Why we need Relationship Value, the missing metric…

How often have you heard: “It’s not what you know, but who you know”? Or as a Rainmaker from a major firm, when asked about his success in business development, commented, “It doesn’t really matter what your business strategy is; it all comes down to the relationship.”

Sales people know that relationships are critical instinctively and jealously guard what they know to be a precious resource. (This is why the disruption wrought by the Internet and Social Media on sales and marketing and on how relationships are developed is so vexing and why CRI is more important than ever.) Consider your own experience: it’s not that unusual to follow people who serve you well from one company to another as they change jobs. You don’t want to lose the special relationship, the personal attention.

What’s mind-boggling is if relationships are so important, why haven’t they been measured to capture their value? In fact, everything but relationships is measured in sales and marketing.

The metrics focus on the efficiency of the person executing the function, or on the organization’s use of a tactic. Cost per lead, time to close a sale, time to resolve a service issue, or the percentage of “perfect” orders are good internally-directed metrics, but they are not usually incorporated into a complete relationship view.

Current customer metrics count customers one way or another, rather than measuring the entire customer relationship. Popular metrics include how many leads, how many qualified leads (And now that the Internet and Social Media are speeding up the integration of marketing and sales, you have marketing-qualified leads and sales-qualified leads!), how many customers, how many in this region or that, how many in this channel or that, how many buy this or that, how many spend this much or that much, how many are aware of the company, how many are satisfied with the product/ service, to name a few. (Not so different from counting how many “friends” you have or how many downloads of a white paper there have been as measures of success in Social Media!)

None of these metrics accounts for all of the customer activities in sales and marketing and customer retention. How could they? They are not cross-functional, like a customer relationship is. Few of these traditional metrics relate to profit, which is no surprise either. They are not cross-functional, while profit, which is directly tied to the customer relationship, is earned by the orchestration of functions across the company. No wonder it is hard, if not impossible with current methods, to determine just how much of any activity contributes to profit, despite all the attempts to justify marketing program with ROI calculations. Standard calculations just don’t cover a big enough picture to be relevant.

Finally, most traditional metrics measure the company and the company’s activities in relationship to the customer, but not the customer relationship itself. What’s important here? Management guru Peter Drucker sums it up: “You cannot manage what you cannot measure.”

Relationship Value is the building block that measures whether the Interaction moves the relationship forward or backward—its effect—and is a proxy for the Interaction itself. Relationship Value measures cause-and-effect. Relationship Value is a Key Performance Indicator for relationship development and a leading indicator for profit and satisfaction.      

Customer Experience Wisdom: Relationships drive business. Relationships drive everything.

Questions: Are you measuring relationships to capture their value?

Can you tie relationship development to profit?

If not,

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