Monthly Archives: August 2009

I was speaking at a Customer Experience conference recently and was asked by one of the delegates “So what comes after CEM?” We have grown up on a diet of TLAs (Three Letter Acronyms) first being exhorted to embrace TQM, then BPR, through CRM, CMR and now CEM (Customer Experience Management), so it seems perfectly reasonable to ask about the NBT (Next Big Thing!).

But to do so runs the risk that CEM will follow a path of being a fad rather than a sustainable route to achieving competitive advantage and customer growth. My answer was that I don’t believe there will be a “next big thing,” rather we will find more rigorous ways of implementing CEM across new channels and employing innovative new ways to satisfy customers. I can’t conceive of a time when customers or what they experience will ever become obsolete.

CEM has become well established in the US and UK markets and is becoming increasingly a “hot” topic in the newer emerging markets. Unfortunately with so many consultancies jumping on the CE bandwagon it is not always implemented with the level of rigor needed to achieve significant business results.

We hypothesised in Smith+co that the newer European 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 could 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 with our local partners, Executive Conversation Polska to find out the level of awareness, enthusiasm and the current status of implementation of CEM. We used a number of dimensions identified in our book Managing the Customer Experience. In this article we shall share our findings, but more importantly, some of the lessons we have learned in working with organisations world-wide to implement CEM successfully.

We hope to encourage executives in some of the newer markets to implement best practice and for their US and UK colleagues to focus on what we already know about CEM rather than look for the next silver bullet.

1. Successful deployment requires the active and continuing involvement of leadership

Execution is the hardest part of creating a customer experience because in order to deploy successfully we have to mobilise employees 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 CEOs 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 need for leadership is even greater.

Many of the exemplars of Customer Experience tend to be organisations led by passionate founders or CEOs that see it as a primary source of differentiation.

Leadership is vital for any significant organisational change yet, as we concluded in our book Uncommon Practice: People who deliver a great brand experience—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 percent of the senior management respondents in our survey agreed with the statement ”Leaders make decisions that are consistent with our customer experience strategy” yet only 41 percent of their non-management colleagues agreed 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.” Jeff 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. Amazon reports one of the highest Net Promoter Scores (highly satisfied customers) we have seen.

2. 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 VP, 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 what we refer to 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.

3. 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.

Harrah’s, the US-based entertainment and gaming company, found that 82 percent of its profits came from just 26 percent of its customers and yet it only enjoyed 36 percent of their spend. However, when these customers were very satisfied their average spend with Harrah’s increased by 24 percent. 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 percent.

This would seem to be an area where companies in Poland too feel on strong ground because over 75 percent of executives agreed with the statement “We have identified our most profitable customers” however, only 52 percent feel that they are clear about how these customers rate their experience on the things that are most important to them.

4. Finding out what these customers truly value

Knowing who are your most profitable customers is all very well, but if you do not know what these customers value and the three or four most important attributes which drive their intention to repurchase you cannot influence their behaviour. 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.

A key component of a branded customer experience is being differentiated in a way that is valuable to target customers.

At Harrah’s, the gaming experience was redesigned to increase customer satisfaction and differentiate the brand. So for example, its Total Gold loyalty program was transformed into “Total Rewards,” which segmented customers into Gold, Platinum and Diamond categories, depending on their loyalty to Harrah’s. Harrah’s 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.

5. Being clear about what you stand for

In 2001, UK-based bank Barclays aired a television advertisement called “Big Idea.” It was a beautifully crafted ad featuring Anthony Hopkins as a big shot businessman with a big house, a big car and a big meeting to attend. The tagline was, “A big world needs a big bank.” The ad received a bronze award at that year’s British Television Advertising Awards, but customers replied with a less than enthusiastic, “big deal!” The ad simply reinforced common customer pre-conceptions about large banks: that they don’t care about the average person and are interested only in making as much money as they can.

