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Measuring Customer Performance – The Value Co-Creation Way

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I found a new Dutch initiative to measure a Company’s Customer Performance: The Dutch Customer Performance Index (DCPI) (Dutch only) – a new objective and validated index for measurement of Customer performance – . I thought it worthwhile sharing with you.

The Dutch Customer Performance Index is an initiative of the Customer Insights Center of the University of Groningen (Dutch only), intelligence bureau MIcompany and market researcher MetrixLab. The University of Groningen is responsible for the scientific bases of the research. MIcompany determines wich value companies create for themselves from their Customers and MetricLab is repsonsible for data collection and building the benchmark database.

The DCPI conducts their research on a regular basis for 80 of the largest service providers in The Netherlands, which is based on a research base of 4.000 Dutch consumers.

The DCPI measures and compares these 80 companies based on two perspectives of a company’s Customer performance:

  • The value a company creates FOR their Customers: Value to the Customer (V2C)
  • The value a company creates for themeselves WITH their Customers: Value to the Firm (V2F)

The Value to Customer Dimension

The V2C dimension is based on articles by Rust, Lemon and Zeithaml and Verhoef, Langerak and Donkers and is based on four components, all equal in weight to the total score:

  1. Relationship Equity: Valuation by Customers of the relationship with the company.
  2. Value Equity: Valuation by Customers of the price-to-value relationship.
  3. Brand Equity: Valuation by Customers of the brand
  4. Emotions: Valuation by Customers of both positive and negative emotions that can be associated with a company

The Value to Firm Dimension

The V2F dimension is based on articles by Gupta and Zeithaml, Reichheld and Gupta, Lehmann and Stuart and also has 4, equally weighted components:

  1. Revenue: Customer spend on a company’s service(s)
  2. NPS: Net Promotor Score
  3. Retention: The likelihood of Customer retention
  4. Risk: The risk of future revenue. This one is based on the variation between the three previous components. In short: the higher the variation between the three individual scores, the higher the risk.

My take on this

I like this research for a few reasons:

  • It’s Dutch.. but that doesn’t mean anything to most of you probably ;-)
  • It has a scientific/academic foundation and the research is conducted under the responsibility of a respected Dutch University.
  • The two dimensions fit into my “value co-creation” thinking.
  • The fact that the Value to Firm dimension does not talk only of financial value and it’s not based on one number.
  • I particularly like the way the research approaches the Risk of future earnings by bringing it into the equation for starters, but mainly by it being a component based on the variation between the three other components. This makes a whole lot of sense to me.

Additionally I would like to add that I’m not a fan of NPS as an indicator. Most certainly not when it’s presented as a “silver bullit”. I would choose to add at least one more question to the NPS question:
– Did you recommend company x/y/z over the past three months.

Unfortunately I do not have insight in the questionnaire itself. Hopefully I will obtain this. If I do, and get permission, I will put it up here too.

Curious as to what you all think. Is there something similar to this somewhere else in the world? If so, how’s that working? Is this the closest we get to measurement of value co-creation on a company to company comparable level? If not, what are your suggestions for improvement? [tweetmeme source=’MarkTamis’ service=’bit.ly’]

5 thoughts on “Measuring Customer Performance – The Value Co-Creation Way”

  1. Hi Wim,

    I come a bit after the battle has been fought, but I only just discovered your blog … ;o)

    I also like the way this index has been built, but in my opinion indices are fine to build comparisons (industry, countries, …), but they only tell you where you are not necessarilly where you should head to, and certainly not how to get there ….

    I always preferred to measure specific, actionable items, and this both on importance and performance …

    What do you think?

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  2. Wim, an interesting approach.

    I was at a partner conference the other day in which we were sponsoring. Ken Hitchen, Consultancy director of our partner Sabio made a number of interesting comments – one around benchmarking that reminds me of this.

    It was along the lines of “why benchmark something that makes you unique in the first place”. This really got me thinking. Why do we benchmark, surely as Ken indicated this is the thing that make it unique. This above however does seem to take more than a simple score into account.. The other challenge is every customer has different expectations and one size never really does fit all – what might be a great experience for one, may be a bad for the other…

    I need to think more on this, but I like the idea

    Nigel

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  3. Hi Wim,

    I read it too, and loved the way they combined the traditional value and the value wich can not be measured in money.

    Too bad that this something we hear about this after it has been published. We (the cs branche) should know what is going on.

    At this moment there are too many awards, researches, polls etc about “the best customer service” (they are not all the same but kind of)

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    • Hi Ludo,

      I agree with you completely.

      I think this index is more powerful though than others there are currently for a few reasons, on top of the ones mentioned in the post already.

      First:
      This index talks the talk of the C-level: Value to the firm, and it relates that clearly to Value to the Customer. I’ve done some analysis on the numbers and the results are very clear: High Value to Customer = High Value to Firm

      Second:
      This index is presented as a tool for “investor analysts” & C-suite to better understand the value of a company and the position of a company within it’s industry. The initiators aim to establish a new “logic” to company (=shareholder) valuation. Not only do I think it makes sense to bring Customer Performance into the company’s valuation, I fully support the goal. I also think it can be successful, because of what Drucker said: What gets measured, gets managed: if investor analysts and the C-suite take this index seriously it may just be a tipping point for more businesses wanting to become Customer Centric.

      Third:
      Most “awards” focus on just one element of the Customer Experience, like Customer Service, or Marketing etc.. The index is not about Customer Services, but about Value provided to the Customer and created With the Customer, meaning that Companies need to dig in and find out what creates most value for their Customers. Service (recovery) is just one aspect of that.

      I sincerely hope the Index will be widely adopted, and I hope the researchers will open-up their methodology even more (up to the level of the questionnaire). This will enhance adoption for sure.

      What do you think?

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