The challenge with customer experience efforts is that they are often perceived by leadership as having no clear (simple) metric for understanding progress in numeric business terms. Business leaders manage by the numbers and it is reasonable for them to want a gauge for this work. We inadvertently have complicated matters by introducing surveys as the benchmark we want leaders to manage to. In our quest to make this connection, there has been a proliferation of smart analysis done to establish correlations between lift in survey score results and increase in loyalty and ultimately customer profitability. Smart work (but really complicated)and it still leaves leaders questioning the financial connection.
Many companies don't go back and prove out if the hypothesized correlation between survey scores and growth delivered. If they do, the results are presented in a mathematical equation that failsto inspire widespread leadership action or clarity on what actions to take. These mathematical equations still do not deliver an easily understood connection between customer focus efforts and the "show me the money" business impact – which nearly every customer experience leader receives at some point.
During my crusades as chief customer officer in the largest corporations, and in coaching customer leaders, what cracks this code is to create a connection with leaders between experience and profitability. I call it simply "customer math." In my book, Chief Customer Officer, I gave the handle "Guerrilla Metrics" because it really does help you in your quest to elevate customer metrics to the same level as sales goals and quarterly revenue targets. But you need to explicitly drive the connection between how these two are connected to get leaders to pay attention. Uniting how you measure customers as assets across the company does that for you.
And here's why: It's simple. And it's powerful for leaders to talk about. Creating the competency for building a "one company" version of this customer math drives passion across the organization and establishes a simple rallying cry for leaders. It gives your leaders a galvanizing message to help people understand the end game with customer experience. But to do this, you must be diligent about how you measure the growth or loss of that customer asset.
Step 1: Establish this Simple Version of Customer Math for Your Business
This means getting inside your databases with all of the operating units and gaining alignment. It is likely you have multiple versions of what 'new'and 'lost' customers are. It's critical to connect these definitions and the data so that you can tell the organization (the entire organization) on a monthly, quarterly, and annual basis how the outcome of your customer experience has grown or shrunk the customer asset. Start with the data you have and come up with a first articulation of your customer math. Engaging your CFO in this effort is tremendous here, as these folks can be found to be cynical about the impact of customer experience. Bringing them on board early in this effort pays off.
Critical checkpoints: For many companies, since every silo frequently has varying definitions, putting together these simple articulations of"incoming" and "outgoing" customers requires:
1. Alignment in definition (What is an incoming customer? What is an outgoing customer?)
2. Alignment in data and databases
Step 2: Talk to Lost Customers
This is a powerful culture boost activity as well as an information gathering action to attach customer experience to ROI. My suggestion is to have your leaders all call lost customers as part of this process. I encourage this to be done at least quarterly. Remove the fear factor that leaders often face in this by telling them that their job is to primarily listen. Once a customer realizes that it is really a leader of the business calling to apologizefor the reasons that made him leave and wants to know why…the conversation will come naturally.
In addition having executives call; employ your service folks or others available to call asubstantial number of lost customers to get a handle on the trends and to prove enough volume in critical areas, so you can map these to the stages of your customer experience journey.
Step 3: Create the Connection between Experience and ROI
The power in creating the connection between the expansion and shrinkage of the customer asset is in the deliberate connection to the experiences that impact customer math performance.
To accomplish this, collect and map customer feedback gathered from sources across your customer lifecycle to identify experience failures and determine which experiences and interactions drive customer and revenue departure.
These sources are rich in helping you identify the trouble spots:
1. Feedback acquired through contacting lost customers
2. Trending of complaints
3. Closed-loop feedback with detractor customers (if you employ Net Promoter)
If you do not actively conduct departing customer conversations, I strongly suggest that you begin now. Because explicitly making the connection between the volume and value of lost customers and the experiences that drove their revenue out the door is what leaders need to explicitly create the connection between experience andmoney. That experience drives growth. When you make this happen in a simple and explicit manner,you will get the attention of leaders. Customer growth and customer asset management will (finally) become as important and be discussed with the rigor of sales goals and quarterly revenue targets.
Often the response received when introducing customer math to an organization, is "oh we do that—we track retention." The challenge is that those numbers are embedded somewhere in the sales score cards or a line item in a proliferation of other score card items. And retention rates have the risk of delivering a false positive. If you are standing steady at 70 percent retention, leaders don't think about the incremental growth and profitability that could have been realized if the customers who left hadn't. If you are holding steady, you are constantly working just to fill the leaky bucket of that customer asset flowing out the bottom.
Take Action: Reconcile "Customers In" with "Customers Out" to know how well you are managing customers as an asset of your company.
Go to the post Managing Customers As Assets to get more specifics on what comprises a good starting set of Guerrilla Metrics and a worksheet to determine where you are now.