Customer experience management (CEM) is a strategic process that manages a customer's entire experience with a company across all touchpoints. CEM focuses on consistently meeting both functional and emotional customer needs and expectations. While related concepts like customer relationship management and customer satisfaction are important, CEM takes a more holistic view. Implementing CEM can help companies differentiate their offerings, improve reputation, reduce costs, drive employee satisfaction, and increase customer retention and acquisition rates. However, many companies only make superficial changes and fail to fully implement CEM. Successful CEM requires identifying key experience drivers, considering the customer experience in all decisions, and coordinating efforts across departments.

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An introduction to Customer Experience Management
What is CEM and what can it do for your organization?

2. An introduction to Customer Experience Management
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What is CEM?
Customer experience management (CEM) is "the process of strategically managing a
customer's entire experience with a product or a company"1
.
Touch points
Although there are many different definitions of CEM, all place a heavy emphasis on the
concept of touch points. For instance, Colin Shaw, author of “Building Great Customer
Experiences” and “Revolutionize Your Customer Experience”, defines the Customer
Experience as “a blend of a company’s physical performance and the emotions evoked,
intuitively measured against customer expectations across all touch-points.”2
David
Jacques, founder of the consulting firm Customer Input, states that the Customer
Experience is "the quality of the experience as apprehended by a customer resulting
from direct or indirect contact with any touch point of a company. In other words, the
customer experience is the impression created on the customer as the results of contact
with a company through any touch point, whether through marketing, branding,
customer service, support, in-store experience, usage of a product, service or Web site,
etc.”3
What makes CEM different
While Customer Relationship Management and Customer Satisfaction and are often
mentioned in conjunction with Customer Experience Management, Customer
Experience Management is broader. CRM is simply an enabler for a good Customer
Experience: it is not necessary, but it can help a great deal. On the other hand,
Customer Satisfaction is absolutely necessary to create a good Customer Experience but
it is not necessarily enough.
Traditional Customer Satisfaction metrics lack the holistic view that Customer Experience
Management takes. That is, they pay little attention to the consistency across touch
points. In addition, Customer Satisfaction measures are almost always confined to
functional customer needs and tend to ignore emotional ones while it’s the emotional
aspect that is crucial in customer loyalty4
and engagement5
. This could explain why
Customer Satisfaction is such a poor predictor of future behaviour in most categories
and therefore a poor “compass” by which to plot an effective customer experience.6
1
Schmitt, B. (2003). Customer Experience Management, The Free Press, New York
2
Shaw, C. & Ivens, J. (2002). Building Great Customer Experiences, Palgrave McMillan
3
Customer Experience Optimization, 01-04-2005
4
Christensen, V. (2006) Customer experience management: Customer satisfaction vs. customer loyalty.
5
Applebaum, A. (2001).The Constant Customer. Research Paper. The Gallup Organization. Note that 8 out
of 11 questions of the Gallup Customer Engagement Questionnaire are dedicated to emotional needs
6
20:20 Customer Experience. Whitepaper. IBM Business Consulting Services.

3. An introduction to Customer Experience Management
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Mercer Management Consulting7
as well as Bain & Co.8
found that the majority of ex-
customers had described themselves as “satisfied” or “very satisfied” in the 12 months
prior to leaving. The question is thus not whether customers are satisfied with the
organisation’s products or services, it is whether they are satisfied enough to be
retained.9
By taking a wider, more integrated view, CEM can help answer this question.
The benefits of CEM
Organizations usually turn to CEM with product and service differentiation in mind.
However, CEM can also improve your organization’s reputation and can deliver more
benefits on the side. This whitepaper briefly touches on two of them: cost reduction and
employee satisfaction.
Differentiating your product and service offering
When everything in the marketplace is equal, customers will make a decision based on
price. This puts pressure on margins and revenue growth in markets with fierce
competition. Differentiating your product and service offering can ease this pressure as
the graph below illustrates.
In short, CEM enables an organization to attract more customers, keep them longer, get
them to purchase more frequently, and increase the average ticket.
7
Kon, M. Customer Churn: stop it before it starts. Mercer Management Journal 17
8
Cuccia, N. Customer Loyalty leads to retention – the elusive prize. Pyramid.
9
Chen, F.L. Customer Satisfaction and Retention. Presentation. National Tsing Hua University Taiwan.

