May 26, 2006

News & Opinion: Guerilla Metrics

By: 800-CEO-READ @ 3:34 PM – Filed under: Management & Workplace Culture

Can you hear that? Its the shot being fired into the air by CEOs the world over saying that they want focus on the customer. CEOs now know that customer profitability is the Promised Land, the final frontier of validation that theyre running their business well. However the quest for how to get there remains elusive. Frequently the CEO hasnt thought through how accountability for customer experiences and customer profitability will be wired in. In the absence of clearly redefined metrics and methods for accountability, nothing changes.

See if you recognize your company in this example: A home builder declared its mantra to be customer partnership. Customer revenue, it was predicted, would dramatically climb as customers would come to rely on the builder for services such as move-in support, spring cleaning, fencing, security and ongoing warranty and maintenance. The revenue upside and future rates of customer profitability were calculated. Only thing was - accountability metrics didnt change to direct focus of customers and customer partnerships. They were still home sales, quarterly sales goals on upgrades and costs of running the business. Customers were lost in the shuffle.

Besides the standard sales goals, that home builder should have also been asking for the Guerrilla Metrics. Thats because the Guerrillas give CEOs five questions for driving the business toward customer relationships and customer profitability:
  1. New Customers; Volume and Value?
    Ask about the volume and value of your incoming customers as often as you ask about sales goals. You may find that you are tracking incoming customers across a multitude of company areas - with conflicting definitions of what it means to be a new customer. The wild card here is if you have achieved alignment in how customers are classified inside your system. The part thats not likely tracked is the quality of incoming customers.
  2. Lost Customers: Volume and Value and Reasons
    The volume and value of lost customers needs to be paired with the new customer information to lay out the true situation for your company. You must reconcile Customers In with Customers Out to know how well you are doing with managing customers as an asset of your company. In addition to knowing which customers left, you need to know the reasons why they dont care to do business with you anymore so you can drive change across the business.
  3. Customer Renewals with Reasons
    For this to have relevance for your company, youll need to define customer behaviors that constitute renew or the commitment to continue doing business with you, according to your business model. The key is to understand patterns which indicate loyalty based on continuous purchase habits. You must ask for reasons why customers are staying with you to ensure that you personally know what you are delivering to customers that they value and to ensure that there is awareness when these reasons shift or begin to erode, and actions are taken to reverse the trend.
  4. Revenue and Profitability by Customer Group
    Getting to this classification of customers is not a trivial project. 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 wont happen.
  5. Referrals by Customer Group
    If your customers are willing to stick their necks out vouching for you, they have become your marketers. Keeping these customers, growing them and developing other customers like them are the key. If you can track the rate of referrals in general and by customer group, youll know the strength of your ongoing revenue stream before you even spend another dollar on marketing. Companies completely focused on customer profitability will learn how referral rates differ by customer group and reasons for not referring.

This is the elusive CEO platform thats missing for people after the big focus on customers is announced. These questions power the customer on to the corporate agenda. What do you think of the Guerrillas? Lets talk about how they might work for you.