Summer is coming, and you’re planning a big family road-trip. What will it take, what will be your measures, of it being a Success; for your family to have many happy lifelong memories?
Miles per Gallon? Number of Trucks Passed? Hours Waiting in Line? Frequent Flyer Miles Used? No, those aren’t Success Metrics.
The problem with those metrics is that they do not measure the Value of the Experience, nor do they even Infer it.
The same goes for the superficial (and probably too easy) metrics known as Net Promoter Score (NPS), Cross-Sell Ratio (CSR), and Website Impressions. They do tell you something: they are Activity Indicators. But, they are rarely predictors, or even precursors, of Customer Lifetime Relationship Value (LRV): the Master Metric.
While a lot of firms have come to rely on them, some (especially in regulated markets such as banking) have gotten in to Big Trouble because they used these superficial indicators to value and prioritize their sales and relationships… and, then, based workforce performance incentive compensation on them.
The real Metric that matters is Customer Lifetime Relationship Value (LRV), at the Point of Acquisition (POA) of each Relationship, and at business-cycle relevant Points of Retention (POR) and Points of Enhancement (POE) for each Relationship. LRV tells you what really matters, to both you and your customers. And, it is a profoundly accurate predictor of Revenue, Profitability, Customer Satisfaction, Relationship Retention, Employee Retention, and Brand Value. Even more: it is a more reliable and relevant basis for sales compensation.
Beginning in 1989, we pioneered powerful tools for calculating and reporting LRV, virtually real-time, from individuals and their work-teams, up through business units, to the enterprise. LRV aligns workforce behaviors, distribution and service technologies, and business processes to optimize the Customer experience, and fulfill whatever operating goals and objectives you establish.
Here’s the guideline… if a metric measures a factor that is not actually relevant to your Customer, don’t use it as a management metric to value the relationship: use a metric that is relevant to the Customer. If it matters to them it should matter to you.
When you use metrics to measure and manage strategy execution and performance, use metrics that matter to achieve it.