The Business Case For Customer Experience (CX) Management

The Customer Experience Challenge, Solution, Framework, Risk and Payback

The Business Problem

There’s a threefold challenge that stands to impact your ability to retain your customers. Customer expectations are rising, customers are more readily sharing their bad experiences publicly and customers are switching their suppliers at a dramatically increased pace.

The rise of social media and social customers now reward those brands that engage customers through social channels and deliver a consistent and rewarding customer experience (CX). Or on the flipside, suppliers which do not deliver rewarding customer experiences are being called out publicly in forums and social networks that reach thousands or millions of potential or existing customers and have a duration of months or years. If a vendor’s products are chastised by existing customers, new prospects will clearly seek competitor solutions and existing customers will take note, thereby increasing their likelihood of churn.

Buyers are more connected and have more knowledge that at any time prior. And they have more options. Suppliers are a click away so customers can get want they want in more places. Access to more suppliers delivering more and better online information about their solutions, and verified by independent references within the buyers social circle, has decreased barriers to switching vendors.

A 2013 Customer Experience research study released by O’Keeffe found that 49% of executives believe customers will switch brands due to a poor CX, while 89% of customers say they have switched brands because of a poor CX. Recognize these customers did not report that they may or would switch brands based on a poor CX, but they actually did. Customers are clearly beyond idle threats and implementing change at an increased pace.

The problem is real, the business impact is material and business leaders are taking note. A Bloomberg Businessweek survey found that 80% of companies rate CX as a top strategic objective. The O’Keeffe CX research found that 93% of business leaders say that improving CX is one of their top three priorities for the next two years and 97% state that CX is critical to their business success. They also understand the cost of failure is large—estimated at 20% of their annual revenues.

A perfect storm has emerged whereby customers’ expectations are growing, barriers to switching vendors are declining and innovative competitors are stepping up—and effectively converting customers from competitors who fail to achieve their customers’ expectations.

Most Competitive Advantages Are Fleeting

Traditional competitive advantages and barriers to entry are eroding at an accelerated pace.

• Product innovation counts, but competitors copy products in shorter and shorter cycles, thereby decreasing the advantages of product strength.
• Lean manufacturing counts, but the financial benefits are being eroded by global outsourcing and its labor cost arbitrage.
• Smart supply chains count, but online channels with drop-ships sourced from the around the world delivered in even small quantities are diminishing distribution benefits.
• Brand value still counts, but online customer comments and opinions render big brand investments impotent.
• Product availability counts, but e-commerce with its virtually sourced inventory makes in-stock product availability more expensive and less valuable. Substitute products are a click away and can be sourced from around the world.

Competitive advantages from products, brand, manufacturing, distribution and IT are fleeting as these enablers are universally achieved, deliver little differentiation and are essentially an ante or cost of doing business.

The only durable competitive advantage is to know your customers better than your competitors and deliver a consistent and rewarding CX that keeps customers wanting to come back for more. CX is enabled by technology, but not displaced by continuous technology disruptions. Understanding, engaging and delighting customers is a business strategy that is both not easily replicated and not suddenly displaced with new technology innovation. Growing customer relationships for mutual value creates a connection that can withstand disruptive technologies, competitor encroachment and erosion of all other competitive advantages.

The Solution

Customer Experience (CX) Management has become the go-to business strategy to satisfy customer demands, deliver consistent and rewarding service, retain customers and grow profitable customer relationships. The strategy is easily understood, but delivering consistent and rewarding customer experiences is hard. In fact, to be successful the vendor must deliver timely, contextual, relevant and personalized information or knowledge at every customer touch point across every engagement channel. Did I mention this is hard?

The tools to enable CX strategy include a mix of technologies which i) capture customer, product and other information, ii) centralize, integrate or sync the data so it is accessible, iii) expose the data through intuitive search and query tools and iv) automatically deliver the data to the person or interaction point (based on a triggering event, push-based scenario, workflow configuration or other business process automation) where it can satisfy a customer question or contribute to a customer situation.

Once you think through the customer relevant use case scenarios you begin to understand the factors that challenge the mission. Customer, product and other information reside in ERP systems, CRM software, MDM applications, legacy systems, shadow systems and probably a few more data siloes, including destinations outside your company such as social networks. Integrating this data is a challenge that most companies haven’t resolved over a few decades.

