Edition 20

Customer Metrics Every Organization Should Track and Measure

16th February 2010 By Laura Patterson no comments

The value of establishing and tracking customer loyalty and engagement is that they provide some effective leading indicators into how your customers are going to behave.

A survey by SAS and Peppers & Rogers Group polled 150 senior executives from leading US corporations to gauge their customer experience management capabilities. The results, published in the first annual Customer Experience Maturity Monitor study, found that only 39% of the study’s companies rated their capabilities as ‘good’ or ‘excellent’ in predicting a customer’s likelihood to purchase, cancel or defect. The study found those companies that have better customer experience management capabilities enjoy a distinct competitive advantage and outperform their competition. The survey also noted that customer-centricity is growing as a key strategic concept and that companies are beginning to incorporate customer metrics as key performance indicators. There are three customer metrics we recommend you include in your marketing executive dashboard: customer trust, customer loyalty, and customer engagement.

With the renewed emphasis on customer, there are six customer relatedmetrics that every company should be familiar with and know how to calculate: Churn/Attrition Rate, Customer Retention Equity, Share of Wallet, Customer Trust, Customer Loyalty, and Customer Engagement. Here’s a quick summary of each of these:

1. Churn rate is a measure of customer attrition.  Today, companies realize the value of focusing on and investing in keeping customers. Churn is a commonly accepted statistic related to customer retention (source: “Leading on the Edge of Chaos”, Emmett C. Murphy and Mark A. Murphy).Data shows that companies with high retention grow faster. Knowing how many are defecting and why is the reflection of knowing how many are staying and why.

2. Customer Retention Equity/Lifetime Value.  In most businesses, existing customers are the most valuable assets that a company has. Most surveys across industries show that keeping one existing customer is five to seven times more profitable than attracting one new one (source: “Companies Don’t Succeed - People Do!”, Graham Roberts-Phelps).

3. Share of Wallet and Potential Wallet Value.  Many businesses use “share of wallet” as a way to improve their understanding of where added value may exist among their customers. The wallet of a customer is defined as the total amount this customer can spend in a specific product category. The share-of-wallet then is how much they spend with a particular seller.  By understanding the total wallet and the share-of-wallet you can identify which customers are the most “loyal” and which customer have the greatest growth potential. Both the ratio and the actual difference is important – the first tells us the share of wallet and the second the potential value.

4. Customer Trust - A study by the CMO Council found that some 99% of customers surveyed said they would either scale back or terminate relationships with vendors who fail to build customer trust. The Oxford Dictionary defines trust as “a firm belief in reliability, honesty, veracity, justice, strength of a person or thing; reliance on truth of statements without examination; confident expectation; accept without evidence.” Trust implies an absolute and assured resting on something or someone; often suggesting a basis upon other grounds than experience or sensible proofs. Results from the annual Edelman Trust Barometer, which surveys nearly 2,000 opinion leaders in 11 countries found that the most important factor in building trust is “Quality products and services.” In addition, trust is built through frequent interactions. These interactions are your opportunity to build trust. How are you measuring customer trust?  And when was the last time you mapped all your customer touch points and the frequency of interaction per touch point?

5. Customer Loyalty - Behavior is more important than attitude.  Customers show their loyalty by the direction of the feet.   Are your customers staying or defecting?  Do they serve as advocates for your company?  Do they proactively endorse your company, its products and services?  What customer behaviors can you measure and impact that demonstrate the company is improving customer loyalty? You will want some way to measure loyalty. There are a number of approaches to help you measure loyalty.

6. Customer Engagement - Engagement should be defined by customer response. Gallup Consulting developed a series of 11 questions that measures both a customer’s rational assessment of a brand as well as their emotional attachment.  In addition to questions related to how a customer is to continue to choose/repurchase [brand] and how likely they are to recommend [brand] to a friend/associate, responses to questions related to confidence, pride and passion are used to determine the emotional attachment. This might be a good resource for you to explore.

VisionEdge marketing are currently running their annual Marketing Performance Measurement (MPM) Survey. For all those that take part, they are giving away:

a complimentary copy of our new MPM Best Practices White Paper

a complimentary copy of the MPM Survey’s Highlights Report

PLUS, a chance to win a $50 Gift Certificate from Amazon.com

For your input, and a chance to win, CLICK HERE.

About the author: Laura Patterson

Laura Patterson is president and co-founder of VisionEdge Marketing, Inc, a leading data-driven metrics-based strategic and product marketing firm located in Austin, Texas. 

The company specializes in consulting and learning services that help organizations use data to make fact based decisions to address market, customer, and product opportunities and to improve and measure marketing performance.

For more information, go to www.visionedgemarketing.com

Check out Laura’s newest book, Metrics In Action:  Creating a Performance-Driven Marketing Organization, published by Racom Communications.

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