Customer Experience Management: Past, Present and Future

This is a popular time of year to write predictions for the upcoming year. In a nutshell, I believe that 2011 will be the year when focusing on the customer experience will hit the mainstream. The practice of Customer Experience Management (CEM) is maturing and we won’t have the bad economy as a convenient excuse to hunker down much longer.

CEM first caught my attention in 2005, which prompted me to launch a major research study in 2006. Based on interviews of industry experts and business leaders, I defined CEM as “Managing customer interactions to build brand equity and improve long-term profitability.” You can learn more about CEM and how it is different from CRM in my article The Next Generation of Customer Management? Customer Experience Management.

Past: Customers have always valued experiences (buzzword optional)

Differentiating around the customer experience is hardly a new idea. Nearly 30 years ago, Jan Carlzon engineered a turnaround at Scandinavian Airlines by improving “moments of truth” in passenger interactions with the airline.

Since then, Customer Relationship Management (CRM) has been mainly concerned with how to market to customers and get value from them, often leveraging technology. But largely forgotten was the insight that Carlzon understood intuitively: Customers perceive value based on the experiences they receive and perceive.

Or, as he told me in a 2006 interview (paraphrasing)—it’s not about the aircraft!

And for some time, we thought if we just had very new and nice and technically developed aircraft, people would regard our company as good. But when we questioned our passengers, it showed that 90 percent of them didn’t even know what kind of aircraft they were flying. Where did they get their impression or perception of the company? We found out that they got the perception in those meetings with human resources, the employees working in the company: a salesman over the telephone; a girl behind the check-in counter; a stewardess on board the aircraft; the captain, the way he spoke over his microphone.

If you’re excited about the potential for CEM to improve your business, good! But before you get started, take some time to read Carlzon’s groundbreaking book, published waaaay back in the dark ages of 1987: Moments of Truth: New Strategies for Today’s Customer-Driven Economy.

Present: Listening to voice of customer, building the business case

In the past five years or so when we’ve seen CEM emerge as a more systematic approach to differentiate based on customer experience. The use of survey-based “Voice of Customer” (VoC) programs has also hit the mainstream during this period. Frankly, I don’t see how any company can claim to “do” CEM without a strong VoC program as a foundation.

For mainstream CEM adoption, of course the “ROI” question must be answered. Executives want to know, “If we invest in CEM and improve how we listen to and treat our customers, how does the company succeed?”

The answer is simple: CEM is important because experiences really do matter to customers in their buying decisions. Experiences affect loyalty, which every CEO should be concerned about.

In CustomerThink’s 2006 cross-industry study, we found a remarkable consistency in customers valuing experiences about equally with the core product/service. We also found that leaders in CEM effectiveness tended to achieve higher levels of business performance (profitable growth). Since then numerous studies have found much the same thing. For more on the ROI issue, read Jon Picoult’s article Yes, Virginia, There Is A Return On Customer Experience Investments.

Getting customer feedback is a critical first step towards CEM success. And increasingly companies are turning to survey-based “Voice of Customer” programs to get insight into the quality of specific interactions or transactions, or to assess the quality of relationships. This has created a significant new industry for so-called Enterprise Feedback Management (EFM) tools.

But technology-enabled listening is not enough. In my Can You Hear Me Now? article I wrote about these five pitfalls:

• Pitfall No. 1: Lack of executive support to drive change
• Pitfall No. 2: Garbage in, garbage out
• Pitfall No. 3: Employees aren’t motivated to be customer-focused
• Pitfall No. 4: Listening with only one ear
• Pitfall No. 5: Ignoring social voices

In short, while companies are doing a much better job in asking questions with the support of technology, they need to be sure they are asking the right questions and have the organizational support to act on what they learn.

Future: 360-degree listening, experience innovation

These days, most companies are aware of the importance of customer experiences to build loyalty and retain customers. In difficult economies or maturing markets, the “easy money” of new customer acquisitions is gone.

Over the next few years, companies should expand their VoC efforts to listen to the customers and the market more completely. Unstructured and often unsolicited feedback—from social media and many other sources—is a goldmine of insight waiting to be discovered. You shouldn’t wait for the next survey to get feedback!

Further, it’s time to stop being reactionary. Yes, it’s important to fix problems because they’re a negative drain on the customer experience. But it’s equally important to proactively create innovative new experiences that differentiate the company.

CEM journey

I think one of the biggest mistakes that companies make is trying to run when they should be walking. Your CEM strategy should be built based on your market position and maturity. Said another way: Don’t try to “wow” your customers with creative experiences when your call center won’t answer the phones.

