loyalty. You can use the insights from this blog to take action to improve your financial outcomes based on full linkage of operations to customers to finances.
We need to start from the operational metrics. These can be any metrics you use to quantitatively measure your operations. You should then link those to customer touch point and brand perceptions to see which ones are correlating. You can then connect this information to Net Promoter Score results and financial outcomes. Lastly you can connect the desired quality thresholds to control the customer experience created through the operations.
Now, this may sound quite complicated. And some of it is that, but there are already well-established mechanisms available for connecting this information, it is just applying that information in the right way.
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These are the steps you need to take to connect the matters discussed earlier. To connect operational metrics to customer touch points and brand perceptions you use statistical mathematics to find those variables that correlate. The second step is to build an action impact model, which enables you to test the impact of touch point improvements to Net Promoter Score. Then you can quantify the financial impact of those changes in customer loyalty and derive the necessary quality thresholds that allow efficient resource allocation. After you have done all this, you have combined all the needed links between the different matters to create one operational system.
I understand all this is fairly advanced level and not all organizations can do this, due to lack of needed data. But you should keep this in mind so that you can work towards accumulating all the necessary information. What you need to have are operational metrics, customer touch point perceptions, Net Promoter Score and financial information. The last part can be found from almost every company, but one or many of the former metrics may be missing.
Why should you bother yourself with this kind of things then?
Linking these metrics together will combine the good sides of each metric. Operational metrics are the ones that employees’ work is measured against. Operations are the way the customer experience is produced at the end, so that is why it is important to understand how those metrics link to financial outcomes for the company. Touch point metrics related to customer experience and brand satisfaction will be the reward given by the customers based on your operations. Customer loyalty leads to customer’s buying more and recommending to their friends and colleagues (measured through Net Promoter Score).
Understanding how changing operational parameters will affect customer loyalty and therefore finances is very valuable information for any business when planning on how to improve the operations. This doesn’t take the “guessing” completely out, but still gives one of the best ways to predict how changes on the operational side will impact the business based on customer behaviour.
Let’s make all this a bit more concrete with examples. Most industries will benefit from one overall model that links operations to customer loyalty to financial outcomes. But let’s talk about insurance sector and how changing some core operational metrics could affect their business. Let’s say that the insurance company wants to change some part of their policy. This company is already measuring related operational, touch point, brand perception and Net Promoter Score metrics. What we can do now, is first to see whether the specific operational metrics are correlated to customer touch point perceptions. Those that are, we can further connect with Net Promoter Score and referral economics. We know how changes in Net Promoter Score will affect finances and then we know the drivers for Net Promoter Score. And since we were now able to connect the operational metrics to those drivers, we can simulate changes in the policy and see how that might affect the financial results. How accurate this model will be depends on the data this insurance company has in use for this purpose.
So, keep on working on your data and have a system in place which enables you to connect all relevant operational, financial and customer loyalty data.
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