Contrast this with First Direct, the online U.K. bank. Executives at First Direct spoke to their most loyal customers and asked them what they liked most about the bank. Their research identified that being able to engage with a real person was an important driver of satisfaction. As a result, First Direct’s advertising agency created ads that featured customers speaking of their experience calling First Direct and getting through to a real person, any time of day or night. The engaging message and apparent empathy struck a chord with target customers.

First Direct promises to be the bank that is “designed to fit around you, not us.” It’s no accident that First Direct claims to win a new customer every 8 seconds and is the UK’s highest rated bank. Or, that 36 percent of its new customers join as a result of a personal referral. First Direct’s customers have become the bank’s biggest advocates, reducing its costs of sale and increasing its share of these customers’ spend.

In the Polish market, 55 percent of executives feel that they have “defined a brand promise that differentiates us in the eyes of our target customers” but only 35 percent “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.” This omission is quite common in our experience and takes us on to our next point. Making a promise to your customers is one thing, delivering it quite another.

6. Delivering the promise at every touch point

In response to the statement “We have identified how to improve our services and processes to deliver our customer promise in a way that is consistently valuable to target customers,” 41 percent of executives agreed achieving a mean score of 5.8 on the ten point scale—indicating that this is a significant opportunity for many organisations. Without a rigorous process for mapping the customer touchline and designing the experience to deliver the promise the danger is that an expectation will be raised that you cannot deliver.

Stelios Haji-Ioannou, Chairman of easyGroup and founder of easyJet, makes this clear by saying: “You can spend £15m on advertising, go bankrupt and your name can still mean nothing to people. Your brand is created out of customer contact and the experience your customers have of you”

This is particularly true in today’s economy. With the pressure on sales and costs you have to make sure that every effort is made delivering those things that customers value rather than things that they don’t. This means having an intimate understanding of the customer experience and being intentional about designing it to deliver value at the key touch-points

7. Providing branded training to ensure that employees understand the brand story

Many organisations provide customer service training yet few are differentiated in the service they provide. The reason is that “vanilla” training creates “vanilla” service. This is not to say that all generic service training is bad. In fact there are some very good off-the-shelf programmes that really help to improve customer-facing skills and make service more consistent.

But if your goal is to differentiate from competitors, “branded training” is required to bring to life the values of your brand in a way that is consistent, intentional, differentiated and valuable. Most importantly it has to start at the top. Some years ago, Orange, the mobile phone company launched its famous campaign “The future’s bright, the future’s Orange.” The company wanted to differentiate on the basis of the customer experience rather than product functionality or price. As a result, it launched a series of road-shows that set out to bring the brand to life for employees. They were taught the profiles of their target customers, what these consumers wanted, the brand values and the kind of experience that would deliver them. Orange redefined the mobile phone market and opened it up to many new consumers who were intimidated by the new technology.

A key ingredient of successful branded training is to build executives into the process so that they have an active role in cascading the message. This is an approach we have used very successfully in a number of our engagements. This would seem to be true in the Polish market too because we found a high correlation between satisfaction with training and the statements, “We have continuing internal communications to build clarity and commitment around implementing the customer experience” and “Our leaders have been trained as champions of our customer experience and are leading its implementation.”

8. Designing CEM before installing CRM systems

At the peak of CRM hype, expenditure on CRM systems was estimated to have increased from $20 billion in 2001 to $46 billion in 2004. Yet one survey by Gartner research estimated that 55 percent of CRM systems drove customers away and diluted earnings.

This is because most CRM systems are installed without any thought about how they will be used to add value for the customer. These powerful systems allow companies to collect knowledge about the customer that can be used to offer them products and services tuned to their particular needs and preferences. However, for many customers the acronym CRM stands for “Constantly Receiving Mail-shots” since many organisations (and banks are the worst) use them as a blunt instrument to stalk, rather than woo, the customer through junk mail. Some software providers are now designing their products to support the customer experience and build CEM functionality into their call-centre products so that the agent is provided with all the information, tools and measures necessary to deliver the desired experience.

