Itâ€™s Not Just Customer Satisfaction Anymore

Measuring Customer ValueIt’s Not Just Customer Satisfaction Anymore

Tom MoormannSenior Consultant

LOMA/LIMRAStrategic Issues Conference

Measuring Customer Value

OUTLINEOUTLINE• Value of a Customer• Customer Satisfaction and Customer Value• Linking to Operational Decisions• Linking to Employee Performance• Measuring Returns on Customer SatisfactionInvestment



Value of a CustomerValue of a Customer• What is customer value?

• Expected profits from each customer



• Revenue Streams - Premium Payments- Purchase More Products- Referral Sales

• Cost Streams - Product Costs- Cost to Attract Customer- Cost to Retain Customer

Value of Customer = Customer Revenue Stream - Customer Cost Stream

Measuring the Value of a CustomerMeasuring the Value of a Customer



Customer Satisfaction

• Revenue Streams- Premium Payments- Purchase More Products- Referral Sales• Cost Streams- Product Costs- Cost to Attract Customer- Cost to Retain Customer

Satisfied customers generate more revenue and cost less to service.

Increasing Customer ValueIncreasing Customer Value



Managing Customer ValueManaging Customer Value



Customer Satisfaction and Customer Value



Identifying and Measuring Customer ExpectationsIdentifying and Measuring Customer Expectations

• Sources of Information• Types of Expectations



Identifying customer expectationsIdentifying customer expectations

Customer Contact

Complaints

Primary Research

Secondary Research

Customer Expectations



What does the customer expect?What does the customer expect?



Linking Customer Satisfaction to OperationalLinking Customer Satisfaction to OperationalStandardsStandards

» Which expectations are most critical?

» What is an appropriate performance target?

» Why are there gaps?

» How do you close gaps?



Which expectations are most critical?

Assurance Gap

Reliability Gap

Empathy Gap

Time Gap

Customer Satisfaction



What is an appropriate performance target?—Better than we used to be?

—Better than our best operation?

—Better than others in our industry?

—Better than others in related industries?

—Better than ”world-class‘?



Why are there gaps?• Performance Deficiencies

—Systemic Causes—Human Error

• Rising Customer Expectations—Competitive Pressures—Prior Experience—Personal Needs



How do you close gaps?—Key Operational Performance

Measurements• Service Turnaround Times• Service Reworks• etc.

—Targeted Investments• Most frequently occurring problems• Largest returns



Your Customers

Your Customer Service

Linking Customer Satisfaction to Linking Customer Satisfaction to Performance StandardsPerformance Standards



Linking Customer Service to PerformanceLinking Customer Service to PerformanceStandardsStandards

—Measure and reward the behaviors relevant toperformance

—Take Customer÷s perspective, not Company÷s—Provide adequate systems support



Linking Customer Service to Performance StandardsLinking Customer Service to Performance Standards• Identify Service Quality Gaps• Prioritize Opportunities

• Most Important to Customers• Biggest Gaps

• Invest Where it Makes Sense• Measure Work Unit Performance - From the Customer’s Perspective• Measure Employee Performance - Contribution to Work Unit Performance



Returns on Investments to Returns on Investments to Increase Value of a CustomerIncrease Value of a Customer



ConclusionConclusion• Goal: Select Best Investment Opportunities• Requirements:

• Models linking investment to returns• Measures of key model components• Integration of planning and execution

Measuring Customer ValueIt’s Not Just Customer Satisfaction Anymore

Tom MoormannSenior Consultant

Itâ€™s Not Just Customer Satisfaction Anymore

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