The Essentials Of Customer IntelligenceThe Essentials Of Customer Intelligence
CRM success relies on clear goals and easy business-level tracking. Here's a guide to help you judge whether you're on the right road.
August 22, 2001
While most companies today are concerned with determining the key performance indicators for their customer-relationship-management projects, there is in fact no single right way to measure the health of customer relationships. Some companies opt for a few, high-level metrics such as customer satisfaction and market share; others perform frequent, detailed customer surveys and in-depth analyses.
But whatever metrics or level of detail you apply, "customer intelligence"--i.e. establishing clear goals and easy business-level tracking of customer initiatives--is essential for CRM success. After all, if you can't define where you're going, it's awfully hard to know whether or not you've arrived. Answering the following eight questions can help you get on the right path. Who are my customers?
Understand customer segments and key characteristics to target appropriate products and services and recognize emerging trends. High-level metrics include: the number or percentage of customers by geography, business characteristics (company size, revenue, industry), or consumer characteristics (age, income, lifestyle, family size); deal size; new vs. repeat customers; annuity stream; and number or type of products purchased. Changes in these characteristics can signal new risks and opportunities. How loyal are my customers?
Once you understand key customer characteristics, understand who's staying and who's leaving. Measure loyalty in terms of both the number of customers retained and the amount of revenue generated to see patterns that might otherwise be missed--such as a few big customers making up for many smaller customers leaving. Who are my most valuable customers?
Prioritize customer retention efforts by determining the best--not just the biggest or most frequent--customers. While difficult to calculate precisely, customer value can often be approximated by tracking discount rates, product profitability, and customer acquisition costs, as well as the cost of service (the number of support calls) and account management (the number of dedicated or shared resources). Each of these should be assigned a relative weight. How satisfied are my customers?
Customer surveys and company service metrics can help determine customer satisfaction levels and problem areas. Use customer surveys to understand key customer expectations. Track service levels to get early warning on potential problem areas. Pay special attention to company handoff points, which are often where problems occur. Typical metrics include call-hold time, on-time shipment, order accuracy, product quality, product availability, first-time fix (reopen rates), shopping cart or call queue abandon rates, customer response time, and customer complaints. How well do I understand and respond to critical customer events?
Most customers don't decide overnight to stay or leave. Instead, they progress--or fail to progress--through a series of decision points, based on interactions with the company. Customers who agree to a product trial must have a positive experience to become a buyer. New customers often need to buy several times before their buying "habit" turns them into a true customer.Dissatisfied customers often show dissatisfaction by slowing new purchases before they cancel standing orders. Changes in purchase frequency and amount, usage frequency and duration, payment promptness, and other behavior are all indications that customers are becoming more or less loyal. How effective is my customer acquisition process?
Track each major stage of the sales and marketing cycle. Cost metrics such as cost per lead and cost per sale are important in assessing the revenue return against the cost. Effectiveness metrics, such as length of sales cycle, lead freshness, forecast accuracy and fallout analysis, help optimize resource deployment, especially for business-to-business companies with long sales cycles and expensive direct sales resources. How well am I leveraging partners?
Almost every company depends on partners for fulfillment or joint promotions, or leads, sales, consulting, or implementation services. Understand key deliverables (leads, product information, proposal input, product availability) and handoff points, and track results. Measure partner follow-through and customer satisfaction levels, and reward your most valuable partners. Where are my competitive threats?
Win rates and market share against key competitors will help you assess market momentum and competitive threats. In industries such as pharmaceutical, consumer packaged goods, and transportation, use external data to compare your product sales with competitors'. Collect and analyze competitor information in sales force automation or other applications. Customer intelligence is your reward for expensive CRM automation projects, but it must be assembled and used to be effective. Start by estimating values, such as customer service costs, that can't be calculated exactly. Next, focus on key metrics for high-value customer segments or areas where customer retention is at the greatest risk. Finally, determine what actions you will take in response to the customer information gathered. In this way, customer intelligence helps ensure not only the success of your customer relationships, but, ultimately, your business.Robert K. Weiler is chairman, president, and CEO of Giga Information Group, a global technology advisory firm. Giga Information Group vice president Erin Kinikin contributed to this column.
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