Evaluation, Measurement and Refinement

Effective metrics help organizations build KCRM strategies and solutions that help understand customer needs, differentiate between customers via customer segmentation, predict customer loyalty, identify problems, predict future events, understand the true customer value, and monitor marketing effectiveness.

Measures reflect success: Metrics define success and failure. Effective metrics must reflect what is important to customers, and in turn, to your business. Employees will maximize things that are measures, which may not necessarily be those that are important.

Traditional financial metrics are insufficient: ROI, NPV, Tobin’s q, and total cost of ownership measure only the hard and quantitative factors at the cost of soft, qualitative ones.

Benchmarking is a starting metric but not an end in itself: Benchmarking allows you to compare the performance of different business units but is subject to problems related to selecting the right targets and the lack of detailed analysis. Although you can begin with benchmarking, you must eventually adopt a more comprehensive set of measure. The stages of knowledge growth framework provide a high-level assessment of your customer relationship management capability and customer knowledge to determine areas that need most attention.

Devise a Balanced scorecard customized to your business: The balanced scorecard method provides the most comprehensive set of measure that take long-term and short-term objectives, financial and nonfinancial measures, lagging and leading indicators, and internal and external perspectives into account. Your business’ initial set of metrics must eventually lead toward the formulation of the cards within a custom-built balanced scorecard.

Effective metrics can facilitate the right customer-focused initiatives if they are analyzed using an integrative relational cause-effect approach such as the balanced scorecard.

Pitfalls: Having no metric is better than having relying on one that is absolutely wrong. The choice of a wrong metric can have more ill effects than positive ones. Metrics when applied to knowledge work, or in general, are vulnerable to 10 common pitfalls. To avoid those pitfalls, concentrate on what your customers value, not what you want to sell. Make sure that KCRM initiative is well aligned with business strategy and incrementalize the project.