How to move from measuring the past to managing the futureby
20th Oct 2011
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Data looks backward and so when you use data alone there is a lot you don’t know, which could critically impact the future of your business, warns Larry Freed.
The saying goes “You can’t manage what you can’t measure”, yet all too often we don’t measure what matters, or we fail to create actionable insights from the streams of data filling our dashboards every day. The fundamental problem is that most key performance indicators are backward-looking - they tell you what already happened: how much a company sold, how many visitors a website had, how much customers spent, etc. These indicators are chosen because they are easy to count, not because they measure and predict future success. I like to put a spin on the old cliché “you can’t drive forward when you’re looking in the rear-view mirror.”
Today’s retailers and businesses are operating in a era of what I call “accelerated Darwinism,” - survival of the fittest business at warp speed, driven by super consumers who are more savvy, more social, and more informed, courtesy of the Internet and social media. Consumers are demanding a better experience which, if provided, will enable companies to enjoy greater profits. In other words, businesses are under pressure to meet expectations.
This is not a vague business claim. Extensive academic research shows that when measured correctly, customer satisfaction can predict future financial performance, loyalty, recommendations, and even stock prices. The critical question is how to use customer experience metrics to our best advantage and within the framework of the existing metrics we have.
The internet is often the quickest, easiest, and least expensive way to collect surveys that give us such valuable insights into what our customers need and expect, the web is also the easiest place to become buried in data. It’s also the easiest place to collect reams of behavioural data on where they went, what they clicked, what they abandoned in their cart, how long they looked, etc. But what do we do with all the data we generate? If you are a manager or executive you may not see all the detail, but trust me — the detail is there (and if it’s not you have a different problem.)
Most managers and executives (myself included) do not always know what to do with all that data or, more importantly, how to act on and interpret that data in a meaningful way that helps us grow our business.
I cannot stress it more - data is important, critical. But the crux of the issue is that data looks backward. Data tells you what already happened, not what will happen next or how to influence what will happen next. When you use data alone there is a lot you don’t know, and what you do not know could critically impact the future of your business.
What you may not know can hurt you
The key is to know what you know — and to know what you don’t know. This is a key principle I stress over and over to my own team as we manage our own business at ForeSee. Don’t assume that because you have volumes of customer data, that you know what to do.
Think about your current measurement tools, and the data you possess and use in various reports and dashboards. (Most of the following examples apply to websites but have parallels in the offline world as well.)
Do you know:
- Why visitors come to your site (to research, to buy, to complete a transaction, to get product support, to learn more about your company before interacting with you through another touch point, etc.)?
- What influences visits to your site (a referral, a social media interaction, a failure to resolve an issue with a call centre, an advertisement, a news story, a previous affinity with your brand, etc.) and which customer acquisition sources result in traffic that is the mostly likely to convert?
- What visitors need from your website? How needs differ by population segment or other segmentation that is useful to your business—perhaps first-time vs. repeat visitors, heavy users vs. light users, etc.?
- What visitors expect from your website? Do men and women have the same expectations? Old and young? Do people who arrived as a result of a Google ad have the same expectations as those who arrived because of a TV ad?
- What channel your visitors prefer, and are there ways you can influence that preference so they frequent less costly, more profitable channels?
- How customers view your business, compared to the way non-customers view your business, relative to your competition?
- How your customer profiles and expectations change in response to market and broader economic conditions? And what, if anything, you need to change as a result?
I appreciate that I’ve listed a number of questions (I’ve got more if you’re interested), and some may apply to your industry. But if you cannot answer most of these questions with confidence - and you can’t if you only use behavioral data - you could be missing huge pieces of the puzzle.
Changes in technology and customer behaviour make the web channel a crucial element in the success of your entire organisation. By using the intelligence that results from having the right measurement tools in place, your organisation can focus on developing the right strategies and initiatives that will have the greatest impact.
Competition is fiercer today than ever. Consumers have the knowledge and the ability to choose competitors and channels. Switching costs are lower than they have ever been.
The consumer is in control. Never before has satisfying the customer been more important than it is today.
This is an adaptation of a chapter from “Managing Forward:How to Move from Measuring the Past to Managing the Future” is now available, published by Worzilla. For more information or to purchase a copy of the book, please visit Amazon.com or click here.
As president and CEO of ForeSee since it was founded in 2001, Larry Freed is a widely recognised expert in customer satisfaction analytics, strategy and technology and speaks extensively on the topic at private and public-sector industry events. He is regularly quoted in numerous publications and other media, including CNN, Marketplace, Dow Jones, The Wall Street Journal, The Washington Post, the New York Times, Investor's Business Daily, Internet Retailer, and Computerworld, among many others.
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