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, years or longer. 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.
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.
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.
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.
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.
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.
From the prior three 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 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.
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.
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.
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.
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.
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.