The Magic Metric

If you’ve spent any time at all reading my musings, you know I’m a huge fan of Seth Godin. In his daily post yesterday, ( see ) he ended the post with a great quote.

“Measurement is fabulous. Unless you’re busy measuring what’s easy to measure as opposed to what’s important.”

It did leave me with a question to ponder though… how do you define “what’s important?” After some thought, I have this suggestion to offer.

To define the “important” measure we have to know what’s important to the business. By my definition, a business is an entity operating to create value exchange for the mutual benefit of both parties. (As I read what I write, that sounds complicated… let me break it down!) In other words, if you are a business owner, your goal is to create a valuable product that your customers are willing to obtain by parting with something they consider valuable (usually money).

So, if the purpose of being in business to to create value exchange, then wouldn’t it stand to reason that you want to gauge how valuable your customers believe your products are? Isn’t this the most important of all metrics? After all, who cares how long your average invoice collection cycle is if no one is buying what you’re selling!

So how do you measure what your customer thinks? I know there are dozens of social monitoring sites to determine customer sentiment or customer service tools to measure returns and complaints, and I’m sure they all do a fine job. But I’d like to suggest a couple of measures that are probably easier to collect and likely more meaningful anyway.

First and probably the easiest, your customers vote for you vs your competition when they spend money… they vote with their wallet. So how is your business doing with generating revenue? Are you growing month over month or is it flat? And don’t forget to compare your revenue against your competition (if you can). Are more of your target customers voting for your competition than are voting for you?

The other easy measurement is referrals. We’ve all heard that the best advertising is Word of Mouth. Well referrals are the result of word of mouth advertising. If you provide exceptional value, your customers will talk about it and tell their friends. Be Careful! Promoting or incentivizing word of mouth (which is not a bad thing in and of itself) isn’t the same as delivering so much value that your customers want to get their friends on board. However, since any referral is a good referral, by measuring how your customer base is growing through referrals, you’ll also have a good indicator about the overall satisfaction your current customers have with the value you are delivering.

What do you think? Is customer satisfaction a good measure or too “soft” to measure? Are there better metrics for gauging the health of your business. Tell us your opinion in the comments!




 
About the Author
Thom Rigsby is a Speaker, Coach, and Unashamed Non-Conformist blogging at ThomRigsby.com. To get your daily dose from the business coach, visit 7 Minutes In the Morning

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