Wednesday, March 26, 2008

Metrics Are Important

I recently read an article by Neil Davey, the editor of and appreciated some of the points he made. In fact, some were so timely, I decided to incorporate them in this blog. First, the statistics which really have impact on our vision of what customer loyalty is all about. These statistics strongly suggest the need for a serious review of the metrics we are using.

1. Deloitte's 2007 study "in the Dark" seems to indicate that business leaders have an excellent idea of what traditional financial figures mean but are not clear what the customer information means. The statistics from the study show that 87% of companies are happy that their financial measurement is goodbut only 29% can say the same about non-financial indicators.

2. VisionEdge Marketing, a market research company, found in their 2007 study that 78% of companies in their study track leads to conversion but only about 25% track and measure the rate of customer acquisition and fewer than 10% measure customer lifetime value or customer advocacy.

The point of the article, and it is a very valid point, is that when we measure customer loyalty and customer satisfaction we are immediately ignoring the potential customer and the lost customer. Mr. Tom Mooney, consulting and propositions director at Experian Integrated marketing is quoted as saying "The nearest many organizations get is the use of customer satisfaction surveys and average call answering statistics - neither of which adequately measure customer experience."

The bottom line is well stated in the article; namely, companies need to focus on those metrics that aid in decision making and which will contribute to the bottom line of the financial statement. A secondary point made in the article is that the search for a single customer metric that holds the key to success for every company is a futile one. The author suggests that the metrics must include behavioral and experiential metrics along with the traditional metrics. He also suggests we expand our vision of "customer."

I believe that Neil Davey has made a good case for taking a closer look at the metrics companies are using. His point that not all metrics have value and one should be willing to eliminate those that have minimal or no impact on the performance of the company.

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