The Business Mandate For Customer Experience (CX) Management
The Customer Experience Business Problem
There’s a threefold challenge that stands to impact your ability to keep your customers. Customer expectations are rising, customers are readily sharing their bad experiences publicly and customers are switching their suppliers at a dramatically increased pace.
The seismic rise of social media and social customers now rewards those brands that engage customers through social channels and deliver a consistent and rewarding customer experience (CX). Or on the flip side, suppliers who 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 company’s products are chastised by existing customers, new prospects will clearly steer elsewhere and existing customers will take note, thereby increasing their likelihood of churn.
Buyers are more connected and have more knowledge and options that at any time prior. 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 circles, has decreased barriers to switching vendors.
A Customer Experience study released by O’Keeffe found that 49% of executives believe customers will switch brands due to a poor customer experience, while 89% of customers say they have switched brands because of a poor customer experience. 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 demonstrating a propensity for implementing change at an increased pace.
The problem is real, the business impact is large and business leaders are taking note. A Bloomberg Businessweek research 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 their customers' experience 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 revenues.
A perfect storm has surfaced 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.
Your Competitive Advantages Are Becoming Less Competitive
Traditional competitive advantages and barriers to entry are eroding at an accelerated pace.
- Product innovation still counts, but competitors copy products in shorter and shorter cycles, thereby decreasing the advantages of product strength.
- Lean manufacturing still counts, but the financial benefits are being eroded by global outsourcing and its labor cost arbitrage.
- Smart supply chains still count, but online channels with drop-ships sourced from the around the world delivered in even small increments are diminishing distribution benefits.
- Brand value still counts, but online customer comments and opinions render big brand investments impotent. 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.
- Product availability still 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, manufacturing, distribution, brand and even IT are fleeting as these enablers are universally achieved, deliver little differentiation and are essentially an ante or cost of doing business.
The only sustainable competitive advantage is to know your customers better than your competitors and use that knowledge to deliver a consistent and rewarding CX that keeps customers wanting to come back for more. Customer Experience 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 the erosion of all other competitive advantages.
The Business Solution
Customer Experience Management (CXM) has become the go-to business strategy to satisfy customer demands, deliver consistent and rewarding service, retain customers and grow profitable customer relationships. This strategy is easily understood, but delivering consistent and rewarding customer experiences is hard. In fact, to be successful the supplier 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 software tools to enable CX strategy include a mix of technologies which i) capture customer, product and other related information, ii) centralize, integrate or sync the data so it is accessible, iii) expose the data through intuitive search and access 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 request or contribute to a customer solution. CX processes are designed using customer journey maps.
Once you think through the customer use case scenarios you begin to understand the factors that challenge the goal. Customer, product and other information reside in CRM software, ERP systems, 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 technical challenge that most companies haven’t resolved over a few decades.
Similarly, distributing the right (relevant, personalized and contextual) 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 (self-service web, contact center, social network, kiosk, mobile/SMS and more) at exactly the point in time where it can be applied is a complex undertaking.
A Recommended Implementation Approach
The challenges are substantial, but not insurmountable. Further, there’s really no option to sit the sidelines as retaining customers is an imperative to business health. Here’s a simple Customer Experience deployment framework that can help guide a CX business strategy.
- Begin your CX strategy without outside-in thinking. For many companies, this represents a fundamental change from a product-focused company to a customer-centric company. I recommend starting 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.Also 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. At the same time you are implementing a VOC (voice of the customer) program, I recommend a voice-of-the-employee analysis. It’s been my experience there is a solid correlation between happy employees and happy customers, or put another way there's a business connection among 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.
- Designate 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 single division or geography. This champion should report directly to the CEO with a dotted line relationship to a Board member.
- Define your 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 and substantial ROI are the first to go. According to the 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 drill down into supporting tactics and enabling processes.
- 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. 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 appreciation, patience and empathy for customers. This is an unfortunate truth that may require some personnel changes. It’s also likely that new incentives will be necessary to replace ineffective behaviors or reward newly 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 steps you’re then in position to solidify a 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 metrics 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 standardized scoring system for business processes, which includes the four customer-oriented measures of convenience, responsiveness, reliability and relevance.
- Map the customer journey. To delight customers, you need to align customer engagement with every customer touch point. Originally created by my friend Esteban Kolsky, and used by Oracle in their CX strategies, the below diagram depicts key processes along the customer journey.
While a subtle difference, recognize the customer journey is not a customer lifecycle but a continuum (i.e. it has no beginning or end, else you are missing the point).
- Identify customer channels and touch points. Customers use different channels based on their activities and objectives. Understanding the relationships between customer behaviors and communication channels is a prerequisite to designing repeatable processes which deliver predicted CX results. Below is a simple table depicting a customer journey across channels.
Once the customer journey is diagramed, you can then align each step in the journey with customer personas, objectives and specific moments of truth in order to identify the supporting content, knowledge, engagement, tools and desired outcomes for each interaction across all channels.
- 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. You'll then need to coordinate the linking of several tactical systems in order to orchestrate information delivery across channels and devices.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.
- Apply special consideration to cross-channel support. Customers expect that you know 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 staff working in all other channels.
Omni-channel support is hard. As companies have historically implemented customer-facing applications in silos they struggle to deliver consistent customer service across the constantly rising number of touch points 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, low First Call Resolutions, poor customer sat scores, and high cost per customer interaction and resolution.
- Once customer journey maps and business processes have been architected to deliver specific results, and enabled with supporting technology, deployment 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 business leaders fail in the execution. The O’Keeffe CX research reported 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 CX research by IBM about 2 years ago, which found business leaders get the vision, but incur great difficulty in executing the plan. And because customer expectations are generally exceeding their supplier capabilities, and social media will only further exacerbate this trend, both the ROI and cost of failure will continue to grow.
Like CRM, Customer Experience 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 projects 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 catering to these customers by delivering a CX which engages them, satisfies their anytime/real-time quest for detailed information and wins over their affinity by being perceived as helpful, relevant and transparent.
These competitors are 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 accommodating buying and service experience. And they are generally doing it at scale and a lower cost than the irrelevant suppliers who find themselves blind sided by their customer losses.
These new disruptive competitors recognize that the only sustainable 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.
Some 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 also willing participants to brands and suppliers that engage them in an effort to create mutual value.
Customer Experience Management isn’t just about keeping customers from leaving. In a Forrester research study the analyst firm found a very high correlation between Customer Experience and customer loyalty, and the financial results of loyalty which include repeat purchases, greater customer share and likelihood to refer and 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 shows that a 10 percentage point improvement in CX can produce more than $1B in revenues.
Maybe even more compelling, 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.