WHAT I KNOW: You MUST Do Customer Math

Posted on August 18, 2022

Hi, this is Jeanne Bliss. And what I know is that you have to count customers. This is what I call “honoring customers as the asset of your business.” But what the foundation of this is: recognizing that the whole purpose behind our work is to earn the right to growth of our customer base.

Let me tell you why I know this and why this approach to counting customers to doing customer math really changes how you lead, and what you do inside your organization to earn customer-driven growth.

Shift from WHAT You Sold to WHOM You’re Selling To

When I went from Lands’ End to Mazda, what was fascinating to me was watching how success was measured and doled out. And it was by the kind of car. So “GLC sold this many,” hurrah! “This truck sold this many,” hurrah! But there was no aggregating of the information around customers, what we were measuring was the stuff we were selling.

And think about that inside of all of your organizations. Frequently, what you’re going to hear people talk about is the selling of the stuff, versus the understanding of who you sold it to, and the measuring—or the counting of—if you’re increasing the number of people who are buying your things. And if you’re increasing the amount that the people who are buying your things buy from you.

So I had to do a really quick down and dirty (analysis) table for Mazda when we introduced this notion of customers in/customers out— because again, we were getting this very false positive around product-driven growth, but not customer-driven growth.

Also, when you don’t measure your customer growth in a one-company way, you also get many versions of the truths that are presented to the CEO. So frequently, growth is presented by product category, channel, even by action item, or marketing campaign. Again, what that says is, “Tactically, here’s what we’re doing.” But it doesn’t connect to the outcome of as a result of everything we’ve done. “Did we have an impact on the thing that drives our growth the most?” Which is we brought in more customers than we lost.

Understanding the Leaky Bucket

So in the good old days, none of this was automated. So I went to RL Polk and got all of the information and aggregated it and then put it against the different name plates and had to create for them the first version of “the leaky bucket analysis” of how many customers came in volume and value. Value is important. Because as you lose customers, and you will, you want to notice and recognize if your new customers are at lower value than your last customers.

So the power of this—and what I want you to think about doing—is engage with your CEO and your CFO and get permission to do customer math. And what what you do is: you look at all your customer, you look at your customer base, and you have to understand across everything you sell—in a month period/a quarter period—and over time, an annual period—how many new customers you brought in volume and value.

Frequently, the sales organization feels they own this number. And, you know, I don’t like the word “ownership.” But initially, that’s your acquisition number. But the the important thing here also is everybody has to agree with what is new. Because if you don’t agree to these metrics, again, it won’t roll up for your CEO and for your board. When this works, it then becomes a board level metric and it also becomes something in public companies that we present out.

So what is the metric and what is the data: new customers volume and value? You then have to do the math for that same period for that month, quarter or year: what are the lost customers or lapsed customers or reduced customers in that same quarter, volume and value?

Creating a Shared Language and Curiosity

So again, hard work is not building the dashboard. It’s getting consistency and getting everybody to agree to: what is new, what is lost, what is lapsed, what is reduced? And then it’s much more than just reporting out the information.

What we find is when this simple metric of “did we earn more customers than we lost” becomes part of the language of leaders. It pushes everybody to care about the why. When you care about the why—and I’m Italian, I always say I want to create agita, get people to be “a little sick in the belly”—about why we lost more customers that we gained, or why we lost more valuable customers and we gained.

Then there’s a natural curiosity and also an empathetic—and a leadership passion—around systemically improving the things that drive customers away. And at a higher level changing and innovating to keep more customers.

So leadership language also has to fearlessly be changed so that your entire C-suite and their people—and then over time their people—start meetings by fearlessly sharing,

“As a result of the experience we all delivered, did we earn the right to grow in this past quarter? Through the great work that we’ve done, we attracted/we brought in this many new customers. But in that same quarter, we lost this many customers. And here’s the volume of those that we lost. So let’s dig in and understand why.”

When this becomes part of the common language, and the cadence of league leaders, it becomes part of the culture of the organization. And the caring about the why fundamentally changes how people think about their work. And the work of the business. And it adds this human empathetic touch. That also is different in the beloved companies, as I call them.

Why You Should Use Real Numbers

The other thing that you need to do is use whole numbers. When you use just retention rates in your customer math, you’re going to get that kind of glossy dashboard, anything that doesn’t really get in your craw doesn’t get you emotionally. So “we brought in 50,000, but we lost 47,500.” That hits you a lot more than, “We’re at 79% retention rate.” Also just looking at 79% retention rate does not tell you how many last does not show you the leaky bucket.

The other thing you could do if you want to is be a little brave and be visual. With this, when we presented this information for the first time to a leadership team of a very major membership organization—you know them but I can’t say who they are. We created a mathematical equation around new customers and lost customers and value. And we presented the leadership team with two bowls of marbles. “Here’s the bowl of marbles of our new customers volume and value while we were graded acquisition. But in the same quarter month or year, here’s the number we lost.”

And in that first presentation, because you have to help people recognize what’s going on, they had lost the same amount of customer value as they had gained. And so all the efforts in marketing and advertising and innovation didn’t drive growth at all.

So think about a way that you can also visually depict this so that it really gets in people’s head and you know what you can say, “Then we lost their marbles.”

Final Thoughts

This is Jeanne Bliss. What I know is that until you look at this simply, you really will not unite the organization around the whole importance of what we do and why we do it is to earn the right to customer-driven growth. The other big power of this is you cannot cross-tab your way out of this. You cannot say, “This customer was a good customer or a bad customer. “You cannot refute the survey score around this.

You either kept more customers and grew them than you brought in or you didn’t. You either kept more customers than you lost or you didn’t.

So what I know is that customer math—honoring customers as the asset of your business—will earn the right to customer driven growth and earn admiration and how you lead to that outcome. Thanks everybody. Go to customerbliss.com/WhatIKnow to learn more and to sign up. Take care.

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