I was invited to give a talk at Eastside Incubator on how startups can incorporate customer experience management into their companies. These are the slides. You can read my blog post on this topic (http://businessoverbroadway.com/three-customer-experience-management-tips-for-startups) that are a good complement to these slides.

1. CUSTOMER
EXPERIENCE
MANAGEMENT
FOR STARTUPS
Bob E. Hayes, PhD
CCO, TCELab.com
President, businessoverbroadway.com
@tcelab @bobehayes
© 2012 TCELab LLC. All rights reserved. Unauthorized duplication or distribution is prohibited.

2. Background
• Bob E. Hayes is Chief Customer Officer of TCELab and President of
Business Over Broadway (B.O.B.). Received PhD in industrial-organizational
psychology. Conducts research and provided consultation on how companies
can use customer data to drive business growth
• Writes (e.g., books, blog, articles) on such
topics as customer feedback program best
practices, analytics, customer experience
and customer loyalty measurement
• Implements customer feedback programs and directs global customer
feedback research projects for many enterprise companies:

3. Overview
• What is Customer Experience
Management (CEM)?
• Impact of the Customer Experience on
Customer Loyalty
• Building a World-class CEM program
• The Key to Business Success is Customer
Loyalty
• What can startups do?

4. Customer Experience Management (CEM)
• Customer experience is the
sum of all experiences a
customer has with a supplier
of goods/services
• Customer Experience Management (CEM)
is the process of understanding and
managing your customers’ interactions with
and perceptions of your brand / company

5. Why Develop a CEM Strategy?
• Customer experience impacts customer
loyalty
• Decreasing customer defections by 5%
increases profits from 25% to 85%* 100%
Percent Increase in Customer Value
75%
50%
25%
0%
Auto-service Branch Credit card Credit Insurance Industrial Industrial Office Software
chain deposits insurance brokerage distribution laundry building
management
* Reichheld, F. F., & Sasser, W. E. Zero defections: Quality comes to service. Harvard Business Review, Sept-Oct. 1990.

6. Customer Experience Management Program
Strategy
Overarching guidelines around the
company’s mission and vision regarding the company objectives/goals
Governance
The guidelines and rules (how the program is directed); roles and responsibilities (how data
are used and by whom ); and change requests (how changes to the program are made)
Business Process Integration
Integration of customer feedback program (including
processes and data) into business operations and processes
Method Reporting Research
Data collection (social How customer feedback data Systematic research using
media, surveys, brand are analyzed, summarized customer feedback data to
communities); Measurement and disseminated throughout gain additional customer
(experience/ the company insight
loyalty/sentiment)

7. Loyalty Leaders vs. Loyalty Laggards
Adoption Rate
∆ in
Customer Feedback Loyalty Loyalty
Adoption
Program Component Leaders1 Laggards
Rate
Strategy/Governance 89% 71% 18%
Business Process
Integration
86% 59% 27%
Method 72% 60% 12%
Reporting 70% 60% 10%
Applied Research 80% 51% 31%
1 Loyalty Leaders defined as respondents who have customer loyalty percentile ranking of 70% or higher. Loyalty Laggards
defined as respondents who have customer loyalty percentile ranking lower than 70%.
Source: Hayes, B. E. (2009). Beyond the ultimate question: A systematic approach to improve customer loyalty. Quality Press.
Milwaukee, WI.

8. Strategy/Governance
Industry percentile ranking
Companies who Adopted Practice
of customer loyalty
Companies who did not Adopt Practice
40 50 60 70 80
1. CF is as important as
Customer feedback results are as important as
financial measures in
financial measures in making business decisions.
making business decisions
Customer feedback is included in the company's
2. Included vision, mission and goals.
strategic in vision/mission/
goals feedback results are used in
Customer
executives' objectives and incentive
3. Executive incentive comp. compensation.
A top executive (e.g., CEO, VP) is a champion of
the customer feedback program.
Customer feedback results are used in front-line
employees' objectives and incentive
compensation.

9. Strategy/Governance
• Incorporate customer feedback into vision,
mission, and goals
– Include in employee on-boarding process
– Use in setting company goals
• Include customer feedback in decision-
making process
– Executive reports customer results at executive
meetings
– Present customer feedback data in company
meetings, official documents
• Use customer feedback when setting
executive’s objectives and incentives
– Use key metrics (business areas, customer
loyalty)

10. Business Process Integration
Industry percentile ranking
Companies who Adopted Practice
of customer loyalty
Companies who did not Adopt Practice
40 50 60 70 80
1. CF included in
executive dashboards
Customer feedback results are included in the
company/executive dashboards.
2. Program integrated
Customer feedback program is integrated into
into business process
business processes and technology (e.g., CRM
and technology system).
3. All areas of the customer feedback program
Program processes/
(e.g., process and goals) are communicated
goalsregularly to the entire company.
communicated
to resolution ofcompany that are
The
entire customer issues
identified using the customer feedback program
is integrated into the company's Customer…

