“Delight the customer at all costs.” Heard that before? Or on the other end of the spectrum: “We need to fire our unprofitable customers.” Which view is most widely held at your company?

Turns out that 85% of CMOs recently polled by Forrester believe there’s room for improvement in establishing a common view of the customer across customer-facing functions (Figure 1).

Figure 1 - Views of Customer Out of Sync

Figure 1 – Views of Customer Out of Sync

In fact, I’d bet if you were to ask somebody from sales, marketing, finance, R&D, and support to name the most important key performance indicator (KPI) as it pertains to customer management, you’d hear responses ranging from customer satisfaction to contract renewal rate to support ticket handle time to customer lifetime value to payment terms compliance.

Your company’s approach to customer KPI management – the fourth and final operational pillar of customer management – can be the key to synchronizing the various views of the customer held across your company.

Follow the Leader

The most appropriate task force to review your company’s current and desired approaches to customer KPI management is of course the cross-functional customer management team described in previous posts. In fact, the very existence of this cross-functional team should contribute substantially to a more unified view of the customer. A unilaterally understood short-list of customer performance metrics can act as the rudder that keeps all customer-facing functions aligned in their perceptions and actions.

The deliverable you should expect from the customer management team is a KPI dashboard. And here are a few steps towards building this dashboard:

  1. Brain dump: Poll the members of the customer management team with the question mentioned in the hypothetical scenario above: what’s the most important customer KPI?
  2. Leading or trailing?: With perhaps a few exceptions, all of the answers you collect in step 1 can be categorized as either a leading indicator or trailing indicator of customer health. Leading indicators could be any signs of whether a customer is becoming more or less financially valuable to your company. Examples are customer satisfaction scores, reference calls, inbound support ticket calls, days sales outstanding (DSO) or some other measure of receivables aging, or services contract attach rates. There is likely to be some debate around the most important leading indicators, but it’s critical to agree on the few that are most highly correlated to financial impact. In fact, if you have enough data points, you might even be able to quantify these correlations to assist in the prioritization process. Trailing indicators should be more straightforward and largely financial. Common ones are trailing twelve months (TTM) revenue, TTM margin, and customer lifetime value (CLV).
  3. Establish Targets by Tier: As discussed in a recent post, not all customers should be treated or measured equally. For each of the four tiers, set a target level for the leading and trailing KPIs. These targets should be calibrated to your company’s annual operating plan and should be vetted and blessed by the Finance contingent on the customer management team.
  4. Report on Actuals: Finally, establish a reasonable interval for reporting actuals. Quarterly and annually are typical. The end result should be a matrix of actual and target leading/trailing KPIs mapped to each of your customer tiers (Figure 2).

Figure 2 – Sample Customer Management Dashboard

Got other viewpoints on measuring customer performance? Would love to hear them. Post a comment and share your perspectives.

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