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Customer centricity: building on the benefits

by Iain Stanfield , 07.05.2015

In our webinar series about customer centricity, The Junction, we explored how companies need to re-orientate themselves to put the customer at the heart of their operations. Brands that have succeeded in doing this can now understand the commercial benefits of using three new customer-centric metrics that, alongside traditional key performance indicators, can predict future commercial performance and understand the lifetime value of a customer much more effectively.

In our work with leading brands and their customers around the world, we have developed a new set of metrics that provide insight into how brands can build growth, achieve market momentum and measure market performance. If you’re embracing customer centricity, here are the new metrics you need to know to evaluate how you’re doing.

Your brand experience score

A brand experience score is the first metric a customer-centric organization needs to know. This looks at the overall memorability of experiences with the brand, both positive and negative. A high brand experience score is a good predictor of future performance. Behavioral economics thinking shows that positive and memorable experiences of your brand have a bigger impact on brand perceptions than non-memorable ones, and this is increasingly critical to achieving long-term “stickiness”.

Secondly, it is important to understand the type of relationships your brand has with customers. Using our brand relationship model we can start to evaluate the strength of equity that brands have and how changes in customers’ experiences with the brand impact on their connections with it. While strong relationships such as “guru”, “social circle” and “close friends and family” are most critical to achieving market share, it is the seemingly intransient “fling” type relationships that are vital to achieving a price premium.

Your brand equity score

Where customers have a strong relationship with a brand, we can combine this with brand preference to reveal two new metrics: Latent Brand Equity (customers who do not have a preference for the brand) and Active Brand Equity (customers that do prefer the brand). We have seen time and again that Active Brand Equity is an effective predictor of future sales performance. Brands with a high Active Brand Equity score will typically outperform the market in subsequent years, whereas a decline in Active Brand Equity usually correlates to flagging business performance in the same period.

Furthermore, when combined with driver analysis, marketers can identify what specific initiatives are required to move customers from Latent to Active both in terms of message and channel. The challenge for marketers is to implement the right campaigns and initiatives so they enjoy positive brand performance.

“Net Flow” to predict market momentum

Customer loyalty is traditionally calculated by measuring advocacy and likelihood to switch. Yet such measures are unable to predict how a brand will fare in the future. We have developed a new metric called “Net Flow” that offers a more effective way of predicting market momentum. We calculate “Net Flow” by subtracting the outflow of customers from the inflow of new customers.

We have also proposed a new set of KPIs for understanding customer relationships that focuses on measuring experiences at a brand level (both positive and negative). We understand that loyalty is also dependent on durability and how customers view their ongoing relationship with the brand. Ultimately, the lifetime value of a customer will be linked to “Net Flow”– marketers must work to minimize outflow, while maximizing advocacy to drive inflow.

In summary

GfK’s new customer-centric metrics add a new dimension by predicting business growth and customer lifetime value – from acquisition through to loyalty and retention through to minimizing attrition. These new metrics will enable you to optimize your marketing spend by focusing on the key customer experiences and identifying the right initiatives to drive sustainable business growth and create lasting customer loyalty.

For more information please contact Iain Stanfield at iain.stanfield@gfk.com.