Many organisations are talking about customer experience management (CEM) but few know what it takes to successfully implement it, according to Shaun Smith. He gives his tips on how to make CEM work in part one of a 10-step guide.
By Shaun Smith, smith+co
Researchers at Satmetrix Systems conducted a study in 2001 to empirically determine if there were any links between improved customer satisfaction and higher price-to-earnings ratios. What they discovered proved more startling than anticipated. The research revealed that the P/E ratios of companies with above average customer loyalty index scores were more than double those of their competitors. That spread translated into a $1 billion market valuation for even the smallest Fortune 1000 firm. A study by Montgomery and Accenture over that same period concluded that "superior relationship management is worth half your bottom line". No wonder then that compelling findings like these spawned the customer experience management movement and gave rise to numerous books on the topic.
Unfortunately, the reality for many organisations is that they have found it difficult to implement CEM and to realise the promised business results. CEM, as a concept, has become well-established in the US and UK markets, and is becoming increasingly a hot topic in the newer Eastern European markets. We hypothesised these markets would follow a similar trajectory as their US and UK counterparts - along a path of awareness, enthusiasm, adoption and, finally (for some) disillusionment. But can we share the lessons of successful implementations to increase the probability of success of CEM in these markets?
To answer these questions, we decided to conduct research in the Polish market in early 2008 to find out the level of awareness, enthusiasm and the current status of implementation of CEM. Below are some of the findings and lessons learned in working with organisations world-wide to implement CEM successfully.
Execution is the hardest part of creating a customer experience because in order to deploy successfully, employees have to be mobilised at all levels and align competing agendas, functions and executives. This is no easy task. Perhaps that is why that so many of the exemplars of customer experience tend to be organisations led by passionate founders or CEO's that see it as a primary source of differentiation. Think of Starbucks, Amazon, Southwest Airlines or Virgin, and inevitably you quickly think of Howard Schultz, Jeff Bezos, Herb Kelleher and Richard Branson. CEM can work just as successfully and achieve startling results in large mature corporates too, but the risks are greater.
In our work with leading brands around the world, we have seen a number of mistakes that are common to many failed initiatives. The good news is that they are all avoidable. So what are the pitfalls to watch out for in implementing your own customer experience initiative? An awareness of these will help you plan for them and finds ways to mitigate the risk of their occurring in your own organisation.
Successful deployment requires the active and continuing involvement of leadership.
Leadership is vital for any significant organisational change. Yet, most leaders ‘stumble the mumble’ rather than ‘walk the talk’. They fail to clearly communicate its importance to the organisation and then fail to take decisive action to demonstrate that it is high on the management agenda.
Our survey in the Polish market revealed some interesting perspectives in this regard. For example, 63% of the senior management respondents in our survey agreed with the statement 'leaders make decisions that are consistent with our customer experience strategy'. However, only 41% of their non-management colleagues agree with them. This matters. No matter how committed to customer experience you feel, it is what you do that counts. We found the highest correlation in the survey between those respondents agreeing with the statement just mentioned and ‘our company's top executives demonstrate their commitment to our customer experience strategy'.
Our experience has shown time and time again that the most significant factor in creating strong companies are leaders who take personal responsibility for communicating, demonstrating and rewarding brand or company values. Amazon.com CEO Jeff Bezos says: "Our mission is to be the earth's most customer-centric company." Bezos and his executive team personally demonstrate their commitment to this mission through their actions and decisions - and in the process have created an enviable reputation for reliability and one of the most widely recognised brands in the world today.
Ensuring cross-functional ownership is vital
If the CEO or president recognises that it will take more than rhetoric to make a difference, the next common mistake is asking the marketing vice president, HR director or customer service executive to fix the problem. The brand and the customer experience must be owned collectively by the senior management team. Each function has its particular part to play but to be successful, these three functions must operate as a 'triad' to optimise resources, efforts and budgets, to create an organisation-wide strategy for delivering the brand.
Our research found a strong positive correlation between the statement 'we have created a partnership between marketing, HR and operations to define and deliver the customer experience' and another survey item: 'Our leaders have been trained as champions of our customer experience and are leading its implementation'. When we work with clients on CEM projects, one of our first actions is to form a steering group comprising executives from marketing, operations or customer services and HR. One of the first meetings with this group is to educate them on what it means to lead this kind of change effort. The fact is that the experience you deliver is a result of these functions working together around a common agenda. Unfortunately, in many companies the effort is fragmented and often beset with politics.
Focusing on your most strategically important customers
The starting point for our work is collecting customer data to inform the definition of a promise and design the new experience. The most frequent client response to this suggestion is "we already have lots of customer data and research so you don't need to bother". In reality, whilst organisations undertake customer research and collect mountains of data, relatively few know who their most profitable (not largest) customers are. The fact is that a few customers will typically represent the significant proportion of your profit and these are the ones to focus improvement efforts on.
"It is all very well knowing who your most profitable customers are but do you know what these customers value and the three or four most important attributes which drive their intention to repurchase or refer you?"
For example, US-based entertainment and gaming company Harrah's found that 82% of its profits came from just 26% of its customers, and yet it only enjoyed 36% of their spend. However, when these customers were very satisfied, their spend with Harrah's increased by 24%. By focusing on this target segment Harrah's was able to fine-tune its offer to create greater value for these profitable customers. In the year following, revenues increased by 17%. This would seem to be an area where companies in Poland too feel on strong ground because over 75% of executives agreed with the statement 'we have identified our most profitable customers'. However, only 52% feel that they are clear about how these customers rate their experience on the things that are most important to them.
Finding out what these customers truly value
It is all very well knowing who your most profitable customers are but do you know what these customers value and the three or four most important attributes which drive their intention to repurchase or refer you? Without the answers to these questions you may have data but you do not have insight. A key component of a branded customer experience is being differentiated in a way that is valuable to target customers.
In the case of Harrah’s, the gaming experience was re-designed to increase customer satisfaction and differentiate the brand. So, for example, its Total Gold loyalty programme was transformed into Total Rewards, which segmented customers into gold, platinum and diamond categories, depending on their loyalty to Harrah’s. The firms executives discovered that delays at reception were a turn-off for customers, so gold customers benefit from fast-track lines; platinum customers have shorter lines still; and diamond customers have no lines at all. Harrah's share of these customers spend rose significantly.
Being clear about what you stand for
Winning customers in a recession discussed a TV ad by Barclays that featured Anthony Hopkins as a big shot businessman. The problem was, it reinforced common customer pre-conceptions that large banks don’t care about the average person and are interested only in making as much money as they can. In contrast, online bank First Direct conducted research among its most loyal customers and identified that being able to engage with a real person was an important driver of satisfaction, which influenced its ad campain. It is now the UK's highest rated bank, winning a new customer every eight seconds.
In the Polish market, 55% of executives feel that they have 'defined a brand promise that differentiates us in the eyes of our target customers'. But fewer (35%) have 'mapped our customer touchline to determine the key points of contact our customers have with us and how our promise should be delivered at each'. However, making a promise to your customers is one thing; delivering it quite another.
Shaun Smith of smith+co speaks and consults internationally on the subject of the customer experience. His landmark books on customer experience include 'Managing the Customer Experience - turning customers into advocates', 'Uncommon Practice - people who deliver a great brand experience' and his latest offering 'See, Feel, Think, Do – the power of instinct in business', which investigates the role of instinct and innovation in customer experience.