I thought David Kelly did an excellent job raising the issue of the connection between customer loyalty and comp plans, and I wanted to contribute some additional insight on this issue based on Merced's experience.

One metric that many organizations are adopting is Net Promoter Score (NPS) (click here for another interesting link on NPS). NPS is a defined and measurable metric developed by Bain & Co. that has proven to be an effective way to measure customer referrals.

While NPS offers one effective means of measuring customer loyalty, there are other metrics that organizations commonly track as indicators of customer satisfaction, and incorporate into comp plans as a means of driving desired behavior at the front line. Below is a short list of metrics we at Merced see our customers utilize to measure customer loyalty, and which are often hooked into individual's compensation plans.

Customer Related Metrics:

• Customer Satisfaction
• Customer Retention
• Customer loyalty
• Customer profitability
• Increase in CLV (Customer Lifetime Value)

Productivity Metrics (most of which David lists):

• Number of calls or meetings
• Average meeting/call time
• Rep coaching
• Availability
• First Contact Resolution (FCR), or issue resolution time (to read more about FCR, check out my colleague, Wendy Lauther's posting)

The metrics above are just a sampling of potential customer loyalty metrics, and it is important that each organization identify the metric or blend of balanced metrics most suitable to the individual operation.  Choosing a few key metrics or weighting the averages of a set of several metrics helps to reduce the number of data tracked and enables quick action to be taken.

Generally we see two key approaches organizations take in integrating these non-sales metrics into comp plans to drive customer-focused behavior among the front line.  In one approach these metrics act as qualifiers - if employees do not meet specific thresholds, they are not eligible for incentives.  In this approach, once a rep qualifies to receive incentives, variable pay is calculated off sales metrics.  The other approach incorporates these non-sales metrics directly into the comp plan.  For example, a rep that receives a customer satisfaction score of 80 will only receive 80% of his or her comp.

In closing, I would like to spin the old business mantra of "what gets measured gets improved." Rather, from my experience I have learned that "what get's measured, get's measured." Just because something is measured doesn't necessarily mean it will be improved.  If you're expecting improvements based on distributed information, you must also provide the tools to enable action on that data.  However, stopping there again won't necessarily elicit improvement.  The final step to guarantee improvement is checking on progress, to ensure the proper action has been taken.

If you have any other interesting metrics you're using to track customer loyalty, send them my way!