Measuring Commerical Health

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As we start to explore the reset of the Customer Health Eco-System, it starts to become clear that one of the most difficult areas to navigate is commercial or contract health. There are so many different factors at play and it can be difficult to get enough granularity to properly measure health and risk. There are some basic things you can do to help you through this difficult process, but it's worth noting that this can be a long process involving multiple stakeholders, both internally and externally and will take time to get right. Like with all the other areas of Customer Health, you need to make sure that this forms a part of your system, and you don't view it in isolation - it's all about the context. Define your KPIs What is your CS team trying to achieve and how does it align with the business goals? To measure contractual health, you first need to understand which commercial elements you have direct responsibility for and what is classed as a risk. The thing to keep in mind when you’re starting out, is that all of the data points need to relate back to your KPIs so they have to be well thought out. These ultimately help you tell the “story” of customer health and help guide you as you build your system and then continuously measure it through the customer journey. Understand your landscape Does your industry often have short, rolling contracts? Do people move between suppliers often? What are the factors at play? You can use this information to properly set your own benchmarks, giving you a more accurate picture of health. Like all areas of Customer Health, you have to make sure that what you are measuring is relevant and appropriate for the context of your business – it might be perfectly “normal” for customers to churn frequently in your industry and so this may not be the best way to look at how healthy your contracts are. Similarly, if customers frequently sign long-term contracts but rarely move between suppliers, that also drastically changes the way you need to think about and measure your customers. Risk Assess your Stakeholders It's important that you have an up-to-date stakeholder risk matrix; even if you're in a good place contractually, a lot rides on the relationship with the contract owner(s). If they won't engage or aren't happy, it adds a huge element of risk and you need to intervene. Whilst you would also think about measuring this under “relationship” or “external sentiment” you need to specifically measure the commercial risk associated with your contract owner. What is their role in the organization? What are their motivations or objectives? Who else has access to them? It is easy to overlook these because you might already be measuring relationship health, but simple things like a Promoter NPS response won’t cover off these additional risks, so it needs to be a separate exercise. Map Your Revenue Brackets It goes without saying, but you need to make sure you're tracking who your biggest revenue generators are. Make sure you set up a feed from your billing system so you can fully understand where the risk is and plan your interventions accordingly. It may be the case that your high-touch, enterprise customers (that make you the most money) are all in good health, but most of your customers, who lie in the middle and account for most of your revenue are not. This is important information because it might signal that there are issues with that group, that are causing problems commercially. As an example, setting a basic metric like, “customer brings in 100k+ per month = green” is not going to cut it, you need to think about it in a much more granular way. You might do it something like this, “if Customer is Tier 1 & is on Contract X & Brings £100k+ per month = green”. It’s worth spending the time getting granular, but not to the extent that you have a separate health system for every single customer; if you can’t do that, you may need to think about creating some more rigidity around your commercials. Segment Your Contracts If you have multiple types of contracts, with different terms and clauses, you need to account for this in your health scores. Use this to segment your customers further. It means you can view health and risks in a more meaningful and accurate way and avoid tunnel vision. Whilst you need to segment your customers to define the engagement model, you need to do a similar exercise on contracts; the real difficulty comes in trying to connect the two different concepts and form a coherent strategy for each scenario. Ultimately though, different contracts may require different approaches and therefore different health metrics – again you need to have a view on all the angles, contracts and variations and have a way of managing the risk for each of them. Jamie’s Top Tips "There are many factors at play when it comes to commercials, whilst you may not be able to directly impact them all, you need a way of having visibility into the risks so it's better to be over-cautious." "This is all about aligning with the business, whilst reducing churn might be what you think is needed, the business might think it's upselling, you need to make sure this is clear and built into your health system and strategy."

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