CRM initiatives require that you broadly communicate customer intelligence throughout the organization. One of the most effective ways to do this is through the development of a customer scorecard. A scorecard should not just be a set of statistics. Instead, the card should tell a story, communicate knowledge of customer behavior and suggest new strategies.

Defining the Metrics

The first step in creating a customer scorecard is defining the key business metrics you want to report. Ideally, the customer scorecard should report business metrics by customer segment. Consider including:

  • Current Customers. Some organizations further classify this metric based on active or inactive.
  • New Customers. The total number of new customers is reported against acquisition goals.
  • Retention or Defection. It is often helpful to look at retention not just as pure numbers or percentages, but rather by profitability decile. In that way, you can better understand whether you are losing very profitable customers or those that were unprofitable.
  • Market Penetration. This metric identifies how deeply you've penetrated the potential set of customers in your marketplace and helps to quantify the opportunity for growth. Mapping also provides an effective way to visualize penetration.
  • Product Penetration. This metric typically identifies the percentage of customers that have purchased within each major product category. In service industries such as banking or telecommunications, the metric relates to current ownership or usage. In other industries the metric might look at purchase behavior over the last six or twelve months.
  • Cross-Sell. For each customer segment, this ratio identifies the number of different product or service categories purchased by customers.
  • Up-Sell. Financial services organizations often look at average balance in major product categories. Telecommunications looks at monthly billings. In retail or catalog, the metric might relate to average order size, total market basket or frequency of purchase.
  • Current Profitability. This metric can be as simple as reporting margin or as complex as reporting fully loaded customer profitability. Some organizations also report important drivers of customer profitability such as total fees or service plan/extended warranty purchases.
  • Lifetime Value or Long-Term Potential. These metrics help the organization to understand how long-term customer value is increasing or declining.
  • Channel Penetration and Usage. In many industries, channel usage can have a big impact on customer profitability and lifetime value. Therefore, many organizations also provide several metrics related to the channels customers use. The focus is often on the use of less expensive electronic channels. For example, airlines are focusing more on more on the number of tickets sold online. Banks track ATM transactions versus the more expensive teller transactions. Click-and-mortar organizations might compare retail volumes to catalog and online.
  • Customer Service or Satisfaction. Some organizations also report metrics related to number of customer service calls in various categories or the results of recent satisfaction surveys.

The metrics you report will take on additional depth if you also consider the impact of time and sequence. Measuring change over time is the single most critical way of deepening your insights about your customers. Tracking penetration over time will provide you with early warnings of shrinking segments and early indications of new opportunities.
Keep in mind that this list is only representative of common metrics that organizations track at the customer segment level. However, you should confine your list of metrics to ensure that you are highlighting those that are most important. Too many or too much information will distort the picture and confuse the story you are trying to tell.

Building the Story

With each customer scorecard you publish, add new knowledge you have gained about customers. This knowledge might discuss:

  • New learnings about customer behavior such as defined purchase paths for a specific customer segment.
  • Results of a recent test offer that was successful for new customer acquisition.
  • Information from "what-if." simulations that suggest ways to increase customer profitability on lifetime value.
  • Information discovered as part of recent surveys or focus groups relating to customer needs or attitudes.

Highlight important information on your customer scorecard. Clearly state the key findings from both the benchmark statistics and knowledge sections. Provide recommendations for applying the information.
You might also want to consider producing different versions of your customer scorecard for different audiences. Business decision makers will likely focus on different aspects of the information than middle management and front-line staff.

Updating the Scorecard

To be effective, the customer scorecard can and should change when:

  • Key business drivers change.
  • Key business strategy changes.
  • Customer segments are redefined.
  • The data tells a more compelling story from a different point of view.

Survey your readers periodically to find out what they look at first and what information is most helpful to them. Ask what could be added to make the scorecard more valuable to them. Find out how they use the scorecard to manage their business and their daily work. All of this information will aid you in refining the CRM scorecard to be a valuable and effective business tool.

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