In the early ’90s, the term “customer relationship management” (CRM) joined the Marketing lexicon. Though the idea is often thought to refer to the implementation of some kind of technology, the real idea behind CRM is that the management of customer relationships is a business imperative.

CRM is about deciding which customers or segments to target, and then developing customer acquisition, retention, and growth plans that will attract and keep your best customers. CRM is really about making your customers the heart of your business. Our job as marketers is to acquire, grow, and retain profitable customer relationships to create a sustainable competitive advantage. When Marketing  achieves this purpose it serves as a Value Creator.

One of the key themes that has emerged from the Marketing Performance Management (MPM) benchmark studies is how much more Value Creators versus Sales Enablers and Campaign Producers know about their customers. Value Creators serve as the clearinghouse for insights into the organization’s customers. The studies reveal that compared to the Campaign Producers, Value Creators are 5 times more likely to use data in order to understand, and market to, customers. Only 10% of Campaign Producers claim to effectively understand the customer experience based on data, compared to nearly 50% of the Value Creators.

A heat map was created from the study information to illustrate how effective the various groups are at using data to define the customer buying process, understand customer experience, create personas and develop models.

Customer Vulnerability Blog, metric

This research conducted since 2001,  consistently identifies two improvement areas for all marketers: mapping the customer experience and identifying customers at risk.

Keep your customers from walking out the door, metric

Are your customers preparing to walk out the door?

Are Your Customer’s Preparing to Walk Out the Door?

It’s not easy for businesses to predict customer churn. Customer loyalty research suggests that a typical business hears from only 4% of its dissatisfied customers, the remaining 96% go away, and on average, 91% never come back. Experts in the field have identified six indicators that a customer is ready to walk out the door for good:

  1. Customer approval of your proposals comes slower.
  2. Access to upper-level management decreases.
  3. The flow of customer data slows down.
  4. Plans for future work become progressively shorter-term.
  5. One or more of your products or services are discontinued.
  6. The volume of business the customer is doing with you is reduced.

Create a Customer Vulnerability Metric

Add a Customer Vulnerability Metric to Your Marketing KPI’s

How do you measure customer relationships?

  • We’ve all come to accept that creating customer loyalty is an integral part of any organization’s strategy and focus.
  • Many organizations would agree that a loyal customer…
  • Stays with the brand despite competitive offers, changes in price, negative word-of-mouth, and product failures
  • Increases business/engagement in some way
  • Actively promotes the brand to others

Five critical factors influence the success of any customer relationship initiative.

  1. Clearly defined business outcomes related to customer acquisition, retention, and growth
  2. Agreement about who the customer is and what they want and need from your category (and you)
  3. Well-defined customer segments (and their desired behaviors) and customer-experience objectives
  4. A documented, integrated customer strategy
  5. Explicit measures of success, and the data and processes needed to support the metrics

Customer satisfaction and loyalty are two of the most common measures of success. A variety of models are used to measure and quantify customer loyalty, ranging from simple recency and referral models to RFM and customer lifetime value models.  Though there are many approaches to measuring customer loyalty, one metric that many organizations should consider is the Vulnerability Index. A vulnerability index serves as a way to measure loyalty in the face of competitive pull. Its purpose is to help you identify your most loyal customers—those who are going to stick with you through thick and thin.

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Calculate Your Vulnerability Metric and Create an Index

To calculate your vulnerability metric you will need excellent market intelligence about your competitor’s campaign channel, offers, and markets. Once you have this information, follow these steps to construct an index to create a customer vulnerability metric:

  • Map the competitive activity and include the competitor’s name, offer, duration of the offer and the offer’s focus area and market.
  • Generate a list of loyal customers in the market where the campaign ran.
  • Map their repurchase and engagement cycle based on their frequency and last purchase date.
  • Isolate all the customers whose repurchase or renewal dates fall within the competitor’s campaign period. This is your observation set (OS) and the set of customers who will experience the greatest competitive pull and are therefore the most vulnerable.
  • Define your observation period: this is generally the campaign launch date and one purchase cycle after the last date of the competitor’s campaign.
  • Monitor the purchases by vulnerable customers and track all the customers whose purchases drop during the observation period. This set of customers represents your vulnerable set (VS).
  • †Now calculate the vulnerability index, by dividing your VS by your OS and multiplying the number by 100.

Vulnerability Index = (VS / OS) x 100

The customer vulnerability index gives you an exact idea of the proportion of the customers who are succumbing to competitive pressure and a good idea of the level of loyalty in your customers. If the index is high, you know that corrective action needs to be taken. If the index is low, you can assume with some degree of certainty that your customers are exhibiting robust loyalty to the brand. Given that there are limited numbers of good customers, it’s important to retain your best ones. A vulnerability index can serve as a tool that helps you realize that adjustments need to be made to retain your customers.

Improve your customer knowledge by with our workshops and workbooks where we  you will learn how to measure service quality, touch point effectiveness, customer satisfaction, customer experience, customer loyalty/advocacy, share of wallet, customer lifetime value and retention equity.

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