Measure what matters

Measure what matters (to customers)Ed Kless

GN-27

Tuesday, July 28th, 4:30pm to 5:15pm

@edkless

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The contents of this presentation were provided by the individual(s) and/or company listed on the title page. The information and opinions presented in this presentation may not represent the positions, strategies, or opinions of Sage. Unless explicitly stated, Sage is not responsible for the content herein and no endorsements are implied. ©2015 Sage Software, Inc. All rights reserved. Sage, the Sage logo, and any Sage product and service names mentioned herein, are trademarks of Sage Software, Inc. or its affiliates. All other names used in this presentation are for informational purposes only and may be trademarks of their respective owners.

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“Because its purpose is to create a customer, the business enterprise has two––and only these two––basic functions: marketing and

innovation. Marketing and innovation produce results; all the rest are ‘costs.’”

- Peter Drucker

“Because its purpose is to create a customer, the business enterprise

has two––and only these two––basic functions: marketing and innovation.

Marketing and innovation produce results; all the rest are ‘costs.’”

- Peter Drucker

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“What you can measure you can manage.”

The McKinsey Maxim

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“The only way to look into the future is use theories since conclusive data is only available about the past.”

–Clayton Christensen

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Constructing a Theory• Observation (How do you know?)

• Categorization (Rank what’s important - Occam’s Razor)

• Prediction or Explanation (So what?)

• Confirmation/Falsification (If not, revise, start over)

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Economic classifications of key indicators

• Lagging (Unemployment, prime rate)

• Coincident (Sales)

• Leading (New orders, Building permits)

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A Gedanken

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Airline KPIs

• On Time Performance

• Lost Luggage

• Customer Complaints

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Key Predictive Indicators

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Predictive indicators define success the same way the customer defines success

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The Big Three: KPIs

• High Satisfaction Days

• Net Promoter Score

• The Value Gap

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What is the likelihood that you would recommend us to a friend or colleague?

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What is NPS?

0 1 2 3 4 5 6 7 8 9 10

Not at all likely

Extremely likely

Likelihood of recommending

Detractors

Promoters

Passives

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Calculating Net Promoter Score

%P 30% 30%-0- 45% 35%%D 25% 35%NPS 5 (5)

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Why this matters!

“An increase in NPS of 5 increases profits

by 25 to 95%.”

Fred ReichheldLoyalty Rules!

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Getting Customers on The Grid

• Customer name

• Lifetime Revenue

• Net Promoter Score

• Customer Likeability Score (or other index)@edkless

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Customer Likeability Score (CLS)

1. Disagree strongly

2. Disagree

3. Disagree somewhat

4. Agree somewhat

5. Agree

6. Agree strongly

On a scale of 1-6, please rate your level of agreement with the following statement:

This customer is clearly a joy to work with.

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The Grid

C B A

F E DNet Promoter Score

Neutrals (7-8) Promoters (9-10)Detractors (0-6)

Cust

omer

Lik

abili

ty S

core

Dis

like

Like

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On the grid

0 2 4 6 8 100

2

4

6

C B A

F E D

Net Promoter ScoreNeutrals PromotersDetractors

Cust

omer

Lik

abili

ty S

core

Dis

like

Like

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Value Gap

Basic• Customer name• Revenue from the customer per some discrete period• Value provided to the customer in that same period

Advanced• Value that could be provided over a future discrete period• Possible acceptable price (revenue) for that provided value

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Value Gap AnalysisCustomer name Value Provided Revenue The Gap Potential Value Potential Revenue New Gap

Customer 1 1,000 500 500 2,000 1,250 750

Customer 2 - -

Customer 3 - -

Customer 4 - -

Customer 5 - -

Customer 6 - -

Customer 7 - -

Customer 8 - -

Customer 9 - -

Customer 10 - -

Customer 11 - -

Customer 12 - -

Customer 13 - -

Customer 14 - -

Customer 15 - -

Customer 16 - -

Customer 17 - -

Customer 18 - -

Customer 19 - -

Customer 20 - -

Total 1,000 500 500 2,000 1,250.00 750.00

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Measure what matters (to customers)Ed Kless

GN-27

Tuesday, July 28th, 4:30pm to 5:15pm

@edkless

25 #SageSummit

Questions?

• Send any questions you may have about this session to the following email by August 15:

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[email protected]

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Session survey

• Complete a survey for this session!

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http://goo.gl/2MUPWW

Session code: GN-27

Session title: Measure what matters (to customers)

Measure what matters (to customers)Ed Kless

GN-27

Tuesday, July 28th, 4:30pm to 5:15pm

@edkless