Similarly, distributing the right (contextual, relevant and personalized) customer data to the right person in a workforce distributed across departments, geographies and time zones, or directly to a customer over an increasingly growing number of communication channels (contact center, self-service web, social network, kiosk, mobile/SMS and more) at exactly the point in time where it can be applied is a complex undertaking.

A Recommended Approach

The challenges are significant, but not insurmountable. Further, there’s really no option to sit on the sidelines as retaining customers is an imperative to business health. Here’s a simple CX deployment framework that can help guide a CX business strategy.

1. Begin your CX strategy without outside-in thinking. For many organizations, this represents a fundamental change from a product-focused company to a customer-centric company. Start by creating a customer advisory panel and reaching out to customers to understand which business processes are working and which are not. Use this information to create a performance baseline. And recognize that achieving a CX strategy is not a big bang or watershed event, so prioritize those processes that most frustrate your customers and begin a journey of incremental improvements. In parallel I recommend a voice-of-the-employee analysis. It’s been my experience that there is a solid correlation between happy employees and happy customers, or put another way between employee satisfaction, customer loyalty and customer retention. Survey your staff and then identify and prioritize those processes that need improvements as part of your CX program.

2. Appoint an executive champion. CX generally entails a cultural shift that must permeate the business, and therefore the sponsor must have authority, credibility and visibility across the business, not just in a particular division or geography. The champion should report directly to the CEO with a dotted line relationship to a Board member.

3. Define measurable objectives. Many business leaders kick-off CX projects because they believe it's the right thing to do. This is understandable but naive thinking. When budgets get tight those projects that don't show a clear ROI are the first to go. According to the 2012 Global Customer Experience Disruptive Study research survey, top cited CX objectives included: Organic Growth (50%), Customer Retention (48%), Differentiation (44%), New Customer Acquisition (35%), Operating Efficiencies (33%) and Customer Advocacy (22%). Once you've identified your objectives, you're then able to map your execution, investments and payback.

4. Then assess your company culture. If the culture doesn’t soundly recognize the critical importance of customers, and satisfying their needs at every opportunity, a cultural awakening is necessary before moving ahead and implementing any type of technology. From top to bottom every person in the company must recognize the top reason businesses are in business is to satisfy customers profitably. It’s also an unfortunate reality that not all people have the patience, empathy and appreciation for customers. This is an unfortunate truth that may require some personnel changes. It’s also likely that new or revised incentives will be necessary to replace ineffective behaviors or reward new desired behaviors. The executive team must lead by example in demonstrating culture, and management must leverage recurring training so that staff clearly understand how to apply that culture into their daily roles, business processes and customer interactions.

5. From the prior four steps you’re then in position to solidify the plan, get stakeholder approval and begin execution. Once you’ve prioritized and selected the business processes in need of improvement, you’ll need to determine process owners, develop KPIs and may want to develop some business process maps (aka customer journey maps) to aid process improvements along the way. I also suggest you create a standard scoring system for business processes, consisting of the four customer-oriented measures of convenience, responsiveness, reliability and relevance.

6. Map the customer journey. To delight customers, you need to align customer engagement with every customer touchpoint. Originally created by my friend Esteban Kolsky, and used by Oracle in their CX planning, the below diagram depicts key processes along the customer journey.

   

   While a subtle difference, recognize the customer journey is not a customer lifecycle but more of a continuum (i.e. it has no beginning or end else you are missing the point).

7. Identify customer channels and touch points. Customers often use different channels based on their activities and objectives. Understanding the relationships between customer behaviors and communication channels is a prerequisite to creating repeatable processes which deliver predicted CX results. Below is a simple table depicting a customer journey across channels.

   

   Once the above customer journey is diagramed, you can then align each step in the journey with customer personas, customer objectives and specific moments of truth in order to identify the supporting content, knowledge, engagement and tools needed for each interaction across all channels.

