This document summarizes a presentation by Ed Kless on measuring what matters to customers. It discusses using key performance indicators (KPIs) like Net Promoter Score and customer satisfaction to measure how well a business is meeting customer needs. It also presents the concept of a "value gap" analysis to quantify the value provided to customers versus the revenue generated to identify opportunities to better serve customers. The presentation emphasizes that marketing and innovation are the core functions of a business and that metrics should align with how customers define success.

1. Measure what matters (to customers)
Ed Kless
GN-27
Tuesday, July 28th, 4:30pm to 5:15pm
@edkless

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The contents of this presentation were provided by the individual(s) and/or
company listed on the title page. The information and opinions presented in this
presentation may not represent the positions, strategies, or opinions of Sage.
Unless explicitly stated, Sage is not responsible for the content herein and no
endorsements are implied.
©2015 Sage Software, Inc. All rights reserved. Sage, the Sage logo, and any Sage
product and service names mentioned herein, are trademarks of Sage Software,
Inc. or its affiliates. All other names used in this presentation are for informational
purposes only and may be trademarks of their respective owners.
@edkless

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“Because its purpose is to create a customer,
the business enterprise has two––and only
these two––basic functions: marketing and
innovation. Marketing and innovation
produce results; all the rest are ‘costs.’”
- Peter Drucker
“Because its purpose is to create a
customer, the business enterprise
has two––and only these two––basic
functions: marketing and innovation.
Marketing and innovation produce
results; all the rest are ‘costs.’”
- Peter Drucker

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“What you can measure
you can manage.”
The McKinsey Maxim
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“The only way to look into the
future is use theories since
conclusive data is only available
about the past.”
–Clayton Christensen

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Constructing a Theory
• Observation (How do you know?)
• Categorization (Rank what’s important - Occam’s Razor)
• Prediction or Explanation (So what?)
• Confirmation/Falsification (If not, revise, start over)
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Economic classifications of key indicators
• Lagging (Unemployment, prime rate)
• Coincident (Sales)
• Leading (New orders, Building permits)
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A Gedanken

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Airline KPIs
• On Time Performance
• Lost Luggage
• Customer Complaints
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Key Predictive Indicators
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Predictive indicators define success the same
way the customer defines success

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The Big Three: KPIs
• High Satisfaction Days
• Net Promoter Score
• The Value Gap
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What is the
likelihood that
you would
recommend us
to a friend or
colleague?
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What is NPS?
0 1 2 3 4 5 6 7 8 9 10
Not at
all likely
Extremely
likely
Likelihood of recommending
 
 
   
Detractors
Promoters
Passives
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Calculating Net Promoter Score
%P 30% 30%
-0- 45% 35%
%D 25% 35%
NPS 5 (5)
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Why this matters!
“An increase in NPS of 5 increases profits by
25 to 95%.”
Fred Reichheld
Loyalty Rules!
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Getting Customers on The Grid
• Customer name
• Lifetime Revenue
• Net Promoter Score
• Customer Likeability Score (or other index)
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Customer Likeability Score (CLS)
1. Disagree strongly
2. Disagree
3. Disagree somewhat
4. Agree somewhat
5. Agree
6. Agree strongly
On a scale of 1-6, please rate your level of agreement with the following statement:
This customer is clearly a joy to work with.
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The Grid
C B A
F E D
Net Promoter Score
Neutrals (7-8) Promoters (9-10)Detractors (0-6)
CustomerLikabilityScore
DislikeLike
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On the grid
0
2
4
6
0 2 4 6 8 10
C B A
F E D
Net Promoter Score
Neutrals PromotersDetractors
CustomerLikabilityScore
DislikeLike
@edkless

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Value Gap
Basic
• Customer name
• Revenue from the customer per some discrete period
• Value provided to the customer in that same period
Advanced
• Value that could be provided over a future discrete period
• Possible acceptable price (revenue) for that provided value
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Value Gap Analysis
Customer name Value Provided Revenue The Gap Potential Value Potential Revenue New Gap
Customer 1 1,000 500 500 2,000 1,250 750
Customer 2 - -
Customer 3 - -
Customer 4 - -
Customer 5 - -
Customer 6 - -
Customer 7 - -
Customer 8 - -
Customer 9 - -
Customer 10 - -
Customer 11 - -
Customer 12 - -
Customer 13 - -
Customer 14 - -
Customer 15 - -
Customer 16 - -
Customer 17 - -
Customer 18 - -
Customer 19 - -
Customer 20 - -
Total 1,000 500 500 2,000 1,250.00 750.00
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24. Measure what matters (to customers)
Ed Kless
GN-27
Tuesday, July 28th, 4:30pm to 5:15pm
@edkless

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Questions?
• Send any questions you may have about this session to the
following email by August 15:
@edkless
ConferenceSessions.NA@sage.com

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Session survey
• Complete a survey for this session!
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http://goo.gl/2MUPWW
Session code: GN-27
Session title: Measure what matters (to customers)

27. Measure what matters (to customers)
Ed Kless
GN-27
Tuesday, July 28th, 4:30pm to 5:15pm
@edkless