In our most recent blog post, CDPa Founder Sebastian DiGrande offered insight into what smaller or less mature organizations can do to get started on their customer-centricity journey. This included two important steps for every organization to take, regardless of size: first, to identify one or two immediately actionable insights for the core function of the business; second, to begin institutionalizing customer-centric analytics and decision-making throughout the organization.
(As always, it’s worth defining what it means to be customer-centric: setting business strategy and tactics based on customer metrics and behavior, and maximizing your efforts by focusing on your best customers.)
Identifying early opportunities for success is a common thread among CDPa Founders and industry experts. However, once these targets have been set, organizations must be able to define and quantify success. The “set it and forget it” approach is antithetical to the goals of customer-centricity — achieving real transformation that drives long-term value to the business requires constant measurement, reflection, and refinement.
Proper measurement gives your organization proof that customer-centricity is effective. With concrete metrics, you can develop a story for your success and win the support of others throughout your organization; in particular, understandable measurements are necessary to gain buy-in from company executives. In time, these metrics will help you secure more resources for your customer-centric initiatives.
The ultimate measurement: Customer Lifetime Value
No matter what you identify as your first opportunities, your measurements should be guided in the end by Customer Lifetime Value: how much a customer is likely to spend with your brand over an extended period of time. This key metric helps businesses maintain their focus on the specific customers that provide the most benefit to the organization’s success. The right measurements will help businesses to understand what traits are shared by its most important customers, how to ensure that they remain satisfied, and how to identify new potential customers that match those attributes. Measurement is arguably the most important process to achieve this goal: instead of guessing the persona of a company’s best customer, this provides cold, hard data on who you should be pursuing.
No matter what you identify as your first opportunities, your measurements should be guided in the end by Customer Lifetime Value.
Design metrics based on your unique situation
With Customer Lifetime Value as your guiding star, the next step is to create metrics tailored to your unique business, customer base, and goals. Identifying early opportunities for customer-centricity often involves choosing a single use case within the business’s core function. An effective measurement will then be targeted to that specific use case, tying actions directly to changes in revenue and profitability. There should always be clear correlations between the customer-centric action taken in an organization and the revenue outcomes being measured; if you can’t point to the correlation, you should choose a new measurement.
What does this look like in practice? Imagine a retailer has decided to take a customer-centric approach to their marketing organization, specifically focusing on women’s apparel. Having collected data on those women who chose to purchase denim jeans within the last six months, the marketing team can design and serve advertisements to those same customers for jeans. The company can then measure any changes in revenue from that specific product line, offering a tangible proof point for the value of focusing on a company’s highest-value customers.
The goals and targets a company sets should always be based on specific use cases, avoiding goals that are too broad or developed using assumptions and historic decision-making (the fallacy that because a thing was a certain way once it will always continue to be so). From there, these targets should be published and shared with key collaborators; not only does this create accountability for your customer-centric efforts, but it also helps build buy-in as other company stakeholders see quantifiable progress.
Never stop measuring
Progress doesn’t take place in a vacuum. To make the most of your customer-centric transformation, you must check in regularly with your goals and measurements and use that information to inform changes in strategy. Your measurements themselves will grow and adapt as you expand your transformation beyond its initial use cases; by applying these principles and focusing on Customer Lifetime Value, you can ensure that your organization keeps moving toward customer-centricity.
Want to learn more about measuring customer-centricity progress? Check out the third chapter of our June 2021 Playbook, “Getting Your Customer-Centric Transformation Started”.