Is your company measuring, tracking and treating its customers with the care and services they deserve?
A perspective for data leadership and analytics professionals
This article is inspired by “Are you undervaluing your customers?” written by Rob Markey and published in Harvard Business Review, 2019.
Once in maturity, the aims of corporations are evident: maximize profits and boost shareholder value, then communicate accordingly. As a result, companies are experts in interpreting accounting ledgers and financial statements often engineering complex strategies to amplify gains while muting losses. Once a series of checks and balances are audited, results calls and reports are released all in the hopes of proving to investors that a company’s earnings are robust and in good standing; the future is bright.
If you’ve ever worked in analytics, you’ve likely tied your work back to its contribution to; impact on; or measurement of: “the bottom line.” From here all objectives and strategies are derived.
But has this accounting model completely missed the mark? After all, where do companies report on the value and growth of their key asset: the customer base? And how can investors evaluate a company’s performance in serving its key constituent: the client?
Accounting for a customer experience mindset in a post-COVID world
COVID-19 has dramatically re-shaped the world we live today. When the World Health Organization announced COVID-19 as a global pandemic March 11, 2020 the world was forced to adapt overnight. Lockdowns, quarantines and boarder closures swept across the globe and the full impact on businesses, households and governments is yet to be completely understood.
Meanwhile, today’s customers are expecting digital services and digital products as near-perfect substitutes to traditional transactions and in-person activities. Companies are scrambling to pivot into the digital space and fill product and service gaps torn open by COVID-19. Other companies such as Peloton, Zoom, Netflix, and Amazon were perfectly positioned to meet the needs of a user base adapting in difficult times.
Companies with deep pockets, substantial digital transformation budgets, and strong expertise will fare better than those companies unable to meet the needs required to adapt to the new landscape. Yet regardless of budget, size, expertise or maturity, virtually all companies operating today are asking themselves: how do we serve today’s customer?
How customer value translates into corporate value
In his HBR article, Rob Markey, reminds us that ultimately customer value is amongst the greatest sources of a company’s underlying value and if they hadn’t already, it’s about time companies acknowledge this in the way they value and conduct business.
Without a formal measure of the customer base – at minimum their adoption or attrition – in the financial statements, companies can shirk any responsibilities they have to the customer experience and consumer protection.
For example, cutting costs for maximized profits in one quarter/year such that it disturbs customer experience and loyalty in the next is a short-term maneuver that looks good on paper but demonstrates costly long term consequences that can result in real losses or even a market exit. Simon Sinek speaks to this in detail in his book “The Infinite Game”.
Keeping an eye on customer-driven activities such as attrition, drop-outs, and deferrals can all signal important trends worth investigating. These metrics can hint at customers being poaching by competitor offerings whose generous packages and optimized experiences don’t take for granted the needs of the client; customer dropouts due to missed opportunities to serve the client’s preferences or pain points; and deferrals which can signal trust, loyalty or larger macroeconomic impacts on the customer base, to suggest a few examples.
Not only do such numbers protect investors (ultimately impacting pensions and households), but they also protect the customer through an intricate feedback mechanism that signals to the company: focus on the consumer and their experience, or else.
Successful companies will track customer value as they do other key assets
You can’t act on what you don’t measure. While Markey discusses how auditable financial reporting measures – at the corporate level – could be introduced by firms to disclose customer base metrics in valuation criteria, I argue that we all have a responsibility to consider these numbers in everything we do, well in advance of fiscal year reporting or quarterly earnings releases. In a sense, a customer-centric culture must permeate throughout a company. It doesn’t just start at the top or the bottom.
As memberships, bundled-offerings and subscription-based business models become more prevalent, companies are starting to disclose the number of users in their financial statements. One example is Netflix which reports membership numbers in their quarterly earnings and which has become a key signal to investors. In contrast, Jeff Bezos has disclosed Amazon Prime’s membership in its 2017 Letter to Shareholders announcing a 100 million member milestone and once again in a statement after surpassing 150 millions members in early 2020.
Driving extreme value in analytics: measuring the customer experience
If COVID-19 hasn’t already shifted the way companies view the customer and conduct business, leadership certainly will. As the C-suite turns its eye toward customer value, analytics professionals are presented with new demands and exciting opportunities.
When well-established key performance indicators change trends, demonstrate volatility, or communicate new scenarios leadership responds with the question “why?”
Delivering the granularity required to understand the drivers behind new activity is the responsibility of analytics professionals and starting from scratch is not so simple.
Developing customer-centric intelligence
At the outset, what does a focus on the customer look like? It means harnessing customer data and solving the systems architecture to do so, defining the appropriate metrics that are specific, actionable and relevant, it means breaking down silos across teams so that information and objectives are shared, it includes building out customer journeys and profiles for a deep understanding of the customer, its investing in analytics and IT resources with the capacity to understand the customer, and then deliver for customer-focused improvements, products and services. In short: its re-formulating the way and “the why” we work.
Managers and employees with responsibility over specific business lines, processes, products, and services are well-positioned to encourage the sort of customer-focus that leads to generating the best customer experiences and loyalty through their own exploration and innovations. Leadership can further foster this paradigm by including client-centric perspectives into KPIs, design, product, analytics and decision-making on a day-to-day.
Championing the customer-experience mindset
This will require creative thinking, artificial intelligence, advanced analytics, experimentation, differentiated systems/frameworks and methodologies, new and innovative technologies, thought-leadership, skills-building, new domain knowledge, and of course business-to-customer relationship expertise (for all, not just high-level executives).
It will require that technical/analytics professionals are ever-learning and ever-honing their treasury of knowledge and skills, but generally, this is a job-perk. The benefits of this type of specialization in the domain of customer analytics will only become more competitive as companies battle to remain relevant and differentiated in today’s hyper-digital era.
Reorganizing around customer needs requires rewiring the organization and its decision-making pathways – Rob Markey
A management approach on customer value
Markey shares four strategies that are pivotal in shaping the way leaders centralize efforts around the customer and it actually starts early in the business’ operations:
- Develop robust customer-value management processes and tools
- Combine design-thinking with loyalty-earning technologies
- Organize around customer needs
- Lead for loyalty
The opportunity for leadership and analytics professionals to fill existing gaps and develop specialized expertise in the customer experience and engagement space is massive. Leaning into new areas of professional development to consider championing diverse perspectives into the customer may ultimately lead to ultra competitive industry skills.