Most organizations measure “what’s in it for them” and use lagging key indicators such as profit, sales and accounts receivable when looking at their numbers. These indicators measure what has happened in the past rather than what is going to happen in the upcoming months and years.
Managing your business by focusing on the bottom line is analogous to driving a car by looking into the rear-view mirror. Your challenge is to create value for the customer and find ways to measure “what’s in it for the customer.”
Future customer-focused key indicators are the best means for determining the direction in which your company is headed.
Future Customer-Focused Key Indicators
- On-Time Delivery On-time delivery is an excellent indication of how well your company is currently functioning. If all of your operations are running smoothly, there’s a good chance that your on-time delivery is within acceptable parameters.If you are promising your customers a certain delivery date and not delivering, you give the perception that your company is incompetent and doesn’t place a high value on its customers.If the product is not in the hands of the customer when the customer needs it, the value of your product diminishes severely. Charts tracking on-time delivery (daily, weekly or monthly) should be posted where employees can readily see them.
- Surveys Surveys are a valuable tool to measure current customer satisfaction on a wide variety of product and service attributes. Surveys also can measure the relative importance your customers place on each attribute.Companies should attempt to excel at those attributes customers rate most important while diminishing their investments in those areas that are least important from the customer’s perspective.
- Lead Time Lead time measures the length of time between when customers place an order until they expect to get their product or service. If the number of days or hours is less than your competitors’, you have created a competitive advantage.Demands in the customer’s world are causing demands for shorter lead times. Tracking lead times and posting them so employees see their current performance can help improve the company’s performance in this key indicator.
- Complaints Complaints can be a vital source of information. The number of complaints is important, but so are the types of complaints. Complaints offer companies an opportunity to re-engineer parts of their businesses that are failing.The reason for fixing this problem area is two-fold:
- Your customers are unsatisfied.
- Your employees are probably spending a significant amount of time fixing these problems.Complaints are not bad news. Complaints are an opportunity to learn what the customer doesn’t like about your product or service.
- Turn-Around Time Turn-around time measures the time between when a customer sends something to you until you to send it back. It also can be used to gauge service delivery response rates such as how long it takes for a repair technician to come out to your home to fix a washing machine after you make the initial telephone call.
- Time to Answer Inquiry This measures how long it takes you to respond to a customer’s inquiry. This can be a request for information, a response to an ad, etc. A lead loses 1 percent of its potency for every day it remains unanswered or unfulfilled. Tracking inquiry response time and responding quicker than competitors can translate into a competitive advantage.
- Fill Rate This key indicator measures what percentage of time the right products are available for customers. Obviously, the higher the fill rate, the more sales you are going to make. Conversely, if the right product is not available or on the shelf at the right time — it’s hard to make the sale.
- Target Segments All customers are not the same and not all customers are worth pursuing. It’s important to consider which customers you provide the most value to. These customers will most likely result in your highest margin and/or profit.Measure sales and growth rate by segments to ensure you’re growing in the segments that bring you the most value and can lead to higher future profits.
- Volume by Customer If you track customer sales by dollars or units per month and some of your key customers begin ordering less frequently, it might be an early indicator they are giving business to one of your competitors.It also is important to track the growth rate of your customers. If your customers are growing significantly and the number of orders from them is not increasing, perhaps you’re missing an opportunity.
- Error Rate The Error Rate measures how many mistakes were made in your organization when entering a customer’s order into your computer tracking system. Mistakes often equate to wrong products being shipped or increased delivery time.
- The 80/20 Rule This rule dictates that 80 percent of your profit probably comes from 20 percent of your customers. At a minimum, companies should track their top twenty percent of sales to see if they are growing, staying flat or declining.
- System Up-Time This measures the percentage of time your company’s equipment is up and running in the customers’ environment. If the product constantly breaks down or is unreliable, it could severely diminish the value of your product or service in your customers’ eyes.
- Response Time Hospitals are beginning to measure how much time elapses when a patient pushes the call button beside their pillow until a nurse or staff employee arrives. Other businesses could benefit from this key indicator as well.
- Returns/Rejects This indicator focuses on how many products customers return or reject.
- Unused Product Unused product can let you know which items are not effectively fulfilling a need or purpose. For example, a restaurant has a large white dry-erase board directly above a trash bin. The bus boys mark the name of any portion of a meal that a customer has eaten less than 50 percent. The restaurant tallies up the totals each month to determine which items are frequently not eaten.
- Retention Rate Turnover can be an effective indicator of the value customers are receiving from your product or service.
- Referral Rate The referral rate will measure what percentage of your business comes from referrals. It also can sum up your overall success rate at creating value for your customers.
- Telephoning Most lawyers return phone calls within 24 hours. Companies should answer the phone within three rings. Customers may interpret your lack of attention as a lack of caring about their business.The Bottom LineOnce your organization determines which future customer-focused key indicators it wants to quantify and measure, establish a baseline of current performance. Then, set goals to increase your performance in these critical areas.
As customers feel more value from you in the marketplace, this will drive the company’s bottom line in a positive direction.
- “Measure What Matters” — This article highlights the old adage “what gets measured is what gets done” and discusses building for future growth versus living on past accomplishments.