The perennial cry of CEOs around the globe is that understanding what customers need and want and delivering on it is their A-1 mission. Yet customers are having a harder time than ever getting service from the companies they do business with, regardless of how much they spend or how long they’ve been customers. Recent research validates the pain customers are in:
According to a report from Datamonitor, 86 percent of 3,200
- Almost every U.S. consumer surveyed (96 percent) had a negative service experience in the past year, with 80 percent subsequently severing the relationship, according to the Customer Experience Report, a study published by Harris Interactive and RightNow Technologies.
- Zenith Research reports 92 percent of retail organizations have a customer service rating of 70 percent or worse.
- Customers are turning to gripe websites such as www.ripoffreport.com, www.planetfeedback.com and www.gethuman.com actively, loudly and in great numbers.
For many CEOs, a frenzied awareness of a problem leads to an even more frenzied approach to solutions. As internal leaders report and recommend customer actions separately, CEOs react to the random issues landing at their feet.
At one highly regarded financial services company, for example, marketers charged with improving customer loyalty sold their CEO on a customer assistance program that involved up-selling and cross-selling customers who called in for service help regardless of who they were, why they were calling or how profitable or loyal they were. Just the week before, front-line operators had been exhorted to build personalized relationships with each call-a tactic sold to the CEO a month earlier. Meanwhile, the new up-selling program incented keeping calls to a talk-time limit. The result? Operators would try to build rapport and then, as talk-time dwindled, rapid-fire offers to up-sell and cross-sell, alienating some of their best customers in the process.
Taking Hold of Customer Profitability
Organic customer growth drives long-term profitability. So why isn’t it as important to you as quarterly sales goals? The customer commitment typically falls apart because what’s actively asked for, measured and rewarded doesn’t always line up with what’s good for customers. The easily understood and well-defined quarterly sales goals win out and stay top of mind.
A classic example is the business -to- business company that counted 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 “speed kills,” or getting as many customers as possible, as fast as possible. But they weren’t tracking the value of business each new customer brought. Customers had become widgets, with each speed kill carrying the same weight on the tote board used to measure success. As a result, the sales team exceeded their goal for new customer accounts that year, but sales became a drag on profits, which actually declined.
Leaders who “own” the customer agenda don’t stand for that myopia. Harrah’s Entertainment, the renowned casino and hotel company, has become a model for how to integrate metrics and action across a company to drive the growth of important customer segments and develop customer profitability. Harrah’s has a consistent set of “Guerrilla Metrics,” measurements that propel the organization into understanding the customer end-game and supply leaders with a platform to stand behind and reinforce. At Harrah’s, these include customer segment growth, successful host contacts (people who serve priority customers), first-year return on investment by property and overall priority customer (
Five Customer-Focus Questions
These five questions establish a language for CEOs in how they ask about customers and place the customer front and center on the agenda. They are a potent first step to kick start or reenergize a faltering customer focus, because they clear through:
- Inconsistencies in defining, reporting and managing the state of relationships with customers.
- Practices that focus on survey administration and negotiating survey scores rather than driving action and accountability.
1. How many new customers are you attracting and what is their value? Track the volume and value of your incoming customers as closely as you do sales figures. The part that’s not likely tracked is the quality of incoming customers-a critical element as markets become more saturated and new, profitable customers are harder to come by.
2. How many customers are you losing; why and what is their value? The volume and value of lost customers needs to be paired with the new customer information to assess the true situation for your company. In addition to knowing which customers left, you need to know why they don’t care to do business with you anymore so you can drive change across the business. Without this information, the organization misses a massive opportunity to galvanize people into taking action.
3. Why are your continuing customers loyal to you? You’ll need to Marketing.NT.8.1.qxd
4. What is the profitability of each customer group? You need to 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. Getting this data in line to achieve a regular pattern of accountability around customer profitability patterns takes time, but ultimately will optimize your ability to manage customers as an asset of your business.
5. Are your customers vouching for you? If your customers are referring new business to you, they have become your marketers. Keeping these customers, growing them and developing other customers like them are the key. You need to know how far you are down this path of building a customer base that would refer you. 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 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.
Drive Your Customer Accountability Platform
It’s not enough to simply have the metrics-it’s what you do with them that matters. You need to take them out of the hordes of reports and paperwork and put them front and center as part of your personal mantra. There is nothing like public accountability to take the mystery out of what’s important to you and motivate performance by:
1. Laying out the Guerrilla Metrics to your leaders and begin asking for them within one week.
2. Giving a drop-dead date for when you want to know the baseline metrics.
3. Building a customer accountability room, visually mapping each metric and its performance.
4. Holding a walk-through in which you require accountability from your leaders as to why this is occurring, how it can be resolved and when.
5. Repeating the walk-through quarterly or monthly to ensure that change occurs.
Metrics For Board Meetings
Finally, you can use Guerrilla Metrics to redefine business success with your board, based on how well you are performing in keeping priority customers and driving their growth. Customer management issues being elevated to the board level are on the decline, according to “Bringing Customers into the Boardroom,” a November 2004 Harvard Business Review article, which reported that over a third of large U.S. companies revealed that their boards spent less than 10 percent of their time on customer-related or marketing issues. You need to be clear with your board that managing the value and trend of profitable customers is not negotiable.
Guerrilla Metrics can be used as a tool to define, quantify and connect the dots for them on why customers must be discussed and managed as a key asset of your corporation. Guerrilla Metrics will give the perspective you need so you can elevate high-priority customer issues and get your board to sanction investments required to keep them.
Jeanne Bliss is the author of Chief Customer Officer: Getting Past Lip Service to Passionate Action and managing partner of CustomerBLISS (www.customerbliss.com).
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