Getting with the times on client metrics

It’s time for many organizations to re-think some of their long-term favorite measures. Research has demonstrated that many of the metrics used up to this point have significant faults. The reality is that some of our assumptions around what these measures have been telling us were wrong.

Assumption: A client that is “satisfied” is a loyal client, and this is a primary driver for future purchase intent.
The emergence of net promoter score (NPS) is based on some really profound research which demonstrates quite concretely that it correlates strongly with customer behaviours, as well as loyalty. Armed with this information, one would expect to see satisfaction ratings correlating similarly with the NPS results. Strangely, the correlation exists at a practically non-existent level. Basically correlation is so all over the map that it’s not reliable as a primary customer metric. Of course, there are circumstances where client satisfaction can play an important role (such as if your customer base is small and fixed) however a customer’s likelihood to recommend you speaks far more deeply to what really matters.

Assumption: We know what clients think is important
Too many client surveys are rigid, irrelevant dinosaurs. We love trends, so we fight to maintain consistent measurement criteria. We love predictability so we control what gets measured within it (so we can hit our targets) and we think that we understand exactly what should be measured. The best client surveys allow flexibility for clients to express (either choosing only top issues to rate within a larger set, or completing qualitative research first and using their feedback to build the categories. Better, both.) wherein clients set the criteria and it is allowed to change over time based on what they think is important. What is more important than predictability is receiving information that is meaningful, year over year. Prepare for clients to express dis-satisfaction in different areas over time as you are able to resolve the ones that are most top of mind.

Assumption: If we measure just our performance in the areas we know are important, that will tell us what we need to work on.
Again, not necessarily true. This assumes that every category is valued equally. Without an importance rating on each measure, you won’t know what the true gap is. For example: If something is a 7/10 importance for a customer, performing above 7 may represent excess equity in that attribute… whereas if a client values something at 9.5, performing at a 7 could represent an area of significant discontent. Over-investment doesn’t necessarily create additional value so but re-allocating these resources to an area where real gap exists might.

Assumption: Satisfied employees = engaged, loyal employees.
This parallels with client satisfaction vs loyalty/likelihood to recommend. Many organizations operate under the assumption that the first creates the second, when in reality the correlation between the two is very low.

Metrics are used as guidance for decision making. If you’re basing decisions on poor information, your acuity for emerging risks in those areas is going to be poor also. By moving to measures that tell a more truthful story, you’re positioning yourself for success. Once you know that a measure isn’t telling you what you thought it was, it’s really not much use going forward.

Everything will always be relative to the competition

(this is kind of an obvious thought, but one that can get lost in the hustle)

Creating customer loyalty is a product of meeting specific client needs (N) and delivering that through a single value discipline (V) to a degree where you become important to a customer. This rarely occurs by accident and is never maintained by accident.

The mix of N+V is what a value proposition is (VP). The thing about value propositions is that they don’t exist in a vacuum. They exist in relative comparison to your ever changing competition as well as other organizations in your industry that are similar enough for comparisons to be drawn. In the pursuit of maintaining some competitive advantage, this is the most important perspective to maintain; everything you do will always be compared to what your competition is doing…. and I don’t mean simple business volumes. Because of this, incremental improvements must also be considered in comparison to your competition. An increase in the % of the STRATEX budget that goes to continuous improvement doesn’t prove success unless it’s significant in comparison to what your competition is doing. The amount of products and services developed … again the same thing.

If you’re temporarily fortunate enough to be in a position of dominating your market in terms of capacity to reinvent, and you are setting the pace for your competition… good for you, and stay sharp. On the other hand, if your organization is at the point where you cannot directly compete with a larger organization because your pockets aren’t deep enough, you still have an option: Change the mix and change your market focus.

When you reduce the spread of your focus by changing how deeply you target a segment of your current client base, you increase your potential relevance to that group. Becoming incredibly relevant to one segment will inevitably make you less relevant to the other segments. This is the critical choice that David organizations have to make when competing with Goliath competitors. When you can’t be all things to all people, be more specific things to specific people. The benefit of doing this well is that you may be able to go niche, and then offer this to a narrow bracket but in a much larger geographic zone.

Competitive advantage is being positioned to create greater levels of value for your customers, either through pricing or differentiation. Every organization should be aware of what it is doing to move toward a stronger advantage.

To what degree do you have a competitive advantage?