Five Answers Every CEO Should Want to Know About Customers: How Customer Profits Suffer When No One’s Keeping Customer Score

Jeanne Bliss
Posted: 11/30/2009

The perennial cry from CEOs around the globe is that they are focused on their customers. It is their A-#1 mission, the critical job of their company—and everything emanates from understanding what the customer needs and wants and delivering on it. You may have said this yourself.

However, without up-to-date information trending the profitable versus non-profitable customer and issues driving the best customer away, CEOs and their businesses are unable to manage their customer base as an asset. As internal leaders of each silo report and recommend customer actions separately, CEOs react to the random issues landing at their feet, rather than focusing on key issues eroding customer loyalty and customer profitability.

Call Center Marketing Myth Buster

For example, marketers in a highly regarded financial services company charged with improving customer "loyalty" sold their CEO a call center concept touted as a customer assistance program, but it was completely inwardly focused. The goal was to up-sell and cross-sell customers who called in for service help, regardless of who they were, why they were calling or how profitable or loyal they were.

This gave the call center a case of priority whip-lash.

Just the week before, call center representatives were delivered an impassioned call center training on how they should build personalized relationships and customer rapport with each call, even though the process caused longer call times (a tactic sold to the CEO a month earlier). But the lucrative incentive being paid-out for the new call center marketing program was based on keeping calls to a talk-time limit, and on up-selling customers, regardless of who they were.

So, with one eye on the timer prompting them to end the call, the call center representatives would try to build rapport with the customer. Then with talk-time dwindling, the call center representatives would rapid-fire offers to up-sell and cross-sell. The result alienated some of the call center’s best customers who expected help from a company they were extremely loyal to, but instead got disappointing customer service. Neither increased sales in the call center nor growth in customer profitability resulted. In fact customer goodwill declined.



CEOs Must Take Hold of Customer Profitability, Even in the Call Center!

Organic customer growth drives long-term profitability. So why isn't it as important to you as quarterly sales goals? This is where the customer commitment 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.

For example: A business to business company was counting 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 what they actually called "speed kills." They were fired up to get as many customers as they could, as fast as they could. But they weren’t keeping track of the difference in the value of business each new customer would bring. To them, one unit was one unit: customers had become widgets.

Each speed kill carried the same weight on the tote board used to measure success. The sales team exceeded their goal for new customer accounts that year, but sales became a drag on profits, which actually declined. This is because they didn’t focus on the profitability of customer accounts, just the number of them. And no one actively identified, prioritized and eliminated issues driving profitable customers out the door.

Five Answers every CEO Should Want to Know

I call these "guerrilla metrics" in my book, Chief Customer Officer: Getting Past Lip Service to Passionate Action. They are "guerrilla" because often a campaign is necessary to propel the organization into understanding the customer end-game and supply leaders with a platform to stand behind and reinforce. They establish a languge for CEOs in how they ask about customers; placing the customer front and center on their agenda. They are a potent first step to kick-start or reenergize a faltering customer "focus." They work because they clear through the clutter usually encountered in the drive for customer experience and profitability:

  • Inconsistencies in defining, reporting, and managing the state of relationships with customers.
  • Focusing on survey administration and negotiating survey scores rather than driving action and accountability.

Guerrilla Metrics give leadership five questions for commanding customer accountability inside their organizations:

1. What Are Our 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 that’s not likely tracked is the quality of incoming customers. This is especially important as the market becomes more saturated and new, profitable customers are harder to come by.

2. What Are Our Lost Customers; Volume and Value and Reasons?

Pair this question about lost customers with the one above about new customers. 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 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. What Customers Renewed, at What Rate and Why?

For this to have relevance for your company, you’ll 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 you are well aware when these reasons shift or begin to erode. The "with reasons" part of these metrics are key to taking a leadership role in demanding focused actions to drive customer profitability rather than reacting to random pitches that come across your desk.

4. What is Our 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 won’t happen. Getting this data in line to achieve a regular pattern of accountability around customer profitability patterns will take some time, but stay the course. It will optimize your ability to manage customers as an asset of your business.

5. What is Our Referral Rate by Customer Segment?

If your customers are willing to stick their necks out vouching for you, they have become your marketers. 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 completely 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.

First published on Call Center IQ.

Jeanne Bliss
Posted: 11/30/2009

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