I have a favorite saying that all relationships end up somewhere, but few relationships end up somewhere on purpose. Think about it for a minute. You have a variety of relationships in your life and in your interactions with businesses. Some are merely transactional and have no longevity to them – my dry cleaner for example. Great person. Easy to get along with. But if I’m honest, I’m not working to purposefully develop a relationship with him. My two sons, on the other hand… with them it’s about teaching them about life everywhere we go, in all possible situations. It’s about nurturing them to grow up from boyhood into effective male leaders in society. There is purpose. There is intention. The same holds true for our businesses. If we’re beyond the warm fuzzies of chants about customers being number one and if we’re beyond placards and signs that say our customers are first; if we’re truly serious about building a culture that puts others first – namely our customers – then it’s critical that we get intentional and purposeful about building relationships with them.
So, the first question becomes, how do we measure a relationship? Is there a way to quantify how strong or weak or how purposeful or haphazard a relationship is? This week I’m going to address three different approaches you can take to measure customer relationships. This will help you change your company and change how you view customer relationships.
1. Attitudes. This is the classic approach to measuring customer relationships and most commonly shows up in the form of “customer satisfaction.” There certainly is a lot to be said for measuring attitudes. Social science literature is replete with examples of how attitudes motivate human behavior. I want to challenge your thinking around attitudes in two aspects. First, attitudes are typically viewed as rational – how satisfied a customer is, for example. The emerging consumer research shows that customers are also influenced by their emotions. In fact, in purchase decisions – even B2B purchase decisions – it often outweighs the rational factors. The second point is this – if I’m measuring attitudes what I’m really getting is a leading indicator of the customer’s behavior, but not the behavior itself. If I really want to tie my business results to a measurement, then the actual behavior of the customer is what drives results – in the form of more revenue or more profitability – not the attitude.
2. Behavioral intent. This has become a popular approach to moving beyond attitudes. Companies now survey customers asking questions about how likely they would be to do something. Examples include, “How likely are you to purchase again from Brand X” or “How likely would you be to recommend Brand X to a friend or family member”? These questions are getting much more to the heart of the matter. They are measuring the intentions of customers, rather than just the attitudes. By getting a stronger measure of intent you’re starting to progress towards a measurement you can tie to financial outcomes. The risk here is that behavioral intent does not necessarily equal actual behavior. A customer may well say they would recommend you, but never actually do it in practice.
3. Actual behavior. If you’re trying to measure how strong a relationship is, this is the pinnacle. Don’t look at what the customer says or what they say they will do, rather examine their actual behavior. By looking across your click trails on the web, your call center logs, your customer purchase data, your customer utilization files, your CRM databases, etc., you’re able to develop a composite of what actual behaviors a customer is doing that indicate the strength of the relationship. For example, if you’re a bank, you can look at which customers who have checking accounts are also opening credit card accounts. You can take that further and see how much utilization they have of their credit card – are you the first card in their wallet or number two or three? You can look at mortgage application data to see who’s trying to extend the relationship further. Connecting disparate systems of customer data together can yield powerful insights about your customers.
The all-around best approach is to balance leading indicators of the relationship, like customer attitudes, with lagging indicators like actual purchase behaviors that can be tied to financials. Building a complete measurement system for customer relationships should encompass all aspects of the relationship. But the real key, beyond the metric you apply, is that you have to take action and get purposeful about how you are building relationships with customers. It’s not enough to merely measure what’s happening – you have to deliver positive experiences for your customers that add value to the relationship every day. The benefits are high – lower churn, more referrals, more cross-selling opportunities and stronger relationships.
If you want to go further, this article and other information related to customer measurements is available in a DVD format with a discussion guide for teams. Check it out at http://www.beyondfeedback.net/measuring-up.html.