You aim for bottom-line impact with your customer-centric strategy? Get to know the 10 boardroom metrics to have on your radar.

• #1 Customer Lifetime Value
• #2 Customer Effort Score
• #3 Monthly Recurring Revenue
• #4 Customer Satisfaction Score
• #5 Net Promoter Score
• #6 Average Order Value
• #7 Revenue from returning customers
• #8 Closing rate
• #9 Customer Retention rate
• #10 Customer Churn rate

Find out in this article:

• Why you should monitor those 10 metrics, to evaluate the impacts of your customer strategy.
• Which (sometimes disturbing) questions you should ask yourself about the underlying performance factors.
• What are the pro’s and con’s of each of those metrics.

#1 Customer Lifetime Value (CLV)

The question

Are you aware of the actual value of your customers to your business?

The metric

Customer Lifetime Value = customer value x average customer lifespan.

Next to the average value of sales, customer value accounts for: acquisition costs, operating expenses and costs to produce the goods or services.

The pro’s

Customer Lifetime Value, also called Lifetime value (LTV), helps you to prioritise and tailor marketing, as well as your operational efforts, to maximise future return on investment.

It points the way towards successful customer acquisition and retention strategies per customer segment. 

It switches the dynamics in your organisation to a focus on the customer, by forcing the business to examine their accomplishments with their customers.

The con’s

This metric is not relevant if hard data (eg. turnover, acquisition cost, customer service cost, …) are not available.

The future is difficult to predict, even with the best data at your disposal. Customer lifetime value (CLV) remains a predictive metric.

#2 Customer Effort Score (CES)

The question

Do you know exactly where it hurts?

Do you capture the true needs behind the cry of pain of your customers?

The metric

Customer Effort Score is the score you get when asking your customers how easy it was to interact with you. (on a scale of 1 to 7, from 1=very hard to 7=very easy).

Measuring the efforts required by a customer to interact with the company, is mainly used to evaluate the quality of an interaction and to estimate customer loyalty.

The pro’s

The Customer Effort Score metric provides a critical insight on the quality of a process or a service. It is objective and very reactive, considering that it is measured just at the end of an interaction.

It is complementary to other metrics, such as NPS or CSAT that we will introduce later. It is closely linked to satisfaction, loyalty, and generally to speaking customer experience.

The con’s

The Customer Effort Score does not provide much insight when the metric is not followed-up over time. The trend gives more qualitative insights than the absolute value.

Collecting additional data (qualitative) and information on customer sentiment is necessary to complement information from CES.

#3 Monthly Recurring Revenue (MRR)

The question

How impactful is your customer strategy?

The metric

Monthly Recurring Revenue = expected recurring revenue per customer per month x number of customers.

The pro’s

The Monthly Recurring Revenue is an ‘advanced warning’ metric: it helps you to understand the drivers of revenue growth and to identify opportunities to optimise your customer strategy. For example: improving acquisition, retention, pricing strategy.

It strongly supports budgeting/financial forecasting. And is useful to validate the relevance of a decision taken.

The con’s

For business models other than subscription -based models, the Monthly Recurrent Revenue metric can be more difficult to track.

We do not recommend this as a stand alone metric. You get better insights when combining MRR with your customer acquisition cost. And when correlating with your Net Promoter Score.

#4 Customer Satisfaction Score (CSC)

The question

How can you reduce friction points in your customer journey? What steps can you take to streamline your processes?

The metric

Customer satisfaction score = the score achieved when asking your customers how satisfied they are on a scale of 0 to 10.

It measures ‘in real time’ how well commitments are delivered to customers.

The pro’s

This metric gives valuable insight on customer’s overall experience with the products and/or services that you provide.

The Customer Satisfaction Score gives you real-time feedback on the impact of your actions. It is easy to implement, easy to understand for your customers. And thus more likely to provide multiple data points.

The con’s

The Customer Satisfaction Score does not provide you immediately with actionable information. And it requires a qualitative follow-up question to fully understand the score given.

Capturing verbatims is important to better understand where to prioritise your actions.

#5 Net Promotor Score (NPS)

The question

How many of your customers claim to be advocating for you?

The metric

Scores from 0 to 10.

NPS = % Promoters – % Detractors. It is calculated with:

• Promoters: respondents who scored  9 or 10.