8. When it’s time to apply technology, I suggest you begin by identifying your data storage strategy, or how and where data resides so that it can be queried and applied to specific business processes. Start by identifying your customer system of record. For example, is the CRM software or the ERP application the system of record for customers? For many businesses, it’s neither as they instead use an MDM system. As part of this exercise you’ll need to identify the data and data types necessary to add value or achieve the goals of the designated business processes. Increasingly companies are finding some or much of the data needed doesn’t reside in nicely structured formats or even on their servers. In this case, Big Data is one possible answer that has emerged to manage the increasing volumes, velocities, and varieties of unstructured and external data and make that data available for integrated business processes. Big Data relates to the collection and synchronization of disparate data sources with the intent of having a more holistic view of a customer or other entity. The key point in this context is the notion of synchronization, not necessarily integration, to make data available or actionable for customer service use cases. For example, Big data can offer some strategic insights into customer behaviors, buying history and patterns, demographic/cultural preference, and so on. Exposing data so that it is accessible or can be applied to business processes will also require a collection of query, search, retrieval, integration and Business Process Management (BPM) or workflow tools. The tools will of course vary based upon the business processes, data types and customer channels.

9. Apply special consideration to cross-channel support. Customers expect that you recognize who they are regardless of what channel they choose to engage you. They also expect that the information they provide in one channel is seamlessly transferred and immediately available to company staff working in all other channels.

   

   Omni-channel support is hard stuff. As companies have historically implemented customer-facing applications in silos they struggle to deliver consistent customer service across the constantly rising number of touchpoints and devices. A failure to stay ahead of these challenges results in staff having to search multiple systems for answers, long call handling times, high drop-off rates, high transaction abandonment rates, poor customer sat scores, and high cost per customer interaction and resolution.

10. Once business processes have been architected to deliver specific results, and enabled with supporting technology, implementation becomes an iterative process where each cycle accomplishes learning, customer feedback and refinement. Customer expectations are dynamic and evolving, and so too will your CX strategy.

The Risks

Despite the near obvious recognition of the CX imperative, most executives fail in the execution. The O’Keeffe CX research found that while 91% of businesses want to be a CX leader, only 37% are getting started with a formal CX initiative. Interestingly, this survey result is almost identical to a CX survey by IBM about 2 years ago, which found business leaders get the vision, but incur great difficulty in creating and executing the plan. And because customer expectations are exceeding their supplier capabilities, and social media will only further exacerbate this trend, both the ROI and cost of failure will continue to grow significantly.

Like CRM, CX deployments tend to underestimate the cultural implications, and research shows that both CRM and CX projects fail in largest part due to their inability to manage their social implications. Too many business leaders approach CX objectives without a change management plan, recognize change management symptoms early or respond to these challenges in a timely and deliberate way.

There's a New Competitor Eyeing Your Customers

Innovative competitors recognize that customers are comparing solutions online, even for complex B2B solutions, and are responding by delivering a CX which engages customers, satisfies their anytime/real-time quest for detailed information and wins over their affinity by being perceived as helpful, relevant and transparent. They’re using content marketing to be found by buyers, digital tools to find relevant conversations and VOC (voice of the customer) applications to know exactly what customers really want; not what you think they want. They’re making these customers’ existing suppliers irrelevant by delivering a more convincing buying and service experience. And they’re generally doing it at scale and a lower cost than the irrelevant suppliers who find themselves blindsided by their customer losses. These new disruptive competitors understand that the only sustainable source for competitive advantage is to know customers better than competitors, apply this knowledge to deliver timely, contextual and personalized interactions, and focus on CX delivery precisely in the ways customers want to be served.

Final Thoughts

Customers are more connected, more informed, and incur fewer barriers and more willingness to replace suppliers that no longer meet their expectations. But at the same they’re willing participants to brands and suppliers that engage them in an effort to create mutual value.

Customer Experience strategy isn’t just about keeping customers from leaving. In a Forrester research study the analyst firm found a very high correlation between CX and customer loyalty, and the financial results of loyalty which include repeat purchases, greater customer share and likelihood to recommend the company. The Forrester Customer Experience Index shows that loyalty based revenue benefits for a firm going from a below industry average CX score to an above industry average score ranged from $31 million for retailers to $1.4 billion for hotels. The Customer Experience Index also models CX impact, and shows that a 10 percentage point improvement in CX can produce more than $1B in revenues.

Maybe even more compelling, customer experience is very hard to imitate. Products are being copied in shorter and shorter cycles. But CX is the one differentiator that is very difficult to replicate, which is why it is often called the last remaining and only sustainable competitive advantage.

