CRM measurements

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Information about CRM measurements

Published on October 30, 2008

Author: Gumby


Applying measures in CRM : Applying measures in CRM Rationale of measures Calculating measures Applying measures Why measure? : Why measure? CRM systems already have standard report options. But few actually report on the reason for implementing a CRM tool in the first place. Sales and contact measures are good but not sufficient. They hardly justify having a CRM strategy. Measure what you’d like to manage! What to measure? : What to measure? In my opinion CRM is just one part of creating great customer experiences. An underestimated group of measurements are internal CRM usage. The failure of CRM is often down to the fact that there is little incentive for personnel to load data. When this is measured it will improve the quality of data in your CRM system. Some CRM measures : Some CRM measures Recency – based on the time of the last engagement with the customer. These may be purchases, activities or cases. Or a combination of all or some of these. Rate of attrition – the rate of customers lost per cohort (time period). Rate of acquisition – the rate of customers gained per cohort. Average rate of retention – the percentage of customers retained per cohort or across a number of cohorts. Duration adjusted rate of retention (DARR) – is the rate of retention across a number of cohorts with a weighted adjustment. Profit or revenue retention – using retention measures as above but adding in profit or revenue to each cohort. Rate of attrition : Rate of attrition Using the table below as an example; In 1994 413 customers were lost. The number at the beginning of the year was 700. The attrition rate is 59.0%. (413/700) In 1995 there were 563 lost (287-166 and 750-308) and 1037 at the beginning (287+750). The average attrition rate is 54.3% In other words the rate of attrition is the number lost as a % of the number at the start. Rate of acquisition : Rate of acquisition Similar to the rate of attrition in calculation. = the number of customers gained as a % of the number at the start. In 1995 there were 800 new customers and 1,037 at the start of the year. The rate of acquisition is therefore 77.1% (800/1,037) Rate of retention : Rate of retention The simple ratio for the retention rate is the number of customers retained as a % of the number at the start of the cohort. The straight retention rate for customers from 1993 , in the year of 1995 is; 57.8% (166/287) Likewise for customers from 1994 the rate is 41.1%. (308/750) Average rate of retention : Average rate of retention Simply put it is the average retention across the cohorts. In 1995 the average rate of retention is therefore 49.5% ((57.8 + 41.1)/2) Duration adjusted rate of retention (DARR) : Duration adjusted rate of retention (DARR) This rate accounts for the changes over time of the firms rate of efficacy. First identify the number of repeat customers per cohort as a % of the total. See the table on the left below. E.g. 1993 customers remaining in 1995 = 166 or 35% of the total (166/474) (474 = 166 + 308) The DARR in 1995 = (57.8%*35%)+(41.1%*65%) = 46.9% The 57.8% is the retention rate for the 1993 cohort Build in a value to measurements : Build in a value to measurements By adding in a profit or revenue component to the measurements you can analyse the real value of the retention. This is a worthwhile exercise as not all customers are alike in the value they hold to your business. Of course you can drill into segments and match different profiles to get all kinds of useful insight, but that is outside the scope of this presentation. Applying measurement : Applying measurement Now we have some measure in place we can track the efficacy of our CRM strategy and system. Having data is all good & well, but now you need to look for correlations and trends that led the causes to the symptoms. You can now address when the company is vulnerable rather than trying to identify when the customer is vulnerable. Thanks for your time and mail me at if you have any queries or suggestions

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