• Passives: respondents who scored 7 or 8.

• Detractors: respondents who below 6.

The pro’s

Generally used and easily recognized across industries.

The same question can be used for customers and staff.

The con’s

The metric is not “valid”: people who claim to recommend you are not necessarily doing so in reality.

The claims of a causal link to growth stronger than CSAT have been proven wrong.

#6 Average Order Value (AOV)

The question

Is your customer strategy actively leveraging cross- and upselling opportunities?

The metric

The average amount spent every time a customer places an order.

AOV = total revenue/amount of orders placed

The pro’s

This metric helps to assess which strategies are driving your customers to spend more.

It also puts the focus on ways to increase the profitability of your existing customer base.

The con’s

The average order value metric can be affected by a few extremely high or extremely low value orders.

It focuses on the monetary value of individual transactions, not on the long-term customer retention and loyalty.

#7 Revenue from returning customers (%)

The question

Are your processes nurturing customer loyalty? Does your business model foster repeat business?

The metric

Revenue from returning customers = a percentage of total revenue

The pro’s

Comparing revenue generated by new customers to the cost of acquiring those customers can provide insights into the effectiveness of efforts. It helps tracking customer loyalty and identify opportunities to improve customer retention.

The con’s

Revenue from returning customers does not take into account the frequency or the volume of purchases: a high number of returning customers may not necessarily lead to sustained revenue growth if they make only smaller purchases.

The relevance of this metric may vary depending on industry and business model.

#8 Close Rate (%)

The question

Are you presenting the right value proposition to your sales leads?

The metric

Within a period, what’s the percentage of conversion of new customers over the total number of leads generated.

The pro’s

A drop in close rate can be an opportunity to reassess customer expectations. This metric is both tactical (performance of sales reps) and strategic (relevance of your value proposition).

The con’s

A robust controlling is needed if you want to capture every lead your organization generates. This metric isn’t always relevant for business models with long sales cycles, such as B2B companies with high-value products or services.

#9 Customer Retention rate

The question

Are you creating sustainable business growth by keeping your customers?

The metric

[(E-N)/S]x100

• E = # of customers at the end of period
• N = # of customers gained during the period
• S =# of customers at the start of the period

The pro’s

The customer retention rate directly affects customer lifetime value.

Better retention means more reliability on repeat purchases, and thus increased consistency in revenue streams.

The con’s

This metric (CRR) may be influenced by factors outside the business’s control (eg. market conditions, competitive forces).

Relying on customer retention rate only, might overlook the importance of acquiring new customers.

#10 Customer churn rate

The question

Are you removing the right pain points through process review and optimisation (e.g. complaint management,…) ?

The metric

Customer churn rate = number of lost customers over the total number of customers (at the beginning of the period).

The pro’s

Customer churn rate is a quantitative metric that helps budgeting and forecasting.

Tracking this metric motivates an organisation to understand and address crucial customer pain points.

The con’s

It is a post-mortem metric: you capture insight after the fact. Therefor, it is more useful if followed-up over a period of time: reacting to the trend is more important than capturing its spot value.

The full series of Boardroom metrics to monitor your customer strategy

#1 Customer Lifetime Value

#2 Customer Effort Score

#3 Monthly Recurring Revenue

#4 Customer Satisfaction Score

#5 Net Promoter Score

#6 Average Order Value

#7 Revenue from returning customers

#8 Closing rate

#9 Customer Retention rate

#10 Customer Churn rate

Not everything that can be counted counts, and not everything that counts can be counted. 

– William Bruce Cameron

I weigh 62 kilograms. Five kilograms too much to my liking. Time for action! To know if I’m actually getting results, I weigh myself every Monday morning, right after showering and completely naked, to make sure that I can work with comparable results. I’ve been doing that for seven weeks in a row. Without any result. What am I doing wrong? I explain that to you in this blog because we all make the same mistakes in defining our KPIs.

Measuring what doesn’t matter

You use Key Performance Indicators (KPIs) to analyse performance. Thanks to KPIs you want to induce change. And they are perfect for that, because a KPI impacts the behaviour of your employees. Someone measures it, so it’s important. You don’t even have to link an evaluation or remuneration to it. A KPI changes the behaviour of your employees. Point.

