Goodhart’s law tells us that when a measure becomes a KPI, it ceases to be a good measure. The full text of his observation appeared in the footnotes of his presentation at a conference in 1970 held by the Reserve Bank of Australia: “Whenever a government seeks to rely on previously observed statistical regularity for control purposes that regularity will collapse’
That observation is as relevant to every enterprise as it is to government.
Every dashboard produced by CRM systems I have seen makes the mistake of trashing Dr. Goodhardt’s insight.
Customers are subjected to all sorts of profiling as marketers do another iteration of their ‘ideal customers’ and ‘customer Journey’ maps using a different set of assumptions.
One set rarely used, at least rarely in my experience is the ‘inert’ customer.
Most analyses of customers I have seen use some variation of the pareto distribution. A few customers are deemed heavy users, with a decreasing level of usage down to light and occasional. The only alternative to one of these descriptions is ‘Lost’.
Any examination of ‘lost’ customers will reveal that a significant percentage of them are those that simply went ‘inert’ following a failure of customer service to meet their expectations.
For some, the expectations are unrealistic, for others, it is more like a metaphorical shrug of the shoulders. These customers are not lost, they may be just inert, and possibly able to be reactivated by a demonstration of the customer service they expected being available.
Figuring out who in your lost customers list is really just inert may just require asking. This is always far cheaper, and in my experience, more effective than hunting for new customers.
A former client had an extensive list of what they deemed ‘lost’ opportunities. They sold (and still do) a complex product that did a specific job much better than the alternative standard product. When they interrogated that ‘Lost’ data base they discovered that a sizeable proportion had not bought elsewhere. They had gone ‘inert.’ Some were just waiting for a ‘nudge’ which was often just the information and reassurance that the product they initially enquired about was the most appropriate for the job that they had put on the back burner.
Header: Charles Goodhardt speaking to a large audience.
