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CRM Metrics – Tool Metrics vs. People Metrics
By Bill Brendler & Tom Bellemare
Seldom are customer-oriented metrics linked to the performance of public companies because Wall Street is looking for revenue and profit - most recently, revenue and cash flow. Forrester Research interviewed 50 executives responsible for CRM and found that CRM projects failed to deliver as expected because "functional, ROI-driven efforts add little customer value. Firms expected CRM initiatives to accomplish a lot, but few put the customer first - because most companies use internal metrics like ROI to measure CRM success."
Examples of these internal measures are ROI, market share, and improved efficiency. Numerous companies look at call center efficiency, which includes problem resolution rates and the number of transactions a specific Customer Service person can handle. Though it is logical to measure the return-on-investment in tools, there is more to be gained by analyzing the return per customer. There is still more to be gained by attracting new, high-value customers by gaining a reputation for customer service, which translates to customer loyalty. Too few companies are measuring operational metrics based on the customers: customer retention and attraction; time spent at the Web site; increased revenue per customer.
This is likely one of the major reasons why CRM projects don't deliver what management expected. Too many executives want to retain and gain customers while increasing overall satisfaction but use ROI-focused metrics and end up delivering only improved operational efficiency.
Only Seemingly Bifurcated Equation - One important prong of the equation is to improve the bottom line through greater operational efficiency and companies have done just that, (according to Alan Greenspan). The other prong is to improve the bottom line by getting the most out of each customer and attract new customers without spending a lot on Sales and Marketing. This is the real promise of a true CRM strategy.
Good business leaders recognize that it is easier to get high value (profit) revenue from satisfied existing customers than it is to win new customers. Often, a satisfied customer will tell you what their problems are and ask how you can solve them. Solid, CRM strategies address that point. A byproduct of strategies that engender loyal customers is that the word gets out and more customers are attracted without expensive efforts to attract them. As customer loyalty improves, overall, Wall Street measured, corporate efficiency naturally improves because cost-of-sales and discounting tactics are reduced.
OD & Change Management - Changing the metrics requires a mind-set change on the part of the executive team. This often means expanding the business measurements from the traditional product focus to one inclusive of customer metrics. To make this happen, executives often must rethink their measures of performance and rebuild the organizational structure. Proper incentives and properly aligned structures are critical to reaping the desired results. These necessary changes will inevitably cause friction as any substantive change does, people cling to the familiar. Managing these changes is important to the overall success of the effort. Change management is a complex discipline that organizations don't generally have as part of their competency but can be obtained efficiently through specialized practitioners.
While many organizations may generate customer metrics, often within the sales and marketing departments, few of these metrics are considered integral to the business operation… Why?
Most successful organizations got there with a focus on products and channels - and that's what is being measured and on what rewards are based. In addition, many organizations have traditionally lacked a comprehensive view of their customers' behaviors, making customer metrics difficult if not impossible to calculate. Executives often correctly believe that customer metrics are more difficult to calculate.
Measuring customer satisfaction is a good example, which may not correlate with customer behaviors. Some studies have found that service dissatisfaction does not immediately correlate with attrition. Those customers who expressed dissatisfaction were actually less likely to leave. Customers who were willing to invest time in a satisfaction study were those who had loyalty to the brand. Ignoring observed dissatisfaction soon results in loss of loyalty and loss of customers, i.e. lost efficiency. Attention to customer satisfaction is important to the enterprise trying to improve overall efficiency. It is equally important to the overall efficiency of those selling efficiency improvement tools to heed their customers' dissatisfaction.
Understand how your behavior relates to customer behavior - it will directly impact your profit. Customer satisfaction and behavior are critical to customer loyalty and value (profit). A solid understanding of loyalty and value, along with the factors that influence them, provides the basis for sound CRM strategies. One of the basic premises of customer value (profit) is the 80/20 Rule. It's likely that around 20% of your customers generate about 80% of your profit. Learning how to make those observations and use them to your advantage is a discussion unto itself. We will address that in our next article.
Bill Brendler & Tom Bellemare
Bill advises top executives on how to develop positive cultural acceptance of a new technology, business strategy or how to turn around an unsuccessful technology implementation. His extensive experience enables companies to deal effectively with organizational change. With a Masters degree and a PhD in Organizational Psychology, he knows how to effect successful change strategies throughout the enterprise.
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