And that knife cuts both ways. Because when you define the wrong KPI, you get the wrong behaviour. And we still see that happening too often. Employees in a call centre know them well: the KPIs with perverse side effects. Managers in a call centre might evaluate their employees on the length of the phone calls they are doing. In an ideal world they would take less than 3 minutes, because then they can help more customers, keep the waiting time under control and have more satisfied customers. The annoying side effect? Employees who, after 2 minutes and 50 seconds, tell the customer they’ll call back in a minute. The KPIs are green. The customer turns red.

Measuring what matters and still overshooting the mark

Soon I found out that I’d rather weigh myself in the morning than in the evening, that I’d get a better result if I didn’t drink any water the night before, and that it was to my advantage to go to the toilet first. Once I saw the number 59 appear. And quickly disappear again. A typical phenomenon: measuring the intended result but not actually achieving what you want.

Your goal is customer satisfaction. So you show your employees on a weekly basis how often they make a customer happy. You measure what matters, and yet you create problems. A small selection of what we see happening: 

• Employees who only send surveys to customers they expect to be extremely satisfied.
• Assigning colour codes to the survey so that customers are well aware that a 7/10 or 8/10 answer is only ‘orange’.

• An employee who asks your customer to give a high score, because he will be evaluated on it.
• Or handing out gifts to customers, hoping for better scores.

Measure behaviour, not results

Most managers focus on results. Sales managers focus on sales, service managers focus on customer satisfaction, parents focus on report cards, people who diet focus on weight. But by measuring results, you won’t get there. In order to motivate your team and achieve success, it is better to do a behavioural measurement. Here is the difference:

A result measurement

• tells you if you have achieved the goal
• can’t be directly influenced by you
• gives you information at a moment you can no longer change the result

A behavioural measurement

• tells you how likely it is that you will achieve your goal
• can be directly influenced by you
• gives you information when you can still influence the result

Therefore, a behavioural measurement has a more motivating effect than a result measurement.

Is your goal customer satisfaction? Then your result measurement shows how many satisfied customers you have. Your behavioural measurement, on the other hand, measures what your team does to ensure that customers are satisfied.

Why is it that we so often use the wrong KPIs?

If it’s so simple, why do we always use result measurements? There is one simple reason for that: they are easy to implement. You don’t have to look for them, they are often delivered to you automatically.

Measuring behaviour is a lot more difficult. And there are two reasons for that:

The behaviour with a direct impact on the result is difficult to determine.

How do you determine which behaviour has an impact on your intended result? Many managers do this intuitively. They start from assumptions and select those elements that they think have a direct impact on the goal. Like answering customers quickly, for example. If we do that, customer satisfaction will increase. And so we measure the speed with which we solve customer questions. Employees adjust their behaviour and focus on the speed, not on what they should do to make the customer satisfied. A world of difference, because satisfaction is rarely about how fast you do something for a customer. Your customer just needs to know who is going to do what and when. No vague promises. Customers like it super concrete.

Behaviour is difficult to measure.

Have you figured out what your employees have to do to create satisfied customers? Then it’s a matter of measuring how often they behave in this way. How often did your employee give the customer insight into when his question will be answered? Quite a challenge, because this data is seldom available and collecting it takes some effort.

How do you determine a good KPI?

Find the desired behaviour

First, determine your goal. What should your customer say about your organisation? Then, experiment to find out what the behaviour is that your employees have to display in order to reach that goal. Are customers more satisfied when we call them, rather than emailing them? Do customers want a fast solution? Or do they prefer to be kept informed while we take some time? You only know the answer when you test it on a number of customers.

Most important criteria? Your employees must be able to have a direct impact on the desired behaviour. Whether they do it or not, depends solely on their own will to do so. 

Measure the desired behaviour

Is it clear which behaviour is needed to achieve the desired result? Then you have to measure it. And you have to make sure that your employees have an overview of the status. Not a monthly report with the results, but a direct view on how your employees behave.

Do I want to lose those kilos? Then I’d better stop measuring just the result. I have to measure my behaviour. And that’s why I first determine which behaviour has a direct effect on the kilos that appear on my scale. In order to lose weight, I can take two actions: eat healthy and exercise. 

And I can measure those two. How many calories do I eat every day and how many calories do I burn? Do I keep a good record of these two things? That way I focus on what really matters. Not an easy exercise, but better no KPI than a bad one. 

