Keep track of your customers' habits!

All companies want to measure and evaluate performance to the greatest extent possible, and to decide on the necessary action accordingly. But which key indicators are actually relevant? We take a look at the determination of KPIs.

The goal of any measurement approach is to identify evolutions or trends. In general, it can be said that trends arise in response to changes in behaviour. It does not matter whether a company actually had any influence; the trend is bringing about a change in a given situation.

In order to be able to track a trend, appropriate benchmarks or metrics need to be defined for this purpose. The decision as to which metrics might be relevant is driven by the answer to some key questions:

• Which trends are relevant for the company?
• What type of behaviour influences a given trend?
• Can these behaviour patterns be influenced?
• What change in behaviour is needed in order to achieve a desired development?

There is no general rule as to which metrics (or key performance indicators − KPIs) will be appropriate. The most straightforward and popular KPIs are revenue, margin and volume. Moreover, no additional specialist expertise is required to understand these common KPIs.

Nonetheless, there is a problem with using such general observational metrics: they are based on absolute numbers. In purely statistical terms, these figures are skewed, as certain parameters (e.g. revenue per customer as a weighting within the customer portfolio) are not taken into account at all.

In order to establish a trend, closer examination is required. For example, what is causing a margin to fall? Perhaps customers are being granted too high a discount. It is also conceivable, though, that the work with customers has simply become more expensive. However, this would then raise the question of what is causing the higher costs. Is the company's performance poor, or has the customer changed their behaviour? Have the customer's demands increased? If so, why is that the case?

To clarify further, answers can be found to some extent in customer evaluations. One such tool is the customer survey. With the benefit of hindsight, it highlights the impression left on the customer and is certainly a helpful trend indicator. The customer service department can also provide useful snapshots, but the challenge here is that customers rarely bother to provide feedback if everything has gone perfectly. This means there is a risk of impressions being distorted.

At the same time, not everything can be explained by means of customer surveys. Remarks relating to hypothetical questions or future intentions do not offer reliable key indicators from which a strategy can be derived. This can only be achieved through the use of testing.

Whether analysing performance or customer perspective, tests produce KPIs and can reflect trends. It is possible to evaluate the current situation and identify developments. However, in order to influence a trend, behaviour needs to change and this is generally the responsibility of the company. Both the customer themselves and their expectations will continue to evolve. And so the challenge remains: “How can we remain an attractive partner for our customers in the long term?”