Everyone has their own level of tolerance for errors. A good predictor of customer loyalty is how often and how badly you make customers angry. Like many service firms today, FedEx does not place a lot of credence on the customer surveys they do. They know that the ratings are based largely on the last delivery, which is all that most people can remember. A better predictive measure for them is to track the number of things they screw up each day, multiplied by the severity of each mistake.
Each mistake is rated on a 1-10 scale, with 1 being used for a minor mistake such as a package that is a half-hour late, and 10 being a package that is completely lost. Each day FedEx tracks this Operational Service Index as a way of predicting future customer loyalty. Financial services firms need to apply the same model. Ten years of good service can be undone and you can lose a customer after a few major mistakes. A lack of errors does not ensure future loyalty, but many serious mistakes certainly cause customers to take their business elsewhere. A possible value metric may be the time delay between customer complaints and service response, measuring the swiftness of service and the ability to deal with mistakes as they happen.
Several firms I have worked with have come up with metrics that track the relative attractiveness of each client or customer and the level of relationship they have with each one. For example, one firm assigns a 1-10 attractiveness rating to each account. A "10" account generates big sales dollars, high margins, pays on time, partners with suppliers, has a strong set of ethics, etc. Customers' attractiveness ratings are done twice a year because things change. For a financial services firm, attractiveness might be based on factors such as net worth, age, earning potential, stability, etc.
The second part of the metric is a measure of loyalty on a 1-10 scale. A "10" rating on this part of the metric indicates the strongest level of business partnership. Ratings are based on factors such as the percentage of total business the firm has (wallet share), length of relationship, exit barriers, and political factors such as personal relationships with firms' employees. Using a loyalty metric like this, several of my clients have been able to significantly improve margins by building relationships with the most attractive customers.
Trying to build strong relationships with all types of customers is not the answer. Rather, it is important to build the right level of relationship with the right customers. Airlines understand this, and work hard to build loyalty from their 100,000 mile a year flyers, because most of their profits are made from frequent business travelers.
