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Are Your KPIs Leading You to a Disaster?
Posted on June 5th 2014
A few years ago, when I would mention “customer experience” to business people, I often received the same response. Smiling, nodding, then changing the subject or brushing me off completely. It just wasn’t important enough to them at the time.
Back when the economy was booming, sales were undoubtedly the name of the game. But most key performance indicators (KPI’s) still look something like this:
- Sales Per Day
- Sales Per Week
- Sales Per Month
- Annual Sales
- Net Revenues
- Leads Per Sale
While slowly but surely companies are beginning to realize there is value in not just ACQUIRING the customers, but RETAINING them, we still have a long way to go. If all of your KPI’s are focused on getting new customers, you can bet your organization does not have a customer-centric culture.
I once worked with a company that was so very proud of their KPI culture. They had fancy real-time dashboards prominently promoted throughout their headquarters via carefully placed flatscreen monitors. A daily report was delivered to every manager. I kid you not, these guys could answer to a tenth of a percentage point about the various sales-focused data they were tracking.
One thing stood out to me, however.
The reports, dashboards or conversations did not mention the word customers anywhere. Success was measured by customer acquisition and, of course, dollars and cents. What about the customers who defect to competitors? Well, that was more difficult to track.
I believe this is still the case in most organizations. I believe most executives depend on KPI’s that focus solely on hard data such as profits, loss and sales. And while I do believe this data should be included, If you don’t mention customers, or track significant metrics around them, then you are blinding yourself to impending disaster.
If your organization doesn’t have customer-centric KPI’s, here is a short list of where to start:
1. (CLV) Customer Lifetime Value
I’d like to refer you to this well-done infographic by KISSMetrics detailing the various ways to calculate this metric: How To Calculate Customer Lifetime Value. If determining your CLV is too daunting, you can at least get an idea of your customer churn rate.
2. Customer Satisfaction and Loyalty
I am wholeheartedly partial to tracking loyalty, which is based on actual customer behavior, versus mere satisfaction, which is based on what customers say. If you start with satisfaction, it’s something. But keep in mind, customers rarely tell you what they really think.
3. Customer Sentiment
This one can be less scientific, but it’s important to start tracking what customers are saying about your brand via social media and other channels. They tell their networks about their dissatisfaction, distrust, and plans to defect long before they tell you. Construct your social customer watchtower and listen in! You will see the disaster coming before it hits home.
4. Customer Engagement
It can be difficult to create metrics around this, too, but you can tie this back to actual customer behavior. When customers visit your web site, what are they doing? Do their page views lead to conversions? It’s all there to review in your analytics.
There are many other ways to track customer metrics, and the right ones can vary from company to company. But the important thing is to always put your customer front and center, no matter what. You can’t do that if you never mention customers in your KPI’s.