In a research study I concluded recently it was emphasized the failure to measure customer centricity is one of its major limitations. It was accentuated that the measurement of customer centricity proves difficult to implement for many organizations because the phenomenon is qualitative in approach. Due to this perceived challenge, most organizations do not find a compelling reason to be customer centric. For those organizations that do measure the phenomenon, most tend to measure its financial aspects only. A product centric model tends to take this same approach to business performance measurement.
Alternatively, a customer-centric model requires the measurement of the phenomenon not only in financial terms, but in non-financial terms as well. The model takes into consideration what is measured, how, and when it is measured. This implies that all team members need to understand that every single action they take impacts on the customer management or customer experience and the bottom line.
In the next session of the article, I discuss some of the ways a customer centric organization could measure its performance from both non-financial and financial points of view.
· Customer Satisfaction
This is the basic measurement of performance and I consider it a starting point to business performance measurement. It’s an important driver of profitability and, generally, there is a positive relationship between customer satisfaction and customer loyalty. Numerous factors have an impact on customer satisfaction. Some of the factors include; employee friendliness, knowledge, service quality, helpfulness, and value. An organization would need to survey and measure these elements to determine customer satisfaction. Effective survey tools and questionnaires must be used. A combination of qualitative and quantitative research methods must be deployed for optimum measurement. The National Business Research Institute (NBRI) and American Consumers Satisfaction Index (ACSI) offer a variety of instruments that measure customer satisfaction and employee engagement. Amazon.com, for example, has been successful at measuring these customer dimensions and using the information to make informed decisions.
· Customer Loyalty
As indicated previously, though customer satisfaction is significant, it’s not always adequate because in some cases a satisfied customer will still switch brands for various reasons. Customers must be extremely satisfied for it to lead into customer loyalty. Customer loyalty ushers in sustainable competitive advantage. Customer loyalty will be achieved through focusing on key customers, proactively generating high level of customer satisfaction with every interaction, anticipating customer needs, and responding to them before competition does. Moreover, customer loyalty allows building closer ties with customers and creating a value perception. Rewards programs can help foster customer relationships and their measurement. Successful programs connect with customers at three levels: introduction, service provider initiated communication, and service provider initiated feedback. Nordstrom and Neiman Marcus are two retailers that are doing better than most in this area.
· Customer Advocacy
Michael Lowenstein defines customer advocacy as “… active personal espousal or support of a brand, product, service, or company”. He claims that the concept should not be confused with recommendation, which is simply one possible outcome of advocacy behavior. Customer advocacy means advocates are deeply (and emotionally) connected and involved with a brand that they energize. They are vocal and positive about a company and its offerings. Customer advocates are repeat buyers, they refer new business, and provide feedback. They “defend” and make a business case for the brands in which they believe.
Customer advocacy includes elements such as brand favorability, evidence and frequency of positive and negative voluntary personal communication, and the likelihood of continued consideration and relationship. Informal communication by advocates is active on a peer-to-peer basis, resulting in the improvement of business performance. Companies that have benefited from customer advocacy tend to be responsive, accountable, and communicate constantly with their customers and other stakeholders.
· Customer Lock-on
According to Sandra Van der Merwe – customer lock-on means “…the customer wants the enterprise as their sole or first choice over time, even over a lifetime.” Lock-on is voluntary and is anchored in authenticity of the brand and not marketing hype. It capitalizes on stronger and deeper relationships over time. Alternatively, customer lock-in happens (for an example) when an entire industry is underperforming. This means customers will have to deal with the brands or organizations because they have no other option. It implies that organizations that need to attain customer lock-on have to disrupt an industry and offer new options and solutions that offer great customer experience. An example of customer lock-on is a South African bank – Capitec Bank – that disrupted the banking industry in that country by offering creative and innovative solutions that the traditional banks were not offering. Amazon.com is another great example of an industry disruptor that has achieved customer lock-on.
Though the financial performance measurement should not be the only form of measurement organizations use, it plays a significant role. Organizations are in business to make money, so, ultimately, this is the definitive measurement in the long term. Measurements such as return on sales and return on investment fall under this category. The most important aspect to business performance measurement, assuming all the customer dimensions (mentioned above) are managed and measured effectively, is that there will be a positive impact on the financial performance of an organization over time.
At the core of measurement, the clarity of a company’s mission, purpose, goals, creation of the right customer culture, and establishment of an integrated organization play a significant role. As these elements are defined, measured, and assessed they will determine business performance measurement whether non-financial and financial.
Join me again in the last part of the series in a few weeks time….
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Written by Dr. Mary Ritz: International Trainer, Speaker, Author and Consultant