Creating a Customer Scorecard

Chapter 6: Creating a Customer Scorecard

of your products and services, their cost, and the speed of delivery.

Specifically, your customers want your products/services

⻬Faster:What’s your time from order to delivery? Do you always have on- time delivery? What’s the time a single process takes in order to make your product or provide your service?

⻬Better:How do you set and meet customer specifications and measures for product/service quality?

⻬Cheaper:What are your product and service costs (both purchase costs and total lifecycle costs)?

Customers also want to feel like you really care about them. They want to matter and not be treated with indifference when dealing with your company.

That’s not too much to ask, is it?

Understanding customer loyalty

One of your jobs when choosing measures to track customers is to gauge customer loyalty. Some customers find a company they like and stick with it.

Others will make buying decisions based on lowest price alone; these customers don’t develop a loyalty to any one company. Trying to keep these customers can be a waste of your time and effort, because they’re always willing to go wherever they can get the bottom-line lowest cost.

If you want to better understand the kind of customer who’s loyal to your company, ask why you think your customers buy from you — or your competition. Do customers base their decisions on

⻬Better features?

Do customers prefer what your product does, how it does what it does, how it looks, and so on?

⻬Higher performance?

Is your product/service better or faster than the competition?

⻬Longer-lasting and more durable products?

Are your products robust and withstand the environment and how they’re used, or do they break or malfunction when used in ways that should be expected?

⻬How they’re treated?

Do you act like your customers’ business is very important to you? Do they receive products and service that go beyond what they expect?

You find the answers to these questions by — yep, asking more questions.

The following sections cover more questions you must ask and different ways you can go about collecting customer information.

Asking the right questions

The best way to gauge customer loyalty is to ask the right questions. The following list presents some basic questions to ask of your customers when developing your balanced scorecard for them.

Many companies ask customers to answer on a scale of 1 to 5 for most of these questions, with 1 being the most negative answer and 5 being the most positive. These questions are typically asked in surveys (written or online surveys) or in face to face sessions (such as focus groups).

1. How often do you use our product or service?

2. When was the last time you purchased our product or service?

3. Overall, how satisfied are you a. With our product or service?

b. In dealing with any complaints you had?

4. Did you get your product or service in a timely manner?

5. How would you rate the features of our product or service?

6. How would you rate the durability of our product or service?

7. How would you rate the reliability of our product or service?

8. Were the sales/service people you worked with helpful?

9. Were the sales/service people you worked with friendly?

One thing to keep in mind while you’re presenting these questions: Your customers may base their answers on how you stack up against the competition.

They’ll give you their gut feelings and thoughts based on the choices they have when looking to spend their hard-earned money. When analyzing the answers with this in mind, you can get some good competitive benchmarking information from your customers.

With this in mind, you also may want to ask a couple important questions that require longer answers and some thought on the part of your customers:

10. What are the key considerations that help you decide whether to purchase from us or others?

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11. What recommendations can you give us to help our organization improve?

a. Quality

b. Speed of delivery c. Cost

d. Customer experience before the sale e. Customer experience during the sale f. Customer experience after the sale

Don’t take any of their answers personally, and make no assumptions! The most negative answer could end up being the most beneficial for your company.

Collecting customer info

Companies must decide whether to gather customer information on their own or through third-party consultants. We suggest that you take the time to gather the customer information yourself — actually, through your employees who have day-to-day direct contact with your customers or other people who are closest to the customers (the so-called “customer-facing people”

within your organization).

Some companies prefer to use third parties. If you want to use a third party to gather your customer information, try not to rely solely on that service. If you do, you’ll lose your listening ability and eliminate all the wonderful possi- bilities that develop when you get up close and personal with your customers.

A good use for third party consultants is to have them validate your collected data. The best way to work with third parties, though, is to rely on their expertise in creating and conducting surveys and customer studies but counting on your people to lead the way and ask the questions.

Taking customer measurements

After you identify what’s critical to your customers (if you don’t know, check out the section earlier in this chapter, “Discovering customer measures that matter”), you can start figuring out how to measure the things you dothat affect the things your customers want.And, believe us, what you do here has a huge impact on your customers! By measuring, you ensure that you hit the mark, time after time — in other words, you satisfy your customers on a con- sistent basis. Not only that, but you ensure that you hit the rightmark!

The following list presents some examples of measures you can take for the customer leg of your balanced scorecard.

