Performance benchmarking is common practice among big businesses, but this is often driven by a need to satisfy internal KPIs rather than a need to satisfy customers. The yardstick used for performance measurement can have a significant impact on decision-making, which ultimately impacts the bottom line. It can also be a source of noise which detracts from keeping the customer at the core of the ‘what’, ‘why’ and ‘how’ of business operations. Customer centricity removes a lot of this noise and helps businesses to make better decisions that drive customer satisfaction, loyalty and profitability.
“If you are competitor focused, you have to wait until there is a competitor doing something. Being customer-focused allows you to be more pioneering.” – Jeff Bezo (Amazon CEO)
How do companies typically evaluate performance?
Companies measure their success in all sort of ways, however there tend to be three common processes or heuristics that we are naturally inclined to follow to evaluate performance.
The first port of call and probably the most commonly used is comparing performance against competitors. Maintaining a position somewhere in the middle of the competition, or improving performance relative to the ‘herd’ can give companies a sense of security. It can pay to learn of the challenges and experiences of your competitors, especially from a diverse network of them. However, without doing anything differently you are merely copying them or staying afloat.
The next most obvious method of judgement is to compare to our own past performance. What has been the trend of our bottom line over the last five years? Has it remained the same, worsened or improved? Improvements may give management confidence, but backwards looking comparisons can often mean the company fails to realise its potential.
The first two forms of performance measurement do serve a purpose. The first generally carries little risk, while the second provides an indication of what direction the company is headed. However, it keeps companies either looking sideways or backwards, not forward.
A better yardstick for performance
The high performers in any industry will always use customer-based metrics as their performance yardstick. Customer satisfaction, acquisition, retention, loyalty, referrals. Acknowledging the need to measure performance this way is the easy part, but finding a way to integrate customer metrics into your own business can be overwhelming.
Amazon is an often used as a relevant illustration of what it takes to innovate rather than imitate. And there is no doubt that the one yardstick that Amazon strives for – and arguably provides – is a utopian customer experience.
Focusing on the customer when defining your success is not just a choice, it’s a necessity.