Customer Relationship Management

Lesson 11

CRM Metrics: Metrics to be

Analysed, Types of Customer
Metrics, Identifying KPI Related to
Various Dimensions of CRM
Implementation
CRM by Alok Kumar, Chhavi Sinha
and Rakesh Sharma

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 Metrics to be Analysed

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 What Needs to be Measured:
Attitudinal and Behavioural Loyalty
• The attitudinal brand loyalty approach takes the
view that loyalty involves much more than repeat
purchase behaviour. This view holds that brand
loyalty must also include a favourable attitude
that reflects a preference or commitment
expressed over time.
• An attitude comprises an individual’s general
affective, cognitive and behavioural responses
to a given object, issue or person.

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 What Needs to be Measured:
Attitudinal and Behavioural Loyalty
• Behavioural loyalty refers to customer’s
intentions of repeat purchases from an
organisation, his willingness to
recommend the organisation and display
less price sensitivity. Behavioural loyalty is
important since it focuses on ‘the value of
the brand to the customer’. #

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 CRM Metrics
• The main metrics for the CRM initiative are
as follows:
– Customer Contact Intensity
– Customer Satisfaction
– Customer Profitability
– Customer Penetration (that is, product and
service penetration of the company)
– Customer Loyalty Index #

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 Types of Customer Metrics

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 Types of Customer Metrics – (1/3)
• Companies develop Key Performance Indicators
(KPI) in order to measure progress on CRM.
KPI’s are the specific measures that best
indicate the performance required for Key
Success Factors (KSFs) of each selected
customer relationship centre.
• There are two basic types of KPIs :
– Lead indicators and
– Lag indicators

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 Types of Customer Metrics – (2/3)
• Lead indicators are ‘cause’ indicators and
lag indicators are ‘effect’ indicators.
• Companies traditionally measure profit
and loss, prepare balance sheets, all of
which are ‘lag’ indicators. Lead indicators
are a critical component of CRM
scorecards as they serve as early
warnings for potential problems in
achieving selected KSFs.

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 Types of Customer Metrics – (3/3)
• Lead indicators such as share of
customer, revenue mix, customer
satisfaction, and the time spent with
customers or customer involvement in
product planning cycles show what is to
come. What you do on the ‘lead’ side can
influence the ‘lag’ side. #

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 Identifying KPI Related to Various
Dimensions of CRM
Implementation

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 Three Approaches to KPI
Development
• In order to bring about the desired
changes in behaviour, three approaches
have been identified in the development of
KPIs (Key Performance Indicators), which
are as follows:
– (1) Measures to align – align enterprise’s
goals with functional objectives
– (2) Measures to motivate – proactive actions
– (3) Measures to improve – corrective
measures. #
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 Three Approaches to KPI
Development

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 Measures to Align – Balanced
Scorecard – (1/6)
• In an article in HBR, Robert Kaplan and
David Norton suggested that the vision
and long term strategy should be linked
with tangible goals and actions between
and around objectives in four areas as
follows:
– (1/4) Financial performance,
– (2/4) Customer knowledge,

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 Measures to Align – Balanced
Scorecard – (2/6)
– (3/4) Learning and growth, and
– (4/4) Internal business processes.
• Thus, Balanced Score Card is a format of
expressing company objectives in an
operational mode. #

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 Measures to Align – Balanced
Scorecard – (3/6)
• Financial: encourages the identification of
a few relevant high-level financial
measures. In particular, designers were
encouraged to choose measures that
helped inform the answer to the question
"How do we look to shareholders?"
• Customer: encourages the identification of
measures that answer the question "How
do customers see us?“
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 Measures to Align – Balanced
Scorecard – (4/6)
• Internal Business Processes: encourages
the identification of measures that answer
the question "What must we excel at?"
• Learning and Growth: encourages the
identification of measures that answer the
question "Can we continue to improve and
create value?"

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 Measures to Align – Balanced
Scorecard – (5/6)
Each of the four boxes
should contain
objectives, measures, Financial
targets and initiatives ‘To succeed financially,
. how should we appear to
our shareholders?”
Internal
Customer Business
“To achieve Vision Process
our vision, and “To satisfy our
how should Strategy shareholders
we appear to Statement and customers,
our what business
customers?” Learning and Growth processes must
‘To achieve our vision, we excel at?”
how will we sustain our
ability to change and
improve?”
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 Measures to Align – Balanced
Scorecard – (6/6)
• A properly constructed scorecard is a
balance between short-term and long-term
measures; financial and non-financial
measures; and internal and external
perspectives.
• The balance scorecard is a management
system that can be used as the central
organising framework for CRM exercise
incorporating both lead and lag indicators.

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 Measures to Motivate and
Measures to Improve
• Measures to motivate help companies adopt a
proactive approach wherein the selected KPIs
under this category motivate individuals to
examine their contributions and drive
improvement on selected metrics.
• Measures to improve, on the other hand, have a
reactive orientation and focus on inputs received
from the customer, such as customer complaints
and drive concerned personnel to take
corrective action.
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 Adopting Customer Life Cycle
Approach
• This approach examines the KPIs as per the
stages of customer life cycle:
Number of prospects
Customer
converted into
acquisition KPI
customers
Customer retention Raw customer retention
KPI rate
Customer Cross product holding
development KPI ratio

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 KPI Development – External
Measures
• The measures by which customers’
perception (through market research) of
the organisation can be understood are:
– Overall image of the organisation
– Products and Services offered
– Quality of Sales and after-sales support
– Loyalty displayed
• These measures are from customer
perspective of the organisation. #
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 KPI Development – Internal
Measures
• The internal measures are required to
understand, predict and improve
performance and are seen from
organisational perspective, for example:
– Overall image
• Number of customer accolades received
– Products and services
• Defects, errors and rejection rates
– Retention rate
• Recency, Frequency, Monetary value (RFM)
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 Customer-Facing Operations –
(1/2)
• Most, if not all, traditional CRM software
collect all kinds of basic data regarding
customer-facing activities. These
operational CRM systems automate
customer-facing activities, and in doing so,
collect information on employee and
customer behaviour. #

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 Customer-Facing Operations –
(2/2)
• These CRM metrics in customer-facing
operation cover the following areas:
– Marketing operations
– Sales force operations
– Service centre operations
– Field service operations
– Supply chain and logistics operations
– Website operations ##

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