⻬Customer satisfaction and loyalty levels (which you can find out from surveys and focus-group data)

⻬Length of your customer relationships

⻬Repeat customer rate

⻬Number of customer complaints

⻬Product return/warranty rates (per 100 units, 1,000, 10,000, and so on)

⻬Number of complaints resolved the first time

⻬Customer response time

⻬Cost of complaints

⻬Customer loss and retention rates

⻬New customer acquisition numbers

⻬Total number of customers

⻬Price of your products/services

⻬Total product lifecycle costs

⻬Your price compared to the competition

⻬Revenue per customer

⻬Revenues from new customers

⻬Sales volume

⻬Sales per product/service line

⻬Sales per employee or per employee contact

Common mistakes made in customer measures

Measuring and tracking the wrong things in the customer leg of your balanced scorecard can not only waste your time, money, and effort, but also cost you customers. In the end, it can be fatal to your business. You need to avoid that deadly mistake and those in the following list and all the problems that come with them if you want your business to be the kind of success story that appears in all the leading business magazines:

⻬Not getting help when obtaining customer data and information.You should ask for the aid of outside consultants or a third party when you need it; don’t always believe that you can do it all by yourself.

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⻬Not getting the cooperation on tracking the customer measures and objectives from the employees who are responsible and accountable for them.Your employees don’t want to have measures and objectives forced down their throats by higher ups or people outside of the processes and systems being measured.

⻬Shoving old (and often flawed) customer measures and objectives into your balanced scorecard.Do your customer measure homework and do it the right way.

⻬Having a lack of data integrity.You can’t have people fudging or deco- rating numbers so that they can avoid changes, critical issues, and potential conflicts or confrontations.

⻬Not taking measures often enough to get real-time or near real-time data.Don’t rely on bi-weekly, monthly, quarterly, semi-annual, or annual data reviews.

⻬Not acting upon the data and information you gather. Don’t develop a sense of complacency or a “we’ll worry about that tomorrow” type of attitude. Take the info you gather and use it to create your customer scorecards (see the following section).

⻬Denying what your customer information is telling you or arguing over the validity of the data until it’s too late to resolve the issues in a timely and cost-effective manner.

⻬No drill down from the high-level measures and objectives to the areas that drive those measures and objectives.You need to pass information from the strategic level down through the operational- and tactical-level scorecards; see the following section for more on this topic.

⻬Trying to measure everything.Focus on the critical measures that really matter to your customers and your organization (see the earlier section “Discovering customer measures that matter”).

Getting Dependable Data

Notice, we didn’t give this section the title “Getting Data.” We said, “Getting DependableData.” There is a huge difference! Anyone can get data. That’s never a problem, really. Getting dependabledata can be.

In this section, you’ll learn some of the more common pitfalls when dealing with data and their sources. You’ll check out some of the pitfalls with data from customer focus groups, data mining, and surveys. Then, you’ll delve into the pitfalls associated with the questions you might be asking your customers and the pitfalls of over complicating how you chart your data and information.

Hocus, pocus — the focus group

Conducting focus groups can be a fun and exciting experience. They can also be interesting, like a root canal can be interesting: get it wrong, and it can be very painful. Get it right, and you will find a wealth of information that will help you to better understand what your customers want and need from your company and its services and products.

Just as with any other form of direct contact with your customers, your focus groups need to be well thought out and planned before you conduct them.

They are not to be left to the novices and first timers. You need people who know what they are doing throughout the process, or you may end up wish- ing you were having that root canal, instead of trying to figure out what your focus group data is telling you.

The following list of pitfalls will help you understand some danger signs that may indicate your focus group sessions will not be as effective as you might hope.

⻬Not getting experienced people involved in conducting the design, planning and execution of the focus group involved from the very beginning

⻬When meeting with a focus group for the first time, not informing the focus group who you are, why you are doing the focus group, what you want to achieve, how the information you obtain will be used, and that the information they give is confidential

⻬Making the group too small or too large — typically three to eight people is best

⻬Not getting a true representative sample of your customer base

⻬Cherry picking your focus group members to provide people who are likely to gives positive answers to the questions and topics being discussed

⻬Not maintaining a level of flexibility or staying to tight to a script, thus not allowing for follow through and a deeper discussion of emerging themes and issues that come up during the focus group

⻬Making audio or video recordings of the focus group (something you should do) makes people feel uncomfortable

⻬Allowing individuals to avoid contributing to the discussion or giving their opinions (a good and experienced focus group facilitator will ensure everyone participates — even those who are shy or afraid to speak up in a group)

⻬Too many outsiders – or people not involved in running the focus group — showing up and asking questions. Leave the running of the focus group to the experts and ensure they are the only ones who interact with group members.

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By now, you should have a good feel for the fact that running a focus group of your customers can be very valuable, but it needs to be well managed and run by experts. Get the help you need so that you get the information you want!

Asking all the wrong questions

When using customer surveys and interviews, you will need to design a questionnaire to get answers to your questions and gather your customer data and facts. We’ve all been the user (and sometimes the victim) of questionnaires of some sort. Sometimes, you may have been left wondering what the whole thing is driving at and why they asked certain questions. Designing a questionnaire isn’t all that difficult, if any old thing will do. Getting it right takes some planning.

