Camille Nicita is President & CEO of Gongos, Inc., a consultative agency focused on driving customer centricity for Fortune 500 companies.
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Today’s corporations place a tremendous focus on the value they gain from their customers, but far fewer place the same disciplinary focus on the value they provide to their customers. As a result, they may be realizing only a portion of what can be earned from their customers.
This lack of focus on outcomes that are truly meaningful to customers has never posed more of a threat to—or opportunity for—success than now. Between the shift from shareholder to stakeholder capitalism, the rise of the experience economy, and the global pandemic, the role of customers has been elevated significantly.
Now, companies that strive to be customer-centric will incorporate new metrics into their playbook that are defined from the vantage point of the customer. In fact, Forrester suggests that value-for-customer metrics will become central to company scorecards and predictive of business outcomes. To measure success from the viewpoint of the customer as well as the corporation raises a question: How can it be done?
The way forward is a new model of value exchange that companies can operationalize to ensure that reciprocity drives growth. By exploring the link between customer performance indicators (CPI), a term coined by Accenture Interactive, and customer lifetime value (CLV), companies can optimize how they help customers thrive while simultaneously growing their bottom line. So, let’s dive deeper into CPIs, CLV, and what they mean.
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Measuring Value to the Customer Through CPIs
CPIs are measures of how a company is delivering for the customer against outcomes that customers most value. And at a time when the majority of consumers expect to have a seat at the table to influence business decisions that impact their lives, CPIs aren’t just a nice-to-have—they are a must-have. These metrics are key to keeping up with the social and economic shifts of today and tomorrow through meaningful experiences with your brand at every touchpoint.
Based on research into the drivers of human needs, motivation and behavior, our agency’s CPIs fall into one of three different types of desired universal outcomes. That is, functional (e.g., saving time), emotional (e.g., providing a sense of accomplishment), and social outcomes (e.g., providing a sense of belonging) that help customers to function, thrive and succeed as human beings. Considering people are consumers only a fraction of their waking hours, the dimensions of CPIs must not be just a measure of the here and now, but an enduring expression of delivering against consumers’ changing needs into the future.
Unlike key performance indicators (KPIs), typically designed to measure outcomes that the company cares about, CPIs are identified from the customers’ perspective. They augment internally focused business metrics by providing a window into intrinsic customer needs and aspirations. In our experience, employees find it far easier to internalize CPIs compared to business-centric KPIs, as they can better empathize with and influence the desired outcome for a customer. While the concept of CPIs isn’t new, confusion around what they are is expected.
It’s equally important to highlight what CPIs are not by pointing out that although metrics such as Net Promoter Score (NPS) or Customer Satisfaction Score (CSAT) are “outside-in” indicators of customer sentiment about a business, they are KPIs. These metrics are evaluative in nature—providing validation of current strategies and an opportunity to “repair” elements of a company’s value proposition that may not be performing as anticipated. CPIs, on the other hand, are forward-looking and identify opportunities to optimally deliver on consumer needs and enable an organization to discover and “build” the business through outcomes deemed important by the customer.
Measuring Value to the Company Through FCV
While CPIs are identified from the outside in, future customer value (FCV), a proxy for CLV, is identified from the inside out. Reflective of growth, FCV measures how the customer is creating current and future value for the company. FCV comprises data for three concepts: share of wallet (how much a consumer purchases from a brand), frequency of purchase (how often they purchase from that brand) and future purchase intent (how likely they are to continue to purchase).
As a result, FCV enables companies to focus on what matters to their customer base, so that they ultimately purchase more from them, purchase more frequently and continue to purchase over time. As organizations improve their performance on these three things, greater value is created through the customer population, which leads to growth.
A New Model of Value Exchange in Action
As with anything new, proof points are essential to consideration and adoption, especially when it requires a shift from the status quo. According to the 2021 Edelman Trust Barometer, 68% of consumers agree they have the power to force organizations to change. So the concept of creating a mutually beneficial value exchange between corporations and customers has never been riper.
Through research and analysis, our agency has proven the validity of CPIs and a statistically significant relationship between each CPI and the FCV outcome. In other words, when CPI priority and performance increase, the FCV increases. Moreover, the application of the value exchange model can be used in combination with established business KPIs, such as CLV and associated KPIs (e.g., revenue per customer, contribution margin), to identify the strongest paths available to drive customer-centered growth. Our patent-pending Value Exchange Model harnesses the predictive power to help forecast red flags with respect to market and competitive threats and increase customer acquisition, retention, and innovation opportunities, albeit through the lens of customer outcomes.
Through an integrated focus on CPIs and FCV, leaders can steer their business in ways that operationalize and monetize these opportunities. But doing so shouldn’t be considered standardized or static. Ensuring this model works for your business requires activating against CPIs based on your ever-changing customer and organizational dynamics.
More than a point-in-time exercise, this model demonstrates how companies can help customers achieve outcomes most important to them and simultaneously gain reciprocal value for the organization, shareholders and stakeholders. It quite simply is unwavering reciprocity.
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Author: Camille Nicita, Forbes Councils Member