By now I weigh 57 kg. I practice what I preach.

Intrigued by this subject? Then be sure to read The 4 Disciplines of Execution van Chris McChesney, Sean Covey en Jim Huling

Why pay an entire team of people to solve the same problems over and over again when customers seem no less frustrated after talking to them? And the customers you would actually like to talk to, simply don’t call. Or can’t get through. If you have to cut expenses, this would be the way to go, right?

Before you jump to that conclusion: let’s take a step back. Why did you want a customer service in the first place?

Continuously improve your service

Who better to detect those opportunities than the customer service representative? After all, he is first in line to hear what customers complain about. And when things go seriously wrong, he’s the one trying to deal with the ‘incident’.

Incidents call for incident management: alarming the rest of the organisation and then preparing ourselves for the angry calls to start pouring in. We make sure we know exactly what to say (and how to say it). Basically, we ‘swallow’ incidents.

Can you then be surprised your employees feel pressured? They spend most of their time on conversations they nor the customers want to be having. They are simply not equipped for all this extra workload. And the customers you really want to talk to, are kept on hold for longer and longer periods of time. With many of them just giving up. This is the moment when the customer service starts ringing the alarm bell. They ‘dislocate’ the whole organisation with its craving for extra man power.

Your customer service has so much more potential than that. Instead of reacting, they could be ‘proacting’. You want them to take control of the situation. How? By contacting the customer and informing them of what happened – before they call you.

Eliminate ‘worthless’ customer contacts

But it goes beyond ‘incidents’. Even when nothing goes wrong, you still have to deal with all these ‘worthless’ customer contacts. Just count the number of questions that could have been answered via other, cheaper and often more accessible channels (a.k.a. the internet). Or questions that are a result of unclear communication (just think of invoices that can be made head nor tail of). You’d be shocked.

Your customer service department has insight into all these problems. Sadly enough, that’s where it often comes to a standstill. Is your organisation ready to confront its problems and look for root causes? And fix them? Start by measuring the number of ‘worthless’ contacts. And take action to decrease this number.

Increase customer loyalty

You can’t solve everything. Mishaps happen, new problems pop up. Even without them you will always find unsatisfied customers. No matter how well your organisation handles problems: angry customers will always find their way to your customer service department first.

And that’s when it often goes wrong. Your customer service employee is only human. And humans don’t tend to react very well to angry people. We feel attacked and snap into defence mode. I don’t think I need to paint you a picture of when happens next. The customer gets even more upset, as does your employee until one of them explodes or worse, just hangs up. Nobody’s happy, everybody loses.

Why do these situations go so wrong, so quickly? It starts with the first question a customer service employee is thought to ask himself: “Is this complaint valid?” We basically start by questioning the customer. Highly frustrating of course. Would he have called if he didn’t think his complaint was valid?

So how to go about this properly? It might not sound like it, but an angry customer is actually a great thing. Were you waiting for an opportunity to turn your customers into ‘fans’? Well, this is it!

Richard Gallagher wrote a brilliant book about it: The Customer Service Survival Kit. Bottom line: never ever strip a client of his sense of self-worth. No matter how irrational (or crazy) you think the customer is behaving. Make him feel like a normal human being. Tell him that everybody would feel that way is his situation – heck even you would feel the same way. This doesn’t mean you side against your colleagues. It means you acknowledge his perception as (a) reality. By doing so you create an opportunity to offer solutions – and a customer who’s willing to hear them! Focus on what you can do, as opposed to what the customer demands.

Teach your employees these techniques and you will see a huge difference. Mind you, it will take more than a day to master. Give them the room and the authority to offer clients ‘second time right’ solutions. Support them with processes and systems that facilitate this.

Don’t let you client slip away. Make him your most loyal customer instead.

Be gone with customer service?

Maybe not just yet. Think about what your customer service could be for your customers – and for your organisation. A strong customer vision will bring you a long way. The more concrete and clear, the more people translate it into their day-to-day decisions.

Our ‘humanity’ prevents us from surprising agry customers.

A typical customer service representative? A sadistic misogynist who indulges in his every fantasy. That’s what you’d think if you’d analyse the attitude of some of the customers calling in. Do you want to increase your collection of abusive words? Just listen in for a day at a random customer service department. Angry customers tend to forget that there is a human being at the receiving end of the phone call.

