You Have the Wrong Number! Strategic Differentiation is at Risk

September 16, 2020 at 8:03 pm | Blog

Some businesses have more measurements, controls, and processes than NASA. Others have virtually none.  In my 30 years’ experience working very closely with hundreds of companies of all sizes, I have seen only a handful with metrics that are aligned with the highest buying criteria of their customers and prospects.  Strategic differentiation depends on having the right numbers.

 

What most organizations focus on are common KPIs (Key Performance Indicators) which often look like this list:

sales per employee, cash flow, dollars per rep, employee turnover, gross profit per day, labor costs to sales, new orders booked, training as a % of sales, accounts receivables, etc.

 

Scan books and articles on customer metrics and you will find things such as:

pricing and packaging; positioning and presence; customer profitability, customer lifetime value, brand awareness, customer loyalty, conversion rate, churn rate, net promoter score, etc.

 

None of these matters much to the customer — This is all great information for the company to have as its control panel, but these metrics have extraordinarily little relevance to customers.  Most companies measure that which benefits them, grows them, and produces better margins.  That is a must.  But where are the metrics, the evidence, that benefit the customers: on time, in full, quality, responsiveness, accuracy, etc.?  Strategic differentiation is not just about new products or services but about doing what customers value much better than the other guy.

 

On a slightly more positive note, some companies have some good customer focused metrics but rarely – or never – use them consistently and clearly in their marketing and sales messaging. When I have asked, I am commonly told “oh sure, we measure on time delivery.”  I reply, “okay great, do all your salespeople know the measurement; is it updated monthly, quarterly? Are you sure they are touting it in sales presentations?  Are they sharing the metric to remove risk in the buying decision?”  The most common response was a meek, “no.”  This is a gigantic missed opportunity.  If you want strategic differentiation right away, start here.

 

We have worked with several companies whose most important attribute to customers was first-call resolution.  Only about a third of the companies had such a metric, and of those that did, none communicated their performance results to their customers.    They viewed it simply as an internal report card on their efficiency, not realizing that their customers might also value it.  Once they provided sales teams with this evidence and required them to make this part of their messaging, sales close rates rose.

 

Another client measured quality by their product return rate, but they never analyzed it as a quality metric.  When we reviewed their product return data, we learned that their return rate was less than one percent for 8 years.  They immediately armed the salespeople with the data, and not surprisingly, close rates rose.

 

Strategic differentiation must be based on numbers that are relevant to the customer

 

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