Designing a good questionnaire, one that gives you the answers you’re looking for — takes some thought and skill to accomplish. A poorly designed questionnaire will send you down the wrong path faster than you can say, “This questionnaire is messed up!” Well-designed questionnaires will minimize your sources of bias and will give you the accurate and relevant information that you need to gather from your customers. That said, questionnaires need to be as focused and as simple as you can make them.

The following is a list of the more common pitfalls made in designing and using questionnaires.

⻬They may provide only limited insight into problems because they typically allow for only a limited answer to the question being asked

⻬Many times, the wrong questions are asked

⻬The questions asked may be open to interpretation, resulting in responses that don’t accurately answer the question asked

⻬Bias may enter into the picture by way of questions that lead the respon- dent into the kind of answers that don’t reflect their true thoughts and feelings on the issues

⻬Questionnaire design is often left to those who have no understanding or background in how to create and implement a well thought out and planned questionnaire

⻬The questions asked may ask for personal information that respondents don’t feel comfortable in answering, such as name, address, phone number, income level, or other information they don’t want to — and may not — answer

⻬Poorly designed questionnaires will ask the most important questions at or near the end

⻬Designing the questions in no particular order, without a logical flow

⻬Not providing a cover letter that explains the what, how and why of the questionnaire

⻬Not running a pilot of the questionnaire to proof it and assist in its devel- opment before blasting it out to the whole world

⻬When using a Likert Scale for your questionnaire, respondents have a tendency to “be nice” and answer in a positive way or to answer in the neutral or middle of the road with no feelings expressed one way or the other, thus not allowing you to measure and analyze their true feelings Remember that you will most likely get only one shot at getting your inter- view or survey right. Having a fast horse in a horse race is a good thing, but not if it goes off in the wrong direction and never crosses the finish line. Don’t rush through the process of developing your questions and the design of your questionnaire. It needs to be well thought out and planned for. Take the time to do it right so that you get the data and information you need to keep you in touch with your customers. Make sure you cross that finish line!

Keeping data charts simple

Have you ever noticed that people sometimes overcomplicate things way beyond any needs they may have? It almost seems to be a condition of the human element. If we can make something harder than it needs to be, we invariably will. This is especially true when looking at data and information.

In today’s world of powerful computers and software applications, with all the neat things they can do for us, there often seems that there are system capabilities just looking for a victim that it can be applied to. It’s kind of like having a hotrod car and then always driving the posted speed limit — you just have to put the accelerator to the floor every now and then just to hear the engine growl — you just can’t drive the speed limit! Like the old song says, you just can’t drive 55!

Well, just because you have the capability to do all those fancy graphs and data analysis doesn’t mean you should use it. In fact, if you do, you may end up creating a fuzzy picture and getting the analysis — and your decisions — wrong.

Take a look at some of the more common pitfalls you’ll want to avoid so that you can keep your data and charts simple and easy to understand.

⻬Not providing the who (name), what (type of information) and when (date) details on the charts

⻬Not including a legend for comparative data shown on charts

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⻬Cluttering the chart with too much information

⻬Listing a long line of data and expecting people to be able to interpret and understand what it is saying

⻬Trying to show too many comparisons on any one chart, making it hard to read and understand

⻬Using too many colors on the chart or fancy and confusing color schemes, especially as a background for the charts

⻬Not staying focused on the story the chart is trying to tell

⻬Using complicated analytical charts when they are not necessary to tell the story you’re trying to convey — if you are using anything other than simple line, bar or pie charts, make sure you really need to use them

⻬Not proofreading the chart for information and grammatical errors

⻬Assuming people will understand any of the abbreviations used on the charts

⻬Not educating people on how to read and interpret your charts, especially those used for the first time or showing data in a new and different way

⻬Not cross checking with people to see if they understand what the chart is telling them

Charting is a powerful way to take data and make it tell a story that may be otherwise hidden. Avoid these common pitfalls, and you will get the power of charting.

Avoiding Interpretation Pitfalls

No matter what kind of company you work in, there are mountains of data available to you — it’s all over the place. It’s in this or that database, on the wall, in your emails, and on the internet. It’s here, it’s there — it’s everywhere.

Some might think it’s like reading the tea leaves — there’s some kind of magic required or it takes a special kind of potion to understand it all. Interpreting customer data and turning it into powerful information can be a tricky thing, indeed. But it doesn’t haveto be. Be sure to avoid the pitfalls described in the following sections.

Drawing wrong conclusions

Good data, the kind of data you can use to make good decisions, is a wonderful thing. That is, unless you’re drawing the wrong conclusions from it and

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