Customer Metrics: Measure what matters most to customers

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Key Customer Metrics


As business leaders we tend to pay a lot of attention to the metrics important to the business, that is, revenue, cash flow, profitability, growth and so on… but the real drivers of these business outcomes are customers.

So the obvious question becomes what customer metrics should I be tracking to make sure my business metrics continue to head in the right direction?

Well there are a number of key customer metrics that must be considered for every business:

1. Customer Satisfaction

As a first step it is important to track customer satisfaction, this will provide some inputs as to how well the business is performing on delivering what it promises. But remember customers have already paid for satisfaction, they expect to get what they paid for. So high levels of dissatisfaction are an obvious and immediate cause for concern.

Satisfaction is not enough, even highly satisfied customers can and do switch to alternatives so it is important to also look at Loyalty and Advocacy. That brings me to the next question (Fred Reinhold calls the “Ultimate Question“) How likely are you to recommend us? Loyal customers not only bring you repeat business, they also expand your customer base through positive word-of-mouth.

2.Net Promoter Score

The net promoter score is a simple tool designed to identify 3 types of customers, promoters (advocates with strong positive word of mouth), detractors (negative word of mouth) and those in the middle. The goal is to drive up the number of promoters as a way of driving business growth.

Many of the most customer focused businesses in the world use NPS, see below a list of the current top 10 Netpromoter scores in the US:

USAA – Banking = 87%

Trader Joe’s = 82%

Wegman’s = 78%

USAA – Homeowners Insurance = 78%

Costco = 77%

USAA – Auto Insurance = 73%

Apple = 72%

Publix = 72%

Amazon.com = 70%

Kohl’s = 70%

Source: Satmatrix

3. Customer Value Analysis

This is a more advanced metric specifically looking at the value a customer places on what you offer. Value consists of an equation that includes CUSTOMER PERCEPTIONS of price, service and product quality. Customer value analysis looks directly at how customers view your business vs. your competition and provides you with valuable information on what you might need to adjust in terms of both product and service quality, as well as price, to increase market share and revenue. For a free example and a spreadsheet tool on Customer Value Analysis you can visit our easyLearn site here.

4. Life Time Value of Customers

I talk about this in some more detail in these two posts:

Part 1: Understanding Lifetime Value of Customers

Part 2: Calculating Lifetime Value of Customers – a simple example

Something not covered however were some of the inputs to Customer Lifetime Value which in themselves are useful metrics:

Customer Acquisition metrics include customer awareness levels, the information sources customer use to make purchase decisions, and cost of acquiring a customer.

Churn (%) measures how many customers are leaving, that is, customer attrition. Churn is a commonly used metric related to customer retention. Specifically this is about knowing how many customer are defecting and why.

Customer Complaints are usually an early warning signal that something is wrong. Most customers will not complain they will just take their business elsewhere. Complaints although often difficult to hear are a gift that can help course correct.

What Criteria should I use when deciding on Customer Metrics?

  1. The metric drives business results
  2. The metric correlates strongly with business results
  3. The metric is something you can influence
  4. The metric can be measured accurately
  5. The metric can be measured consistently
  6. The metric can be measured cost effectively
  7. All the stakeholders agree the metrics meet these criteria

Ultimately you want to choose the right metrics for your specific business, they should be tailored to the unique business drivers and business strategy.

Why implement customer metrics?

Tracking customer metrics is important for many reasons, but the most important reason is cultural. It gets everyone on the same page, aligns people across the different parts of the business, and leads to a customer focused culture of success. You should celebrate wins when a key customer metric reaches a new and important milestone. Choosing the right metrics and celebrating progress against them are incredibly important to building a strong customer culture that can work together and grow rapidly.

If you want to dive in a little deeper on reliability and validity of these measures here is a great post from Bob Hayes on some of the technical considerations of customer metrics

What customer metrics are you using?

Republished with author's permission from original post.

Christopher Brown
Chris Brown is the CEO of MarketCulture Strategies, the global leader in assessing the market-centricity of an organization and its degree of focus on customers, competitors and environmental conditions that impact business performance. MCS works closely with the C-Suite and other consulting groups to focus and adjust corporate vision and values around the right set of beliefs, behaviors and processes to engender more dynamic organizations, predictable growth, and customer lifetime value. In short we help leaders profit from increased customer focus.

1 COMMENT

  1. Christopher –

    Enjoyed your blog; however, that said, I’d urge some real cautions, and a little guidance, regarding your recommended measurement protocols. Here, for example are three of them:

    1. Customer Satisfaction – Satisfaction principally measures attitudes and opinions, and is usually tied to evaluation short-term transactional events rather than relationships. It’s fairly indicative; but satisfaction often correlates poorly to actual business outcomes, especially when compared to such metrics as customer advocacy and loyalty behavior.

    2. NPS – Net Promoter has been adopted, even institutionalized, into many organizations. In fact, several of our clients use it. Though receiving broad acceptance and promotion, the metric has been found. through multiple scientific studies with rigorous analysis, to have less applicability and actionability where growth and actual business outcomes are concerned. Including my own blog from last year (http://www.customerthink.com/article/customer_advocacy_behavior_personal_brand_connection), drawn from my 2011 book on customer advocacy, there have been several CustomerThink blogs, and many blogs beyond, which explored the relative value of NPS as a metric. Here are two of them:

    http://www.customerthink.com/blog/sorry_nps_i_m_not_buying_it

    http://www.customerthink.com/blog/the_net_promoter_score_let_us_not_forget_the_past

    3. Complaints – Through research, companies need to identify a) what complaints haven’t been expressed and b) why, i.e. what impediments to expressing them, haven’t these complaints been conveyed. As you note, whether in b2b or b2c, received complaints are often from a relatively small percent of customers; and they can be significantly misrepresentative of the problems which most impact customer behavior.

    Here’s a measure you didn’t identify, but which is an important ‘marker’ or ‘trigger’ of future customer behavior. It’s perceived performanance change over time. If performance is perceived to have improved, there’s strong likelihood that the relationship will continue. If the performance is perceived as having remained the same, that suggests ambivalence and the beginning of relationship complacency and breakdown. If performance has declined, this correlates closely with attrition and potential churn.

    Finally, your blog title has me a little perplexed. From where most of my clients sit, the metric should mostly connect to actual business outcomes at a high and consistent level. You’ve also endorsed this. Monetizing customer behavior, on a long-term basis, is what is most important to them. The 7 criteria you use at the conclusion of your blog say this very well; and I would add that metrics also need to be contemporary and real-world, to reflect what is actually influencing customers, and how they make product and service selection decisions, today.

    Michael Lowenstein, Ph.D., CMC
    Executive Vice President
    Market Probe

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