Gartner Research Group VP Ed Thompson speaking at a 2008 CRM Summit in London said “In terms of the user experience, perhaps only 4 percent of customers can demonstrate a genuine return on investment (ROI) from CRM initiatives, mainly because most companies fail to benchmark projects and real success stories tend to be anecdotal.” This takes us to our next tip for deployment.

9. Measuring the customer experience

Peter Drucker’s maxim that “what gets measured gets managed” is still true today. Yet most organisations focus exclusively on end-results measures. Market share, profitability and EPS growth are all vital measures of business performance but they are all lagging indicators—the result of differentiation, customer loyalty and brand preference. The answer is to move up-stream and measure and manage those activities that deliver the required customer experience and drive customer advocacy.

Market share, profitability and EPS growth are all vital measures of business performance but they are all lagging indicators.

Yet over 51 percent of the executives we surveyed reported that their organisation did not have a scorecard to measure the customer experience. The mean score for the statement “We have a scorecard of indicators that provide leaders with objective and timely feedback on how well we are delivering against our promise” was the lowest achieved in the survey scoring at just 4.6 on our ten-point scale.

CEO Andy Taylor and his team at US-based Enterprise Rent-A-Car only focus on one thing; the number of customers who give the highest rating for satisfaction and are willing to recommend the company to others. Frederick F. Reichheld, director emeritus of Bain & Company and author of Loyalty Rules! calls these enthusiasts “Promoters” and by deducting the percentage of customers who say that they are unlikely to recommend he calculates a “net-promoter score.” Enterprise enjoys both the highest rate of growth and, at near 35 percent, the highest net-promoter percentage in the car-rental industry according to Reichheld.

World-class organizations like Amazon.com have net-promoter scores of 75-80 percent. Reichheld has been challenged on his “one-number” approach and some academics have doubted the Net-Promoter index as being suitable for all businesses. Our own view is that measuring customer advocacy is one of the most important, but not the only metric in a company’s customer experience scorecard. However, what is important is to reward the KPIs that you want to move. And that takes us to our last point.

10. Aligning KPIs with the customer experience

One of the lowest scoring items in our survey was “Leaders measure and monitor the quality of the customer experience.” As many respondents disagreed with this statement as agreed with it. This poor result was reinforced by the fact that only 47 percent of respondents agreed with the statement “Our leaders reward employees who put customers first.” The fact is that unless there is a link between the desired business results, the customer experience necessary to achieve it and appropriate measurement and rewards then it is unlikely to happen.

We have been working with one the world’s best known luxury brands over the past year and have measured the impact of our customer experience work pre- and post-pilot and against control stores in the US, Asia and Europe. We used a concept called the “Power of One” which reduces the many complex and often conflicting KPIs to one primary success measure that the front line can influence.

In this case it was “UPT” (Units Per Transaction), a measure of the ability of the front line to cross-sell as this is a key means to drive revenue in a recession. Whilst the market may be shrinking the challenge is to grow your share of it and this is done by creating a better experience for customers so that they choose to give you their business rather than a competitor. As a result of our work in creating a brand promise, designing a new experience to deliver it, creating branded training to engage equip the front line employees with the knowledge, motivation and skills to deliver the experience and finally, aligning measurement and rewards with it, sales in pilot stores have increased by 30 percent compared with the control stores in the worst market our client has ever experienced. This programme is now being rolled out world-wide and our client has said that the only thing that will not be subject to cost cutting is this project.

The fact is that when CEM is implemented systematically it produces results. Businesses will always have to deliver an experience that creates value for their customers and differentiates them from competitors. What we don’t need is another new fad that promises results without effort- the corporate equivalent of dieting. There is no simple or magic way to lose weight or implement CEM, it comes down to commitment and being willing to implement those things that will make a difference.

Shaun Smith, whose acclaimed books include Managing the Customer Experience, has been a catalyst in expanding focus from customer service to customer experience. He speaks and consults to leading brands internationally. Shaun was recently voted one of the UK’s top business speakers. For details see smith+co. To contribute to research for Smith’s forthcoming book, Bold Business, please visit http://boldbusiness.questionpro.com/.