We need our own “Customer Happiness Index”
Posted on August 27th, 2010 by Paul McArdle – 3 CommentsAs I have noted elsewhere, our customers mostly like us, and what we do – the results we received from the survey we recently conducted were largely what we expected, in this sense.
When I find a bit more “spare” time, I’ll summarise some of the feedback here.
It’s a nice thing, but one we can’t take for granted.
From my perspective, we’ve already disappointed some of them on too many occasions. I really want major improvement in the months ahead.
If we are really going to make “Customers First” our prime reason for being, we need to have an explicit measure of the extent to which we really do live by this motto. When we have this measure, we will drive the company by this measure.
The development of this measure will be one of the core responsibilities that our new GM for Finding, Attracting and Delighting Customers will need to adopt, when we have recruited them.
Hence it was with interest that I stumbled upon this presentation titled “Ideas for Building Better Software Businesses” from Dharmesh Shah (of HubSpot) at the Business of Software conference in 2009:
Note that Dharmesh (as an additional service to his customers and fans) has prepared this page from his “OnStartups” blog to list some of the key points in the video.
I like this approach of “going the extra step” to make the message more understandable.
The following notes are specifically about his suggestions for the Customer Happiness Index (CHI):
Note that there is plenty of other good stuff in this video (you have to get to minute 47 before he mentions CHI), which I might have a chance to talk about at some other time.
1) What is CHI?
Dharmesh explains how the CHI is measured as a number between 0 and 100 that describes the percentage likelihood that the customer will renew.
For HubSpot they use monthly increments, whereas our licences are annual, so the measure will be a little different for us – but the principle is the same.
2) How to measure it?
We will have to conjure up our own formula, specific to our purposes.
However, we’ll certainly be keeping in mind Dharmesh’s suggestions for the three things to be used as inputs:
(a) How many hours our clients use the product;
(b) The breadth of product use, in the periods when the product is being used; and
(c) The actual value delivered – note, for us, this will be difficult to measure in most cases, because of the the confidential nature of our client’s businesses.
3) Once measured, how to use it
Dharmesh suggests four possible applications, and already I can see a couple others:
(a) Predict who is going to cancel – hence work out what to do to rectify whatever issue is confronting them;
(b) Project Life-Time Value (LTV) – and from there an acceptable acquisition cost;
(c) Calculate Commissions for Reps:
This has been particularly puzzling me. For a number of reasons (not the least of which is a real concern for delivering customer value) I would rather not make a sale at all than to sell something to a customer where they genuinely won’t receive excellent value from our product.
A traditional commission-based arrangement (loaded up-front on sale) would work against this alignment, so I have been thinking through what arrangements we’ll need to put in place in relation to growing our “SMarketing Team” – starting with the GM.
(d) Determine product roadmap.
All of these stem from the adage “what gets measured gets managed”.
[...] instance, our company dashboard needs to include a “Customer Happiness Index”, or Net Promoter Score, or something else (a metric that really reflects the nuances of our [...]
[...] Some form of Customer Happiness Indicator that’s specifically tailored to our [...]
[...] noted before that we need to have better metrics of our own (such as a Customer Happiness Index) – and that this is the kind of thing our Sales and downstream Marketing Team will play a key [...]