Happy Monday! Thoughts of this past weekend on customer-centricity.
This weekend originally started as a mental health break. It’s also my birthday month. I have a few events planned. This is my favorite season. (not the winter cold, but the spirit of Christmas.) Anyways, this past weekend, I had a girls day scheduled to go visit the Tate House, located in Tate, Georgia. It was a luncheon, with a self guided Tour.
The Tate House is listed as the Pink Palace in the National Register of Historic Places. Built as a private estate home by Colonel Sam Tate, land baron, philanthropist and business tycoon in 1926, it is now known and loved as an Atlanta area wedding venue.
But based on my “experience,” it got me thinking about customer metrics.
Here’s three ways to measure the success of a customer-centric company.
Not every Ecommerce organization will have the same customer success metrics to measure customer-centricity. However, the three most important customer-centric metrics that should be carefully monitored are 1) churn rate, 2) Net Promoter Score and 3) customer lifetime value (CLV).
1. Churn rate.
Acquiring new customers is becoming more difficult. Therefore, more Ecommerce businesses are investing in keeping existing customers instead of trying to find new ones.
✔️ Acquiring new customers can cost up to 5x more than keeping existing customers
✔️ A 2% increase in customer retention has the same effect on profits as cutting costs by 10%
✔️ On average, companies lose approx. 10% of its customer base each year (also known as customer churn).
Companies with a high retention rate grow faster.
The key to improving retention rates is to understand why people leave, and why people remain customers.
2.️ Net Promoter Score.
Are your customers happy? How do you measure customer happiness? The answer is through NPS. NPS, or Net Promoter Score, focuses on uncovering customer loyalty that’s calculated by asking customers one question: “On a scale from 0 to 10, how likely are you to recommend this product/company to a friend or colleague?”
Each time a customer responds to this question, the answer is then segmented based on predefined criteria: Promoters (9-10): These people are in love with your product or service and are likely to refer you to potential buyers. The customers who rate you a 9 or 10 are repeat customers and will have a high customer lifetime value.
Passives (7-8): These people who rate you a 7 or 8 are content with being a customer of your business, but are the most likely to switch to a competitor should they find a new or better product.
Detractors (0-6): These people are not happy with your product or service and are likely to damage your brand reputation by sharing their negative experience with their friends, family and connections.
The more Promoters you have, the healthier your business.
3. Customer lifetime value (CLV).
For a customer-centric business, the most valuable “asset” is their customer base. If you’re investing in long-term relationships, you can calculate the “health” of the relationship with customer lifetime value or CLV.
CLV measures the amount of revenue a customer contributes to your business for as long as they are a paying customer. It starts with their first purchase and ends when they stop doing business with you.
To calculate CLV, add up the total revenue you have earned and multiply that with the length of the business relationship. Then, deduct the initial cost of acquiring them. For example, if a customer spends $1,000 annually, and the average “lifetime” of a customer is 10 years, then you multiply $1,000 by 10 years ($10,000). Now, subtract the cost of acquisition (in this case, we’ll estimate $1,000), and the CLV is $9,000. Calculating CLV helps you understand why it makes sense to invest in keeping your customers.
Being a customer-centric organization is the ultimate goal towards unlocking the true potential of customer value. Always put yourself in the shoes of the customer and minimize customer effort and maximize customer value.
Do you consider yourself a customer-centric organization?
Perhaps creating your customer journey map might be a good place to start.