Harvard business review
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Despite a flurry of activities aimed at serving customers better, few companies have systematically revamped their operations with customer loyalty in mind. Instead, most have adopted improvement programs ad hoc, and paybacks haven't materialized. Building a highly loyal customer base must be integral to a company's basic business strategy. ⋯ Finally, as the best customers and employees become part of the loyalty-based system, competitors are left to survive with less desirable customers and less talented employees. To compete on loyalty, a company must understand the relationships between customer retention and the other parts of the business--and be able to quantify the linkages between loyalty and profits. It involves rethinking and aligning four important aspects of the business: customers, product/service offering, employees, and measurement systems.
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Frustrated by the inadequacies of traditional performance measurement systems, some managers have abandoned financial measures like return on equity and earnings per share. "Make operational improvements and the numbers will follow," the argument goes. But managers do not want to choose between financial and operational measures. Executives want a balanced presentation of measures that allow them to view the company from several perspectives simultaneously. ⋯ Managers can create a balanced scorecard by translating their company's strategy and mission statements into specific goals and measures. To create the part of the scorecard that focuses on the customer perspective, for example, executives at Electronic Circuits Inc. established general goals for customer performance: get standard products to market sooner, improve customers' time-to-market, become customers' supplier of choice through partnerships, and develop innovative products tailored to customer needs. Managers translated these elements of strategy into four specific goals and identified a measure for each.