So with that in mind, I would suggest three major major phases on a successful CEM journey.

Phase 1. Stop the Bleeding

If your company is losing customers due to poor customer service or other problems, by all means fix these problems first. A classic example of this sort of recovery is Sprint. In 2007, the mobile telecom company achieved unwanted notoriety by firing its unprofitable customers. That’s good solid CRM-like behavior, but it failed to account for the media backlash and didn’t address the core issues of why those customers were calling and therefore unprofitable.

Well, Sprint has engineered an impressive turnaround by systematically uncovering and fixing customer service problems. In my recent interview of Jerry Adriano, Sprint’s VP of Customer Experience, I learned that the company has dramatically improved its customer satisfaction rating, reduced costs and decreased churn. The process took a couple of years and required top management to get serious about CEM. Well done, Sprint!

Phase 2. Focus on (Selective) Touchpoint Excellence

Once you’ve fixed the major “dissatisfiers” that cause customer defection or negative WOM, take some time to study the end-to-end customer experience and learn which interactions or “touchpoints” matter most.

For example, Sampson Lee’s article reviews research on credit card customer experiences across 39 touchpoints, seven different stages (Image, Application, Card Usage, Promotions, Gift Redemption, Repayment, and Service) and multiple channels. He found that some touchpoints are important in driving customer retention, while others are more important to increase loyalty (NPS).

To win at CEM, you don’t need to be world-class in every single touchpoint. Focus on the interactions that matter most to customers and will drive the business outcomes you seek.

Phase 3. Innovate in Experience Design

Now here’s the fun part! What I’ve described thus far can be summed up as fixing and refining what you’ve got. If your competitors are asleep at the switch, this may be enough to gain a competitive edge. But fixing problems and optimizing touchpoints will only take you so far; probably not to industry leadership.

To fulfill the promise of experience-based differentiation, you may need to create entirely new experiences. For example, observe the technologies and services that consumers are using—including social media and smart mobile devices, just to name two. How could these be applied to your business?

Read Michael Hinshaw’s recent post on redefining customer experience for an mind-expanding perspective on the possibilities. To get and stay ahead in customer experience, you’ll need to be more like Apple—constantly innovating the experience, not just optimizing existing touchpoints. Apple is known for its products, of course. But go to an Apple store and you’ll also enjoy the shopping experience with well-trained employees and no cash registers up front in the typical retail checkout process.

Don’t stop there. Instead of putting on a show for your customers, invite them up on stage with you! As a social/collaborative business, look for ways to create products and experiences with your customers. A provocative example of this sort of “co-innovation” is how Threadless sells t-shirts designed by its community.

Tips for Success

As you look at expanding your efforts in CEM and VoC in 2011 and beyond, here are a few things to keep in mind.

• Understand your customers’ complete value proposition. Experiences matter, but so do products and price. In the realm of customer experience, service/support processes carry a lot of weight, because emotions run hot when problems occur. But don’t overlook the value of marketing, selling, purchasing or consumption experiences.Well-designed VoC programs will keep you on track with all of your customers’ loyalty drivers.
• “Listen” to customer behavior and existing communications. There’s a wealth of insight to be gained from analyzing what customers are “saying” with their actions or communications. For example, you can use predictive analytics and text mining tools to identify patterns in customer interactions that are likely to lead to attrition, so you can act before it’s too late.
• Optimize the cross-channel experience. Most large organizations continue to struggle with silos, and this can create huge problems for multi-channel customers, which tend to be more valuable. Make sure that web, phone, social and other channels are working together. This is one area where a Chief Customer/Experience Officer can really help.
• Reward your employees. Yes, technology is essential to manage large VoC programs, and disruptive technologies can enable innovative experiences. But when we researched what really matter to customers in “memorable” experiences, the top factor was dealing with friendly, capable and empowered employees.
• Move towards Market Feedback Management (MFM). Social media has emerged as a critical source of insight into what customers, prospects and influencers think about your brand. New social media monitoring tools can help, but generally these are not integrated into one comprehensive overall VoC effort. That must change in the next few years.

Further reading:

• The Next Generation of Customer Management? Customer Experience Management
• Can You Hear Me Now? Top Five Voice of Customer Pitfalls
• Speech Analytics: Mining Business Insight from Customer Voices
• Blind Spots in Your Online Customer Experience
• Time to Harmonize Your Cross-Channel Customer Experience

Disclosure:

Thanks to Confirmit for inviting me to write a blog post, which stimulated this article. Confirmit is not a CustomerThink client or sponsor. No endorsement is implied of any company, technology or methodology discussed in this article.