Sunday, February 2, 2014

How to Measure an Organization’s Customer Centricity?

It takes rich insight to measure customer-centricity. 

The customer-centric company can be defined as one that adopts specific business practices that result in high levels of customer satisfaction and loyalty. That is, the concept of customer-centricity can be measured by what a company does to improve customer satisfaction and loyalty. Customer loyalty means 1).The customer has a positive feeling about a company and its products/services. 2).The customer continues to do business with the brand.

Make assessment on customer-centricity alignment. The degree of customer centricity alignment – customer strategy, the process to strategy, technology to process, and organizational design to all - tells the story. Consequently, building a customer-centric company starts with identifying those specific business practices that impact customer satisfaction/loyalty. These best practices essentially define and operationalize what it means by customer-centric company. It is also equally important to see that the top management strategy is to be customer centric to have the acceptance of the lower level executable actions and having a measurable tracking and KPI system will highlight the importance of the customers to any organization.

The Organization’s Customer Centricity (CC) score is the measurement of the gap. On one side of the gap is how well you understand your customers and on the other side is how well you deliver to your customers. The narrower the gap then the more CC you are. Once recognition of the gap exists then the journey starts towards CC starts. Measuring how well you are delivering to your customers is relatively easy but developing a true measure of how well one understands their Customers is the hard part. It is akin to measuring the difference between somebody knowing something versus understanding something.

Decide the scope to measure: It is incumbent on the organization to prove its capability to deliver a unique and differentiated experience consistently. However, the other thing to do is to decide if you want an organizational level indicator or if you want to assess relative customer-centricity of different functions and business units. The latter might be desirable if your real goal is to begin the flywheel of awareness and change within the firm, rather than make an absolute statement about how customer-centric your company is.

Assess the customer-centric culture. Culture is how groups of people think and do things in an organization, and a key challenge is related to measure the intangible power factor like culture. If you are going to create greater company-wide emphasis on customers you need to know if you are making real progress. The larger challenge is how you create a common understanding of the business of what customer centricity is and more importantly how every individual can contribute. The employee’s behavior must be linked to outcomes the customer cares about. Another important factor to refer is the social community data through which customers and employees share most of their important views and influential modeling makes a robust process to identify the key influencers of the brand and organization as a whole.

The 'leading measure: Business needs to understand the maturity of customer-centric practices at the overall level (quantified across ALL measures) and at specific section levels. Invariably, most businesses will demonstrate good performance in certain areas and 'not so good' performance in others. The objective is to develop capability across all areas, as customer centric capability is a true representation of the value chain concept: you can only be as strong as your weakest link. This kind of measure is a 'Leading’ customer-centric measure and is representative of how the organization is building capability for the medium to long term. The 'leading measure' is enterprise-wide in nature (doesn't just deal with satisfaction or loyalty) and deals with capabilities and interdependencies in short, medium and long term. This is basically a framework that sits at the center of the business.

The ‘lagging’ measure: The 'leading indicator' then needs to be balanced with a set of 'lagging' measures such as CSI, NPS, and employee satisfaction. These latter measures are a manifestation of the current capability of the organization and highlight immediate issues to be acted upon. Dealing with these issues is normally an example of a tactical initiative. There are various tools through which you can measure the performance of the organization for the customer centricity. Customer centricity shows up to the customers as the amount of value they receive from the company, the benefits they get in customer-centric products, services, treatment etc.

Customer relevance. The other key factor in affecting a customer's perception is that of Relevance. First of all, you would look at how many of your KPI measure the end result from a customer perspective of outcome driven rather than output driven. Does the customer find what it is your offer relevant to their life, the life that they have or the life that it is they aspire to? If they do then you build on it; if they don't then the question that gets asked is - Why do customers not find the offering relevant? You need customers to help you answer this and that in itself move toward Customer Centricity. The other important factor to look back and see while measuring the customer centricity of an organization is about the life cycle of the product as it plays a critical role in identifying the advocacy of customers to a specified store or brand.

‘REAP’ metrics: Those who meet higher profitability indicators over their lifetime – REAP (Retention, Efficiency, Acquisition, and Penetration) metrics are a powerful way to manage the business and optimize value, particularly if the organization is able to 'operationalize segmentation' - really and truly treat different customers differently. A REAP dashboard provides four core measures applicable to the entire customer base, however, the emphasis and the principal focus may be different per segment. The dominant focus on High-Value clients, for example, may principally be around the Retention and Penetration lever, whilst Efficiency may be the focus for lower value deciles. Segment Managers are then best able to design appropriate programs and initiatives to meet the needs, characteristics, and behaviors of their respective segments

In order to measure customer-centricity more objectively, surely the key is to learn from the customers by gathering "actionable insights" from business interactions with them, then to have the processes, structure, and skills to adapt businesses in response to these insights. This is not about the customer running the businesses but about understanding customer’s perspectives, in fact, the insightful measurement of the level of "customer centricity" help achieve ongoing strategy and business focus for success.


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