Wednesday, April 2, 2008

Thinking about measuring customers

I had an opportunity yesterday to have a talk to some people about the setting measurable goals and KPIs (Key Performance Indicators) for their business.

I spent a lot of time thinking about how to describe 'measurement'. Which on the surface seems quite straightforward - you think about a business process, think about the areas of that process that are critical to it working, and measure them as best you can.

And with many processes it is this straightforward - the defects in widgets coming off a production line is an easy to understand measure of manufacturing efficiency.

When dealing with processes that affect the customer (or potential customer), it gets more murky. The idea of a 'measurement' that accurately reflects the success of a process is harder to define.

You can measure if someone is satisfied with your level of service - but they still get pulled away by a lower price. You can measure if someone likes the comfort of the interior of your newest car model - but they buy the one with more cup-holders. You can measure the softness of pillows in your hotel - but it's the complicated alarm clocks that cause more concern.

I just made these examples up (well, mostly). The point being that you're not measuring widget quality - it's not CLEAR what success really is. You can have a go at defining it, but there are things you might miss.

There is no real way around this. It's an uncertainty inherent in the process of measuring a customer or consumer. However, despite this uncertainty I find that a lot of people still approach measuring the customer/consumer as IF they are measuring widgets - that there is one, universally accepted idea of success and that is what they will pin their hat on.

In reality, these (widget measurement and customer measurement) are two different types of 'thinking' about knowledge (and I am borrowing from Donald Rumsfeld here).

Widget measurement deal with things you 'know you know' - you understand exactly, to the minutest detail, everything that has been done to that widget. Customer measurement deals with both 'know unknowns' and 'unknown unknowns'. The former being everything you think might be important (such as measuring cup holder satisfaction) but don't measure. The latter being everything else in the given universe that might affect the outcome of the process in your customer's mind, but you have no current knowledge about it and couldn't even guess as to what it might be.

These two types of knowledge affect the way you manage the process. Customers aren't widgets - which most people understand. And the knowledge you have about them is not the same TYPE of knowledge you have about the widgets - fewer people understand this.

I'm not going to wax philosophical about this for too long as I'll probably put a few readers to sleep. It's more the beginnings of some thinking I have been doing around 'knowledge of customer knowledge' - a topic that isn't really addressed by anyone.

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