The marketing buzz over the past several years has been all about managing the customer experience. Intuitively we all understand that successfully managing the customer's experience is the key to building a durable and profitable customer franchise. And, as more and more products and services become commodities, it's only logical that companies focus on differentiating the customer's experience as a primary source for competitive advantage.
What is customer experience management (CEM) and how is it different from customer relationship management (CRM)? CRM often focuses on a single product or channel transaction—the short-term. Conversely, CEM focuses on holistically managing customer interactions across products and channels over the customer's lifecycle—the long-term. The goal of CEM is to move a customer up the affinity scale from satisfaction to loyalty to advocacy. And today, where a customer can influence millions with the click of a mouse, advocacy is becoming more critical.
But what do we really know about the current state of customer experience management capabilities? Where are companies on their journeys from product-centric sales transaction models to customer-centric profitable relationship models? What capabilities and competencies are required to manage the customer experience for long-term success? More importantly, what is the benefit of improving capabilities?
The research findings revealed a direct link between the maturity of a company's customer experience management capabilities and its relative competitiveness.
The Customer Experience Maturity Monitor (CEMM), a qualitative and quantitative research study conducted by Peppers & Rogers Group, SAS Institute and Jubelirer Research, addresses these questions in its first report, "The State of Customer Experience Capabilities and Competencies." The research measured 58 variables in four categories: customer orientation; customer insight; customer interaction; and improvement. The premise is that a company must have more than the desire to manage the customer experience; it must have enterprise capabilities that leverage customer insight to better manage individual customer interactions and continuously improve results. Importantly, for these capabilities to work, the company must have a customer orientation—a culture that focuses on the customer and builds trust.
After respondents rated their company across these four categories (58 variables), they rated their overall competitiveness: worse, same, or better than their key competitors. Composite scores were calculated placing each company in one of 5 levels of maturity. By comparing the maturity of capabilities with relative competitiveness, the research could determine the value of improving CEM capabilities.
Companies with Mature Capabilities Enjoy 2-3x Competitive Advantage
OK—here's the big "ah-ha!" The research findings revealed a direct link between the maturity of a company's customer experience management capabilities and its relative competitiveness. For companies that have progressed to the highest levels of maturity (levels 4-5), the advantage is twofold to threefold.
For companies that have progressed to the highest level of Customer Experience
Maturity, the advantage is twofold to threefold.
Customer Insight: Manage Data + Predict Behavior + Segment
Differentiating the customer experience for competitive advantage begins with customer Insight. This is not about uniformly enhancing customer satisfaction. It is about designing an experience for each customer that is based upon knowledge of that customer, delivering it across products and channels, and measuring individual outcomes that enable improvement of future interactions.
- Manage Data: CEMM research revealed that companies are good at managing customer data at the aggregate level, but not at the individual customer level. For example, 54 percent of respondents rate the performance of their company as good or excellent in using customer satisfaction as key performance indicator. However, only 26 percent rate their performance as good or excellent at creating a complete and integrated view of each customer across multiple products and channels, or at making a current view of customer information available to all customer touch points. A verbatim from a Director of Relationship Marketing at one company summarized it best when he said, "We are not very successful in creating a 360-degree view of the customer—we are more like 60 degrees!"
Surprisingly, many companies are very mature at collecting customer insight. One customer said, "We have 4,000 variables on every customer...We do information audits, have regular cleansing of the full file on a monthly basis, and use some in-house bureau tools." However, companies are less mature in distributing an integrated view of each customer across the enterprise to improve customer interactions. CEMM revealed that only 41 percent of respondents rate their ability to create and make available information on each customer's product ownership and usage as good or excellent, and only 30 percent rate their ability as good or excellent at creating and making easily accessible a complete and integrated view of customers' contact history (inbound and outbound).
- Predict Behavior: Of course, managing customer data is necessary but not sufficient. To successfully manage the customer's experience, you must be able to predict individual customer behavior including: next purchase; channel preference; loyalty; and profitability. Increasingly, as the price for their loyalty, customers are expecting companies to understand their needs and to be treated as individuals.
Using customer insight to demonstrate that your company better understands a customer's needs is fundamental to differentiating the customer's experience for competitive advantage. This one-to-one understanding creates customer intimacy and loyalty. CEMM research revealed that only 39 percent of companies rate their performance as good or excellent in anticipating customers' likelihood to purchase, cancel or leave. Clearly, predicting customer behavior represents a key opportunity for most companies.
- Segment: Understanding differences between customers is made easier through segmentation. This is an important practical step towards enabling the enterprise to manage customer interactions based on insights about individuals—which is the ultimate goal of one-to-one marketing.
However, CEMM research confirmed that sophisticated segmentation remains elusive for most companies. Only 49 percent are good or excellent at even segmenting customers based on demographics, one of the most basic dimensions to consider. Merely 40 percent rate their performance as good or excellent in calculating customer profitability and just 35 percent rate themselves as good or excellent in using profitability and potential lifetime value to segment customers.
Increasingly, managing customer insight will be what separates winning companies from losers. One leading analyst firm stated that from 2006 to 2010 digital information will expand 6-fold to 988 exabytes in 2010. This explosion of digital information is providing a fertile opportunity for successful companies to compete on customer intelligence—moving beyond simple target marketing— using insight to provide perceptible value to individual customers. This is the brave new world of customer experience management.
What is the current state of customer experience management capabilities when it comes to customer insight: managing data; predicting behavior; and segmenting customers? A verbatim from one customer summarized it best, "There is so much information today on everybody that you can get stuck. You've got to be able to understand what you want to do, pull the correct information, and make a business decision."
Now that you have the big picture around the current state of customer Insight, please look for two future articles that will share CEMM findings around Interaction and Improvement. And of course, if I've tempted your curiosity, you can download the Customer Experience Maturity Monitor (CEMM) white paper [1] (free registration required) for a deeper discussion of all findings.