Aligning business results to customer success
It isn’t enough to drive short-term business success. Business KPIs must be aligned with customer success.
Businesses thrive when their customers’ success is aligned with their business model. Too often, though, businesses fail to even ask the question, “What does customer success look like?” Too often, we are content only asking, “What does business success look like?”
Consider a retailer who had a loyal customer base. The customers who loved them most were committed and would talk to their friends about the store. In an effort to boost profitability, the company shifted the incentive strategy for its merchants. The initiative succeeded. It shifted the company’s emphasis by ensuring each merchant focused on profitable products. Store operators followed suit by incentivizing the sale of certain products.
Profits soared. Margins were fatter than ever.
The first signs of trouble came with a holiday sales report that showed that year-over-year comps were strained. Retail analysts dug into the data and reported that nationwide weather carved some sales off the weekend and allocation issues also limited sales.
Content that they understood the issue, executives pushed forward. On the next earnings call, the company boasted about strong margins driven by focused curation and improved store merchandising.
The Monday after Black Friday, the sales reports showed weak demand. The company determined marketing had missed the mark. To get back on track, the company leaned into the strategy that had produced such impressive recent results.
The company would not have another positive year-over-year comp.
What happened? How do you go from robust profitability to collapsing revenue? In short, executives misunderstood their customers. Incentivizing merchant to raise prices had been a brutal blow to customer loyalty.
However, the nail in the coffin was not understanding why customers came to the store in the first place. It wasn’t because they had no options (the Internet!) They came for the expertise. They came because an employee could answer technical questions. In short, they didn’t know what they were buying until they showed up and the employee helped them figure out the solution to their problem.
Unfortunately, merchants had culled their assortments and selected the items with the highest margins. They had, without intending to, undercut the store’s primary value proposition. Operators traded long-term, full-time store employees for cheaper, younger, part-time employees. Customers came in for help and left with an overpriced item that didn’t quite meet their needs. They came looking for help and left with the unsettling feeling that they had been up-sold. So, for a quarter or two, sales went up and margins went up even higher. But, before too long, customers stopped showing up at all.
The retailer had stopped playing a role in the customers’ success, so the store stopped being part of the customers’ journey.
It isn’t enough to drive short-term business success. Business KPIs must be aligned with customer success.