In this respect, it takes sheer courage to proclaim to our service reps that they ought to ‘serve with a smile’. This kind of angry-customer situations bring out our feral instincts: the ‘fight or flight response’. We defend our position tooth hand nail: “it’s not our fault”. Or we hang up, tail between the legs.

This is the ideal moment to make a difference with other customer services. And the experience your customer had with them. Surprise him!

But how?

Overcome your instinct: tackle both the problem and the frustration.

The essence? A complaint always consists of two parts: facts and frustration. One part is the mere facts of the problem, while the other is how those facts are perceived.

Mostly, we do exceptionally well with solving the problem: calm, rational and quick. But why does the customer stay annoyed?  Because we casually ignore the second part. Surely a good solution will always be important, but the degree to which the customer feels acknowledged is so much more important! A customer who doesn’t feel understood? He probably won’t even listen to your solution.

Reversing a painful situation? A concrete example.

A customer calls the customer service and isn’t in the best mood…

Customer: “At last! I’ve been trying to reach you for the last 20 minutes. By now I’m pretty sick of hearing ‘Für Elise’! Internet has been out all morning, while I have some urgent and important emails to send! How am I supposed to work like this?”

Scenario 1:

Service rep: So there’s a problem with your connection. Could you unplug the router for a minute while I perform a line check?

Scenario 2:

Service rep: What?! 20 minutes?! If it’d been me, I’d be seriously ticked off as well! I’m truly sorry for keeping you waiting that long. I’m going to do everything I can to fix your problem as soon as I can. Could you please tell me what you’ve already tried to get it working again?

Can you feel the difference? We start with acknowledging that the customer is frustrated. Moreover we don’t try to ignore or minimize his or her anger. If anything, we confirm that it is perfectly normal for him to get mad. We encourage him to get it all out before we start thinking –and talking- about solutions.

Turning an angry customer into an extremely happy with by only offering a solution? Not an easy job. Do you really want to surprise him? Respond to his emotion! That is when your organization can truly make a difference!

Communication. It’s the instrument organisations rely on for change. But it doesn’t seem to be enough. Because employees are still struggling to understand and failing to adapt to the new way of working. And that’s where the problem lies.

Big efforts. Minor improvements.

There’s something you should know about services that are groaning under the weight of a huge workload: they are usually struggling with dissatisfied clients too. If it’s no longer possible to cope with the pressure; changes must be made. Now!

So, the organisation puts a project team together, calls on consultants and sets ambitious goals for improvement. The team dives into the analysis phase and surfaces at the end of the creative phase with conclusions and recommendations. Management greenlights the quick wins and budget-friendly initiatives.

The communication machine starts up: eye-catching posters, spectacular PowerPoint presentations and updated processes circulate via presentations and campaigns, company newsletters, intranet, team meetings, etc. So far, so good.

And when the communication round is over, it’s down to the employees. They need to go out and put it all into practice. Every employee goes through a carefully planned training programme. And they’re given the new work instructions.

What does a change programme like this actually deliver in the end? Well, usually, no more than a few incremental improvements. Ones the client will have difficulty recognising.

Less than a year later, the organisation will confirm that it’s once more struggling with excessive work pressure, demotivated employees and clients who have abandoned any thoughts of loyalty. Despite all that effort!

Visible result, together with motivated employees

Are you striving for ‘major improvement’? Well, that requires ‘major changes’.

Make the most of the expertise of your employees on the work floor. They know where the gaps in the current work methods are better than anyone else.

Work with them to form a team of motivated employees. Give them the chance to shape the new way they will be working. And to test it in the practical world. Do this and the change is already underway. Step by step, they’ll make the new way of working their own.

Let them experience how it feels to use this new way of working to score with clients. By doing so, you’ll create a desire for change. And slowly, you’ll notice an undeniable improvement in your efficiency. Your clients are sure to notice it too.

Are your clients disappointed with your service? This means it’s time to examine your communication. Being extremely clear about what you offer makes a radical difference to the experience of your clients, your patients or your citizens.

A service concept describes exactly what you offer and what you need from your client so that he can enjoy or benefit from your services.

We frustrate clients when we aren’t clear about what they can expect

In the following example, there is no lack of friendliness or action. Yet the citizen is still dissatisfied with the service. And the process has wasted valuable taxpayers’ money.

