The Key Metric Too Many Businesses Are Ignoring (OPINION)

Management consultant Peter Drucker said, “The purpose of a business is to get a customer,” and “the two main functions of a business are marketing and innovation. Everything else is a cost.”

If Drucker is right, why is it so hard for businesses to differentiate themselves from each other, and why is marketing so ineffective? I have the answers, but you may not like them.

All Things to All People

First and foremost, most businesses try to be all things to all people, which makes them the same as everyone else. Their brand is so diluted that it is impossible to market meaningfully across a multitude of customer segments and business units.

Second, in their quest to develop sales cultures that sell more products to customers, businesses have forgotten that the real metric they should be using is return on customer. In all the product selling, who is accountable for looking at the customer holistically and making sure the business creates enough value for those customers to be profitable?

Many CEOs and their teams have also taken their eyes off of Drucker’s key tenets. In a world of dizzying complexity and continuous distractions, the customer has, in many cases, taken a back seat in the boardroom.

That last remark should get under your skin. I can hear some of you recoiling defensively and saying, “That’s not us. We really know our customers and are responsive to them. That might describe other businesses, but we pride ourselves in knowing our customers.”

Look, I get it. I’m striking at the very core of your business. No one likes to be told they’ve forgotten their customers, or that their customers have taken a back seat, especially a CEO. However, unless you are truly exceptional, and a few are, I am describing you and your business.

If you still don’t believe me, see how accurately you answer these questions: 1) What percentage of your customers make up 70 percent to 90 percent of your profits? 2) How do those customers break down into categories such as retirees wanting second homes, business owners wanting to sell in the next five years, and families in their early 30s buying their first homes? 3) What are the evolving needs of these high-profit customers, and how do they want you to meet those needs? 4) How can you acquire more customers like these high-value ones?

Raising the Bar

If you don’t have all the answers to those questions, you are in the same boat as most of your industry peers. The good news is you can out-compete the pack with some focused effort.

My job is to help you raise the bar on your performance and provoke you to meaningful action, and you accomplish that if you make an all-out focus to understand your most valuable customers and find answers and solutions to questions like those listed above.

How Will You Lead?

Raising the bar requires using your data to help acquire customers, innovate and market. This requires a relentless focus on the customer, the humility to acknowledge that there might be a lot more for your business to learn about them and the passion and discipline to innovate and market around their needs and preferences.

Your role as the CEO is to understand that there is value to be discovered for both your customers and your business, and to make sure your team has the information, technology and training they need to create a special customer experience.

Without you serving as the chief customer advocate, your team will simply focus on moving products to anyone that will buy them, and that’s not a good long-term proposition. It will keep you in the same boat with your peers, and you won’t have moved the return on customer needle.

Is that the road you want to take, or will you lead your business down the road less traveled? It’s your choice, and what you chose can lead to either an exceptional future, or an average one. Choose wisely. 

Scott McClymonds and CEO Velocity help CEOs build profitable customer relationships. He can be reached at 479-263-0774, [email protected] or @ScottMcClymonds.