Comments (10)	— Comments for this page are closed —

	Harold McGladrey
	I loved this article but companies have been saying the customer is king for decades and we’ve all learned it’s a claim that is usually unfounded.

		Chuck Schaeffer
		For many organizations a customer-oriented tag line is little more than a marketing slogan. Saying the customer is king without objectives, processes, culture and incentives to support that mantra doesn’t make it so. At a strategic level, CX is about the transition from a customer-aware business to a customer-centric business that permeates the culture, guides behaviors and recognizes the value of profitable customer relationships. At more of a tactical level, it’s about listening to customers, removing barriers, enhancing value, continuously collaborating, meeting expectations, developing a partnership and ultimately earning trust.

	Sig Wilson
	Customers are emboldened with the megaphone they call social media and its increasing their demands faster than businesses can keep up. Meeting customer expectations is a seismic problem and while I agree customer experience management is a big part of the solution, it’s a seismic challenge itself.

		Chuck Schaeffer
		That's why companies don’t get to decide how customer centric they are, that will be decided by customers, publicly aired in social media and reflected in the P&L.

	Karen Kilpatrick
	All customer touch points matter, but the call center is often the venue where customer moments of truth are met or not met.

Harold McGladrey

Too many marketers consider themselves apart from customer services, and therefore not influential in achieving CX. Nothing could be further from the truth. It’s important to recognize that CX is achieved when companies keep their promises, and many times its marketing that sets those promises. If marketers exaggerate company promises, or worse set unachievable expectations with customers, it’s inevitable that companies will fail to satisfy customers and those customers will churn. With increasingly high customer acquisition costs, and extended periods of customer service needed to achieve customer profitability, failure to keep customers may be more costly than failing to acquire customers in the first place.

	Marti Chandler
	You reference the business processes a lot, what processes make the most sense in a customer experience program?

		Chuck Schaeffer
		The business processes that will make the most sense will be determined by your customers, presumably as the processes that they most dislike and are therefore in need of improvement. There are many processes to consider. For example, I prefer to start with assessing the ease of doing business with the company and follow that with the quote to cash cycle processes, such as simple order processing, timely distribution or on-time fulfillment, accurate invoicing or enabling customers to start a purchase transaction in one channel and seamlessly continue the transaction in another. On the opposite side of the quote to cash processes are the req to check cycle processes. Then there are the post-sales support events such as installation, customer support, warranty claims and renewals, upgrades, break/fix repair, consistency of support at different times and across different channels, or the ability to just get answers by people that answer the phone (First Call Resolution) rather than having to endure multiple transfers. Also survey your customers to verify things like product quality, value, utility/usefulness and duration. Assess your company’s success in getting customer feedback, and whether the company is responsive to feedback (nothing angers customers more than asking for their feedback and then ignoring their input).

	Ray Zielinski
	It’s interesting that you bring up Big Data as a tool to source, store and deliver more types of customer data to facilitate more customer processes. The more I think about that, the more I see Big Data as satisfying the missing link between customer data and customer fulfillment.

		Chuck Schaeffer
		I think Big Data can be a powerful tool to better understand customer behaviors and objectives, and integrate data for improved business process support. Companies can now look across a wide variety of data sources that are organized and linked in a distributed and complex manner, and mine that data to reveal patterns or relationships about product utilization, customer requirements and much more. While customer data has traditionally been stored and organized in relational databases the availability of inexpensive cloud computing, storage, and distributed processing means we now have the ability to capture, store, search, and analyze much more structured and unstructured data – and apply that data to automated business processes which facilitate customer interactions. The possibilities are many. As more behavioral data becomes available, marketing has the ability to identify more precise customer segments to facilitate improved offers, cross-sell and upsell opportunities and more. Finance has the ability to identify which customer segments are profitable or have high CLV (Customer Lifetime Value), or identify criteria that link behaviors with financial outcomes. Having the means to understand the inter-relationships between various data and customer actions provides real opportunities to implement plans with predictable results.

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Like CRM, CX deployments tend to underestimate the cultural implications, and research shows that both CRM and CX projects fail in largest part due to their inability to manage their social implications.

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