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If You Just Count Your Customers as “Speed
Kills,” You’ll Kill Your Business Growth.
by Jeanne Bliss
Used with permission
Organic customer growth drives long-term profitability. But
without up-to-date information trending profitable versus
non-profitable customers and issues driving the best
customers away, CEOs and their businesses are unable to
manage customers as assets.
As internal leaders of each silo report and recommend
customer actions separately, CEOs react to the random issues
landing at their feet, rather than focusing on key issues
eroding customer loyalty and customer profitability. They
lack one unified view of how customers are voting with their
feet: deciding if they'll stay or leave your company, based
on the experience you're delivering. This is where the
customer commitment falls apart, because what's actively
asked for, measured and rewarded doesn't always line up with
what's good for customers.
So why isn't understanding and managing customer
profitability as important as quarterly sales goals? We've
made it too difficult to measure how we're making progress
with customers and customer experiences. The easily
understood and well-defined quarterly sales goals win out
and stay top of mind.
One business-to-business company was typical. Executives
were counting the number of customer accounts but not the
flow or the quality. The sales team was led by an ex-fighter
pilot who sent off the sales force on what sales reps
actually called "speed kills." They were fired up to get as
many customers as they could, as fast as they could. But
they weren't keeping track of the difference in the value of
business each new customer would bring. To them, one unit
was one unit. Customers had become widgets.
Each speed kill carried the same weight on the tote board
used to measure success. The sales team exceeded its goal
for new accounts that year, but sales became a drag on
profits, which actually declined. They hadn't focused on the
profitability of customer accounts, just the number of them.
And no one actively identified, prioritized and eliminated
issues driving profitable customers out the door.
I call these "guerrilla metrics" in my book, Chief Customer
Officer: Getting Past Lip Service to Passionate Action. They
are "guerrilla" because often a campaign is necessary to
propel the organization into understanding the customer
end-game and supply leaders with a platform to stand behind
and reinforce. They establish a language for CEOs in how
they ask about customers. They are a potent first step to
kick-start or re-energize a faltering customer "focus." They
work because they clear through the clutter usually
encountered in the drive for customer experience and
profitability, including inconsistencies in defining,
reporting, and managing the state of relationships with
customers and focusing on survey administration to the
detriment of driving action and accountability.
Guerrilla metrics give leadership five questions for
commanding customer accountability inside their
organizations:
1. What are our new customers, based on volume and value?
Ask about the volume and value of your incoming customers as
often as you ask about sales goals. You may find that you
are tracking incoming customers across a multitude of
company areas—with conflicting definitions of what it means
to be a new customer. The wild card here is whether or not
you have achieved alignment in how customers are classified
inside your system. The part that's not likely to be tracked
is the quality of incoming customers. This is especially
important as the market becomes more saturated and new,
profitable customers are harder to come by.
2. What are our lost customers, based on volume and value
and reasons for defecting?
The volume and value of lost customers needs to be paired
with the new customer information to lay out the true
situation for your company. You must reconcile "customers
in" with "customers out" to know how well you are doing with
managing customers as an asset of your company. In addition
to knowing which customers left, you need to know the
reasons why they don't care to do business with you anymore,
so you can drive change across the business.
3. Which customers renewed, at what rate and why?
You'll need to define customer behaviors that constitute
renewal or the commitment to continue doing business with
you. Understand patterns that indicate loyalty based on
continuous purchase habits. You must ask why customers are
staying with you to ensure that you personally know what you
are delivering to customers that they value—and to ensure
that you are aware when these reasons shift or begin to
erode.
The "with reasons" part of these metrics is key to taking a
leadership role in demanding focused actions to drive
customer profitability, rather than reacting to random
pitches that come across your desk.
4. What is the revenue and profitability by customer group?
Getting to this classification of customers is not trivial.
Understand the movement of customers from one profitability
group to another, so you can strategically lead the customer
agenda. Your goal should be driving efforts that cause your
costliest customer groups to decline and those most
profitable to grow. If you are not demanding that the
business be tracked this way and if you do not ask for
accountability around these metrics in the regular language
of meetings, it won't happen. Aligning this data to achieve
a regular pattern of accountability around customer
profitability patterns will take some time, but stay the
course. It will optimize your ability to manage customers as
an asset of your business.
5. What is our referral rate by customer segment?
If your customers are willing to stick their necks out
vouching for you, they have become your marketers. Keeping
these customers, growing them and developing other customers
like them are key. If you can track the rate of referrals in
general, and by customer group, you'll know the strength of
your ongoing revenue stream before you even spend another
dollar on marketing. Companies completely focused on
customer profitability will learn how referral rates differ
by customer group and reasons for not referring. They will
rigorously apply this learning to constantly adjust and
improve.
Guerrilla metrics will create your customer scoreboard. With
this simple "customer math," you can elevate high-priority
customer issues, and get your board to sanction investments
required to keep them. |
