The edge your business needs in today’s market
KPI-Centric has always been a common approach of leading businesses in the modern world, however, the real competitive edge in the twentieth century is innovating towards becoming customer-centric. As competition rises and monopoly declines, the only real edge left is maximizing the value of every customer relationship.
As per Forrester Research, organizations in industries ranging from airlines to health insurance have the potential to achieve hundreds of millions of dollars in revenue when providing better customer experience and added-value. The increase in revenue as per the research seems to be driven mainly by increased purchases, reduced churn, and improved word of mouth promotion.
Both Amazon and Zappos are primary role models in this arena.
What are companies doing wrong?
Companies are too focused on traditional KPIs (Internal KPIs) such as:
- Sales Per Day/Week/Month
- Annual Sales
- Net Revenue
- Revenue per department
- Cost per department
These KPIs are what I consider as “90s indicators.” They’re helpful but too mainstream, too traditional, lack both innovation and creativity still many companies tend to stick to them to manage their firms. All the while believing it’s enough to create growth and gain significant market share.
Most companies especially those in the service sector only have their dashboard full of the traditional and common quantitative KPIs with an internal focus such as sales, profit or cost. These are important but certainly not enough!
Are we just neglecting the qualitative factors? Or do we lack the expertise in translating those crucial qualitative factors into quantitative KPIs on our dashboard?
The technological wave has disrupted many businesses since the nineties and easy access to technology has made it easier for competitors to penetrate new markets, demanding more focus on delivering value to customers.
The question is how do we measure such value?
Companies need to become more customer-centric, by measuring the right KPIs if they wish to stay ahead of the competition or even ensure their longevity in the market. Below is a snapshot of certain objectives that could be targeted to attain customer centricity in an organization.
Figure 1: Goals towards delivering customer centricity.
In today’s competitive world, there are certain key indicators to evaluate in order to increase customer-centricity and deliver better value to customers:
- Customer Lifetime Value (CLV)
- Customer Equity
- Customer Satisfaction/Loyalty/Engagement
These KPIs might look more qualitative and harder to quantify, however with today’s technology such data could easily be gathered regularly with the help of tools such as NetSuite Business Intelligence without much administrative efforts, quantified and presented onto business intelligence for better-informed decisions.
Customer Lifetime Value (CLV) measures how much a customer is worth over their lifetime, In short, the amount a specific client is going to spend throughout his relationship with a company.
It is the single most important metric for any customer-centric organization especially for service companies where their source of income depends primarily on customer relationships. For organizations that think of customers as their primary asset, measuring the value of this investment over time is a crucial metric. CLV is extremely important because firms tend to look at customers as a one-time thing, hence providing value only during the initial stages when they were converted from a prospect into a customer.
E.g.: A customer might spend $50,000 USD initially but then nothing after six months, however, you could have another customer spending only 25,000USD every year for ten years.
Which one would be categorized as a privileged customer? Certainly many would say the second one but practically all the efforts go towards the first option. The question is why?
CLV prevents such misjudgments and allows companies to analyze their customers correctly and allocate their efforts to the right assets.
The next big question would be the factors affecting CLV. What do we do to retain those customers with a high CLV?
Seeing the CLV of customers increasing surely demands the need to be questioned. It could simply mean that the company is acquiring more valuable clients or the retention strategy in place is radically increasing in terms of effectiveness of every new customer. This varies across industries and the product being offered however, it gives an excellent indication of the company’s strategies towards growing its quality customers and its revenue/market-share. Similarly, a company that sees its CLV decreasing might want to explore strategies to acquire different types of customers such as from different lead sources or different industries, in different geographical locations or even put a cultivation and retention strategy in place to boost the value of its customers.
But at the highest level, CLV is a “weather vane” that indicates whether all that the marketing team is doing — investing across different acquisition channels, putting retention strategies in place to keep customers coming back — is resulting in more meaningful, profitable long-term customer relationships. Assessing the real value being delivered by marketing and the business development team are never easy, however, CLV helps to bring the ROI of those departments to justice.
Furthermore, Customer Equity works in collaboration with CLV and represents the total value of all the customer relationships created in a given period. It’s equal to the number of new customers per period multiplied by the CLV of those clients.
While CLV alone offers visibility into the value of newly acquired clients, customer equity, on the other hand, provides a broad view of how much customer value the company is creating and whether it is striking the optimal balance between quantity and quality of new customers acquired. CLV is crucial as it shows how much of the efforts of sales and marketing team is going into acquiring and retaining high-value customers.
Customer engagement is also very high on the priority list of senior executives because of the quantifiable links among customer experience, loyalty, and revenue. The most successful organizations are adapting metrics and processes to reflect a more personalized customer-centric perspective. Repeat purchase rate is the easiest way of quantifying the loyalty of customers. As for customer engagement, it could easily be quantified through customers being actively in discussion with the company within a certain period of time. Generally speaking, if your customers are not quiet, they should be engaged and active.
How do you achieve this?
A CRM (Customer Relationship Management) system like the one we use at Big Bang ERP allows us to have a 360-degree view of our Leads, Prospects, and Customers. Such cutting edge tools allow tracking of information to feed your business intelligence, allowing you to have full visibility in real-time of your CLV, Customer Equity, Customer Engagement, Loyalty and more.
The most effective way of meeting client demands for positive customer experience is to utilize these detailed metrics regularly in tandem with the usual operational metrics. By being able to create an illustration of the customer-centricity, employees across departments gain a much deeper understanding of the customer experience and value being delivered. Account managers or those in direct relation with the customer are able to react swiftly seeing those values approaching a certain threshold on their dashboard. They are primed to influence and optimize customer engagement and, if need be, change existing processes and procedures.
Organizations can today employ more dynamic customer journey mapping solutions by leveraging new analytics platforms to capture, analyze, and correlate customer interactions, behaviors, and journeys across all channels. These new engagement analytics platforms allow for real-time information to reflect the inevitable changes in customer interactions and behaviors. Because customers use so many communication channels—often simultaneously—organizations need a single view of the customer journey, pinpointing areas of opportunity and deficiency, and developing actionable strategies to address them.
Dynamic dashboards, advanced data visualization tools, and sophisticated engagement analytics capabilities are now helping leading organizations to truly understand and affect the end-to-end customer journey. But these insights need to be applied and used by employees who interact with customers as well as back-office employees, who sometimes have a huge impact on these interactions as well. This emerging new space is called Customer Engagement Optimization, which combines advanced analytics capabilities with engagement management solutions that include unified agent desktop powered by contextual knowledge management for the front and back office, as well as optimized self-service solutions that are constantly fed by analytics insights.
In summary, delivering a better customer experience is imperative in today’s world to keep your competitive edge, and having a customer-centric strategy is a must for many companies whether they are in retail or the service industry. Why not simplify the process by updating your business tools to stay a cut above the competition?