The Age of the Customer! Customer-Centric Marketing! Customer Obsession!
These are the buzzwords that you’ve been trying swat from your ears for years now.
Buzzwords start as shorthand for something substantial. Then the term gets picked up and abused and drained of its substance so we don’t even know what we’re talking about anymore. Just think of the groans you get from data scientists when you use the term “artificial intelligence.”
At Custora, we don’t think of “customer-centric marketing” or “the age of the customer” as buzzwords because we use these terms to communicate a substantial mindset shit that entails real metrics and measurable results.
That’s why we’ve decided to write a four-part treatise on the customer-centric KPIs to rally your organization around for (dun-dun-duuuunnnnnn!) The Age of the Customer! (cue lightning over a mountaintop).
Today we’re going to defend the notion that customer-centric reporting is the essential top-layer context you need to assess your channel metrics. Next week, we’re going to broadly introduce the most important customer KPIs. And in later posts in the series, we’ll take you through use cases for Acquisition KPIs, Segment KPIs, and Lifecycle KPIs.
In retail organizations today you'll see reports like this:
You’ve got Google Analytics talking about traffic by channel. You've got brands setting goals around same-store sales, revenue goals. You’ve got email versus display versus Google versus affiliate. You're optimizing last-click revenue. You're optimizing web traffic. You're thinking about year-over-year sales in the store. Year-over-year sales or product SKUs. Your organization is probably filled with charts that look a lot like this stuff.
And all of these things make sense. We have no high horse from which to tell you to stop analyzing your web metrics. That would be silly and counterproductive, but the reality is there is more to the business than just what you see in these Omniture reports and these Google analytics reports.
Let’s look at it a different way, the retail timeline.
In the beginning was The Age of the Product, and in this era it was all about optimizing solely around sales. If something wasn’t selling well, it was modified to sell better or left to die on a clearance rack.
Then came the Internet and a massive explosion of new ways for brands to reach customers. This is when we entered The Age of the Channel. For the first 10 or 15 years after Y2K, the game became a channel land grab: get your dollars into every single channel and get a tool to help you optimize around all of those channel metrics.
But now retailers realize that channel metrics don’t tell a complete story.. Your cost per acquisition won’t tell you anything about the quality of customers you’re attracting. Your product reports won’t connect the dots on who is buying your products. Your annual revenue reports won’t tell you anything actionable about why your churning customers are taking so much share of wallet with them.
You might be thinking, “Yeah, I get it. We need to move faster. Customers have changed. More data. Customer-centricity. Blah, blah, blah, Millennials, blah, blah, blah.”
But this is the reality we face as marketers.
- We need to build loyal relationships.
- Repeat buyers matter
- Lifetime value matters
So you’re in this hard spot: you’re living in The Age of the Customer, but you’ve only got the tools for The Age of the Channel and The Age of the Product. They’re not outdated, per se, but they are incomplete.
Some of the world’s biggest brands realize this, and the shift is happening, if a bit slowly. If you look at earnings reports or read what some of the senior leaders are saying across the industry, you’ll notice a new focus on attracting, engaging, and retaining “high-value customers.” You’ll hear people talking about sharpening the focus on and set goals on a core customer segment. Which is interesting because you can’t find that capability in your channel metrics.
It’s really quite difficult to track the KPIs on, for example, how well you’re doing at connecting with your female customers.
As a retail marketing organization, it’s incredibly easy to track channel-specific goals. If your goal is to get a better return on ad spend in Google, then you have reports at your fingertips every day to track your performance on that goal.
But to get the KPIs that tell you how well you are doing on attracting, engaging, and retaining high-value customers or how well you're doing at connecting with these core female customers, it takes a lot of work inside of the organization.
These metrics aren’t flowing through the organization for two big reasons: there’s no clarity within the organization on which metrics to track and, whatever you choose, it will be difficult to track it.
Fortunately, that's what we’ll provide clarity on starting today and into the following weeks as we write about Customer-Centric KPIs. Because while the specifics may not be the easiest thing in the world, C-Suite executives are aware that the customer-centric approach makes the most sense.
For instance, the idea of pairing a metric like Cost Per Acquisition (CPA) with Customer Lifetime Value (CLV) is one of the most basic (and yet revolutionary) formulas for building a sustainable, growing brand — you spend money to get customers, you spend money to serve them, and, as a result, they should spend more money on your products than you did getting them on board.
The completely novel concept is that you should earn more profit margin from them than what you spend on them. When those dynamics work, you get a growing business.
When you describe it that way, it sounds pretty simple, but it’s really fuzzy and gnarly to figure how to get an organization moving around this way.
What we want to do is drill deeper and make it real in a way that retail organizations can optimize the numbers under these very good-sounding ideas. You are what you measure. If you don’t have the right KPIs, then the organization is not going to align in the right way.
Join us next week when we’ll reveal which customer KPIs matter and how you can align your organization in a Customer-Centric formation.
In the meantime, you can learn more about the absolute most important customer-centric KPI (spoiler alert) in our latest book, The Chance of a Lifetime: How to Use Customer Lifetime Value Reporting to Grow Your Retail Business.