Customers' importance in the BSC

Today we're going to see why the customer's perspective is so important in the implementation of the BSC.

A few weeks ago I told you what the BSC or balanced scorecard is, and we saw together why this approach was considered revolutionary: when it was created, more than 20 years ago, companies (almost all) focused only on the economic return to determine the goodness of a strategy or the effectiveness of a promotional act. The advent of the BSC, however, has helped us understand that we can't only focus on cash flow to evaluate the performances of our organization, but we must also look at other points of view: these are customers' perspective, internal processes and learning and growth processes.

Today in particular we're about to focus on the importance of keeping in consideration the variables linked to customers during the measurement of company's performances.

Balanced Scorecard

Many entrepreneurs, to increase their sales, continue focusing only on the product: yes, provide an high quality and cutting edge solution is definitely a plus for every company, but we should not leave aside what the customer wants and what is expected from us. We could not sell something that, although beautiful and high quality, it isn't important for our customers, because we wouldn't sell anything. We must therefore take into account their preferences, learn as much as possible what they really care about and propose it in our products.

For example, it's very important to understand what customers want (more quality, cheaper products, faster delivery or a higher consideration), who are those who buy more (and what are the carachteristics that make them love our products) and understand why some customers don't buy these products anymore (if they felt treated with indifference and then switched to a competitor, if they no longer needed what we sell or if they're not satisfied enough).

All of this will create a solid foundation, but we will have to keep monitoring the information we receive: therefore we must start from this base with our strategy, and then make adjustments based on the feedbacks we receive. These feedbacks are measured, as mentioned in the previous article, with the KPIs, namely the key performance indicators.

Let's see some examples on how to do this monitoring.

First of all we have to establish some goals that we want to achieve and we have to try to quantify them imposing us deadlines: we don't have to think "i want to get more customers", but "I want to get 2000 customers in the next three months". In this case "acquired customers" would be one of our KPIs.

KPIs will necessarily be more than one, the important thing is to choose them based on what we want to achieve in a certain period of time and especially assign them a numerical value, which represents the threshold to be reached (in case of a positive KPI) or to not exceeded (in case of a negative KPI).

For positive KPIs, the ones where we'd have a threshold to reach, we mean, among the others:

  • Number of acquired customers;
  • Market share;
  • Number of customers coming back;
  • Product delivery speed;
  • maintaining of the specifications and quality of the delivered product;
  • Customers satisfaction;
  • Products / services price;
  • Products / services cost;
  • Price compared to competitors;
  • Customers income;
  • index of brand awareness;
  • Closed sales.

Negative KPIs, the ones where we'd set a threshold that we don't want to reach, are:

  • Number of lost customers;
  • Number of complaints;
  • Expenses for customer service;
  • Returned products.

Using the BSC and constantly monitoring the results, you will be able to understand if you can meet your goals and, if not, change the strategy to make it successful. Obviously, you will not have to consider all the KPIs that you have listed, but only those most relevant to your business, or rather the most important for the strategy that you are carrying out at that particular time.

In the next articles we'll talk about the others perspectives that the Balanced Scorecard consider.

Thanks for reading the article.

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