Well-run companies measure their financial performance. They plan annual spending with a view of their return on investments and return on invested capital. They keep track of sales, staff turnover, debt, and administrative costs. These are essential to keeping a company “healthy,” but there is more that must be measured, and that is “customer health.”
For your company, Mike Linton for Forbes promotes a “scorecard” on consumer behavior, which predicts potential weakness, areas of growth, and consumer purchasing power. It should track customer trends and allow you to adjust future sales based on customer knowledge. Don’t confuse financials with customer trends. While your company may have a great sales year with significant growth, you should be aware if growth was due to repeat customers or excessive customer acquisition coupled with decreased repeat sales. By not knowing, you’re fooling yourself of your company’s true health.
So how do you monitor customers? As a starter, try market share. “Absolute sales dollars are a great starting point,” but if you don’t analyze your share in a rapidly changing market, the story might be lost. For instance, in a fast growing market like smart phones, a 10% growth might actually demonstrate loss of market share due to increasing competition.
Look at repeat purchases. Strong repeat means strong business. If the cost of a repeat purchase is lower than the cost of acquisition, consider yourself in good health. Decreasing repeat purchases translate to dissatisfaction with your service.
Linton offers a lot of health similes, which are apt, but past that, this article offers useful advice on analyzing your company’s performance and outlook so you can retain your customers.
