Curtis on...Critical Success Factors for CCOs: 4. Metrics Tied to Profitability
In this fourth of seven videos on critical success factors for chief customer officers and senior loyalty executives, Curtis Bingham, Founder and Executive Director of the Chief Customer Officer Council explains the necessity for metrics tied to profits and revenue growth.
Transcript for Curtis on...Critical Success Factors for CCOs: 4. Metrics Tied to Profitability
The fourth critical success factor for CCOs and loyalty executives is that of creating metrics that tie to revenue growth and profitability. The chief customer officer tenure is only 29.6 months, and one of the reasons why that number is so low and why this role is so fragile is that as soon as a company hits a revenue road bump, they begin looking at executives to determine which ones are contributing the greatest amount to revenue and profitability. And if the CCO cannot prove that they are making a valuable contribution to revenue and profits, then, they're one of the first ones to go.
In recent years, there has been a growing body of evidence that has shown that customer loyalty is a leading indicator and contributes to revenue and profitability. But, at the end of the day, this academic proof is insufficient. Some people are using NPS as a score in trying to prove that the increase of which may be useful to the company. But this is a poor proxy because the CEO deals in revenue, profits, cost savings, and the like; and whether an NPS score goes up or down, it may not mean anything to the CEO or the CFO.
So, what you need to do as the CCO is to make sure that you provide a very clear line of sight to revenue.
A very large technology company found that they were able to generate 33% greater revenue from their highly engaged customers. A consumer electronics firm found that a 1%-increase in customer loyalty actually correlated to a 33.3 million-dollar annual increase in revenue.
Another company started looking at the cost of lost customers, everything that included the time that was spent in trying to win the customers back to understand why they defected and all kinds of incentives and offerings to try to bring them back and found that the cost was huge and unbelievably so within the company.
As the CEO, you need to demand of your CCO or other loyalty executive hard metrics. We're not in this just to make everyone feel good. That's not enough. We need clear metrics that show how we're improving revenue, decreasing cost, or mitigating risks.
As the chief customer officer, make yourself indispensable. Whatever metrics you choose, ensure that they show top and bottom line impact so that the value that you provide is perfectly clear.