145-157 St John Street
London, EC1V 4P
United Kingdom
www.thinkstrait.com
An introduction to Customer Experience Managemen...
An introduction to Customer Experience Management
2
What is CEM?
Customer experience management (CEM) is "the process of s...
An introduction to Customer Experience Management
3
Mercer Management Consulting7
as well as Bain & Co.8
found that the ma...
An introduction to Customer Experience Management
4
As depicted in the graph, the number of active customers is determined...
An introduction to Customer Experience Management
5
Reducing costs
Although cost reduction is not something that jumps to ...
An introduction to Customer Experience Management
6
When things go wrong for customers, first line
employees can get an ea...
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An introduction to Customer Experience Management

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What is Customer Experience Management? How does it differ from improving customer satisfaction? And what are the benefits?

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An introduction to Customer Experience Management

  1. 1. 145-157 St John Street London, EC1V 4P United Kingdom www.thinkstrait.com An introduction to Customer Experience Management What is CEM and what can it do for your organization?
  2. 2. An introduction to Customer Experience Management 2 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. 3. An introduction to Customer Experience Management 3 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. 4. An introduction to Customer Experience Management 4 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. 5. An introduction to Customer Experience Management 5 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
  6. 6. An introduction to Customer Experience Management 6 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

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