4. An introduction to Customer Experience Management
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As depicted in the graph, the number of active customers is determined by the customer
acquisition rate and the retention rate. Although relying on traditional marketing
methods to acquire new customers is relatively expensive10
, it is still a popular approach.
CEM provides a more economical alternative, not only by improving the retention rate of
existing customers but also by attracting new customers firstly by offering something
unique and secondly by increasing the number of recommendations from fellow
customers). Note that recommendations are by far the most common driver for brand
switching, with typically 30-50% of service brand consumers finding their new brand in
this way. This compares with around 20% each for advertising/promotions and personal
search.11
CEM seems particularly important for service providers. That is, with a product brand,
the customer experience remains relatively constant: it is the advertising, packaging and
promotion and accompanying imagery that varies, and consumers tend to judge these
brands impressionistically. With service brands on the other hand, the customer
experience can vary dramatically from one week, indeed one minute, to the next. It is the
consistency and delight experienced in the delivery of a service that is the greatest
determinant of a brand’s appeal, and not conventional marketing imagery, and
customers tend to judge these brands experientially.12
Protecting your reputation
“Happy customers tell 5 people, dissatisfied ones tell 10”. This phrase –a favorite among
consultants- has persuaded many organizations over the last three decades to start
measuring customer satisfaction. The concept still holds but the effect can be even more
dramatic with the surge of opportunities to share experiences on the web. This knife cuts
both ways since positive as well as negative experiences can get a lot of exposure.
CEM can help minimize the number of poor experiences and thereby control the
damage to an organization’s reputation. It can also put a positive spotlight on the
organization, helping it to acquire new customers as mentioned previously. Most
companies are only just waking up to the potential of deliberately delighting customers
to get them to share their experience via social media.
10
The cost of acquisition is 5 times the cost of retaining an existing customer (Barsky, 1994 and Reicheld &
Sasser, 1990)
11
Why customer to customer relationships are the way forward – March/April 2003 Customer Management
12
Williams, D. Chapter 1: Delivering a Distinct Customer Experience. QCI Whitepaper

5. An introduction to Customer Experience Management
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Reducing costs
Although cost reduction is not something that jumps to mind when thinking of delivering
a great customer experience, reducing costs and improving the customer experience are
far from mutually exclusive. Just think of the positive impact of reducing the number of
complaints and claims on both costs and the customer experience. According to
Business Week13
, smart companies – they mention Southwest Airlines and Costco as two
examples - know this and act accordingly. This is where CEM can leverage toolkits like
Six Sigma to drive down defects that negatively impact customers and costs.
Driving employee satisfaction
Great Service brands know that people are key to delivering the experience14
.
This doesn’t only manifest itself in the credos of high profile CEOs15
but also in studies
that show that employee satisfaction drives customer satisfaction, leading to the Service
Profit Chain16
(below).
What has received far less attention is the reciprocal effect: delivering a good customer
experience can improve employee satisfaction.
13
Brian Hindo (2006). Satisfaction Not Guaranteed. BusinessWeek Magazine, June 18.
14
Williams, D. Chapter 1: Delivering a Distinct Customer Experience. QCI
15
Sir Terry Leahy, CEO Tesco: “In a service business like ours, you can only look after your customers by
looking after your staff”. Sir Richard Branson, CEO Virgin Group: “I worry about employees first, customers
second and shareholders third. State of the Nation iV: 2005 (QCI)
16
Heskett, James L., Jones, Thomas O., Loveman, Gary W., Sasser, W. Earl, and Schelsinger, Leonard A.
"Putting the Service Profit Chain to Work", Harvard Business Review, (March–April 1994) 164-174

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When things go wrong for customers, first line
employees can get an earful. Apart from the
immediate discomfort this creates it can also lead to
frustration when it happens often enough. On the
flipside, an employee in an organization that delivers
an excellent customer experience is more likely to get
positive signals from customers, feel proud, and take
partial ownership for the good performance. All can
drive employee satisfaction.
The opportunity
There is good news and bad news regarding the opportunities to differentiate by
improving the Customer Experience. Starting with the bad news, many firms have also
caught on to the potential of CEM. The good news is that most of them haven’t cracked
it yet. Research by Bain & Company17
reveals that 80 percent of companies believe that
they deliver a superior customer experience, but that only 8 percent of their customers
agree.
One of the reasons behind the discrepancy in these numbers is that few companies
move beyond the point of talking about it. Companies that do take action usually just
tweak the front-end of the business, and even then only as an afterthought when all
other important decisions have already been made. As one of our clients said, his
company’s approach to customer experience management made him think of “sprinkling
sugar over brussels sprouts”.
Companies that do get it right share a number of characteristics. If you are planning to
deploy CEM in your organization then you could do worse than remembering these four:
1. Identify what factors shape the customer experience and track the key drivers
2. Weigh the possible impact on the customer experience into every strategic
decision
3. Don’t ignore any departments: non-customer facing roles and back-office
processes also impact the customer experience
4. If silos within the organization stand in the way of a consistent customer
experience appoint a senior cross-silo central coordinator.
Good luck!
17
Allen, J., Reicheld, F. & Hamilton, B. (2005) The three “Ds” of Customer Experience. Harvard Business
School Working Knowledge 11-7-2005