Imagine a typical family outing to the water park. After a bit of fun in the water, you discover your iPhone is no longer with the rest of your belongings. You head to the police post; after all, it’s what they’re there for. ‘No,’ they say. ‘We haven’t found anything. Sorry.’ Bother.

You arrive home and fire up the ‘Find My iPhone’ app. What a great tool! You see the exact location of your iPhone marked on the map. It’s in an apartment building less than a kilometre from your home. You inform the police. The response: ‘Before we can do anything, you’ll have to come down to the station to make an official statement. Sorry.’ Bother. Again.

Once you’re there, your ‘case’ is closed: the police are not allowed to search an entire apartment building for your iPhone. This is understandable.

But what was the point of all that running around and standing in the queue? Why did you have to waste both your own time and a police officer’s? Just for the sake of an administrative declaration? And how did it benefit you or the police? Was contacting them even worthwhile?

The next day, you receive a message from the ‘Find My iPhone’ app: your iPhone is now in the park. Time for action. You call the police again. With your heart thumping and eyes glued to the computer screen, you give the exceptionally friendly police officer the exact location. ‘We will send a team and call you as soon as we are there.’ A little later, the police officer calls you back and tells you the team is on site. You provide the current location of your iPhone: ‘500 metres further along the road at the library.’ The police officer calls back just moments later: ‘My team is there.’ While you’re on the line, you see the iPhone moving on the screen: into a tram, out of the tram, across the street … You once more give the new address. And then, in the middle of all this action: ‘Sorry, but we simply can’t keep on doing things this way. There are other tasks we have to attend to. Unfortunately, we can’t keep chasing after thieves for an iPhone. I hope you can understand this.’

What?! Why did we just go to all that effort? What service does the police actually offer in the event of a theft?

A good service concept leads to satisfaction and efficiency

Being customer-friendly and taking action is important, but it’s not enough. For your services to be genuinely customer-friendly, you need a clear service concept: what can the client, patient or citizen expect from you? And what is not possible? What does a client need to do to make the most of your services?

Would you like to have satisfied clients? You’ll have to make a few choices: where do you want to excel? What practices do you want to leave behind? And why?

In this example, the service concept for the police would have answered the question: when do the police intervene in the event of theft (e.g. as from what value?) and when don’t they? What does the citizen need to do? Etc.

A structured service concept, communicated clearly, leads to satisfied clients, gives the employees direction and results in efficiency. This way, a half-intervention with no result makes room for a satisfied citizen and a worthwhile use of taxpayers’ money.

Loyal clients? They’re a dream come true. They’re the clients who aren’t seduced by attractive offers from competitors. The ones who think of you first, every time they need to make a new purchase. Clients who recommend you to everyone who’s prepared to listen … And even some people who aren’t.

You probably have clients like this. But they shouldn’t be taken for granted. They will leave if they believe you aren’t returning their loyalty. Unfortunately, two-way loyalty is an issue that comes up far too regularly.

Clients get little loyalty back

Loyalty is an emotion. And you don’t hold emotions for ransom.

But what do you do if a loyal client has been paying on time, year after year, before one day leaving it a little too late to pay their most recent invoice? Right. You send them a reminder. With a ‘reminder cost’. And it’s usually paired with some threatening language about what will happen if they don’t make the payment straight away.

The issue isn’t just related to late payments. It’s also far too common when you offer extras, bonuses and rewards. Because your older clients, who took the risk of doing business with you, back before you had proven your value, are often forgotten.

What will they think when they see that you reward new clients for their wait-and-see attitude? What will they think if you’re offering new clients benefits you never offered them? Exactly. **** ***!

And why would you only solve a persistent problem at the moment that a loyal client lets you know they’ve decided to take their business to a different supplier?

Make sure your clients feel your loyalty

It might seem like loyalty is only a one-way street. You put so much energy into new clients. And in detecting clients who are likely to head to the competition. You forget those quiet, loyal clients. It’s crucial to pay attention to them if you want to work on genuine loyalty.

For every marketing promotion, process design and all your communications, think about the possible effects on those clients who have been with you for a long time, but who barely make a sound.

What do you offer them to show you appreciate their loyalty? A birthday card is probably not the answer.