11. Business Process Integration
• Include results of customer feedback in
executive dashboards
– Track loyalty and customer experience
• Communicate customer feedback program
processes/ goals to entire company
– Include in newsletters, emails
– Develop customer-related employee portal on
intranet site
– Metrics/Methods used

12. Method
Industry percentile ranking
Companies who Adopted Practice
of customer loyalty
Companies who did not Adopt Practice
40 50 60 70 80
1. Web surveysto collect customer…
Web surveys are used
Paper and Pencil surveys are used to collect…
Customer satisfaction surveys are conducted by…
The survey delivery is an automated process.
Multiple methods of collecting customer…
In-person interviews are used to collect…
Telephone surveys are used to collect customer…
Customer contact management process…

13. Reporting
Industry percentile ranking
Companies who Adopted Practice
of customer loyalty
Companies who did not Adopt Practice
40 50 60 70 80
1. CFCustomer feedback results are shared
results shared
throughout company
throughout the company.
Customer feedback results are benchmarked
against competitors and industry averages.
Web-based reporting tools are used to report
customer feedback results to employees.
Results of customer satisfaction research are
presented externally (e.g., conferences, user…
Results of customer satisfaction research are
presented internally (through employee…
Customer feedback results are shared only at
executive/management level.*

14. Method and Reporting
• Use Web-based surveys to collect
customer feedback
– Facilitates communication through automation
– Improves ease of integration with other
business systems (e.g., CRM)
• Share customer feedback results
throughout the company
– Keeps employees focused on customer-
centric goals
– Facilitates customer-centric culture

15. Research
Industry percentile ranking
Companies who Adopted Practice
of customer loyalty
Companies who did not Adopt Practice
40 50 60 70 80
1. Operationalestablished between
Statistical relationships are
linkage
established
customer feedback data and operational metrics
(e.g., turnaround time, hold time).
2. Applied research regularly
Applied research using customer feedback data is
conducted regularly conducted.
3. Constituency attitude
Statistical relationships are established between
customer feedback data and other constituency
linkage established
metrics (e.g., employee satisfaction or partner…
Existing information from customer databases is
used to help segment customer feedback data.
Statistical relationships are established between
customer feedback data and business metrics
(e.g., revenue, margin).

16. Research
• Validate customer feedback program
– Ensure results are reliable, valid and useful
– One of first research projects that need to be
conducted
• Develop programmatic research around customer
• Establish statistical relationships between
customer feedback data and operational metrics
(e.g., turnaround time, hold time) and other
constituency metrics (e.g., employee satisfaction
or partner satisfaction metrics)
– Manage customer relationships using operational
metrics
– Expand customer ecosystem; manage all
constituencies

17. Summary of Best Practices
• Loyalty leaders build a customer-centric
culture by:
1. Using customer feedback to set vision and
manage business
2. Integrating customer feedback into business
processes
3. Communicating process, goals and results of
all customer programs to entire company
4. Conducting in-depth customer research
– Integrate different business data (operational,
financial, customer feedback), to reveal deep
customer insights

18. What can startups do?
• Start at the top
– Executive education about CEM
– Consider including in mission statement
• Formalize customer feedback
– Web site, Annual customer survey
• CRD; see remaining slides
• Surveygizmo.com, surveymonkey.com,
limesurvey.org
• Share feedback companywide

19. Customer Loyalty and Growth
• Business growth relies on three types of
customer loyalty
Growth is all about:
Retention Profit from price premium
Advocacy
Profit from reduced
Purchasing operating costs
Company Profit
Profit from referrals
Profit from increased
purchases and higher
balances
Base Profit
0 1 2 3 4 5 6 7 Customer acquisition cost
Years
Frederick Reichheld. The Loyalty Effect. Harvard Business School Press, 1996

20. Customer Loyalty and Business Growth
1. Customer
Customer
Business Renews
Acquisition
(Retention Loyalty)
Programs
Business
Product
Programs
development 2. New
Customer Customer
Customers Firm
Development Lifetime
Marketing (Acquire through Value
(cross/up-sell)
Advocacy Loyalty) Value
Sales
Sales
Service
Service 3. Customer
Customer
Buys More
Infrastructure Retention
(cross/up-sell through
Purchasing loyalty)
• Different types of customer Loyalty
Renew service agreement
Buy from competitor Retention
Continue buying Read more about the
Recommend Advocacy RAPID loyalty approach
Buy more
Buy different products Purchasing
Expand usage across company

21. Customer Relationship Diagnostic (CRD)
• Measures critical components of the health of the
customer relationship
– Customer loyalty
– Customer experience (e.g., product, ease, support, communication)
• Quantifies the value of different types of customer loyalty
– Annual revenue growth through word-of-mouth
– Annual revenue growth through up/cross-selling
– Annual revenue at risk due to churn
• Identifies customer experience improvement solutions
that will improve customer loyalty while maximizing
ROI/Net revenue
• Provides competitive benchmarking information - See
where you rank against competitors

22. CRD: Asks only essential questions
• Loyalty-based survey with less than 20 questions
• RAPID Loyalty Measurement
– Retention Loyalty (1-2 questions)
– Advocacy Loyalty (1-3 questions)
– Purchasing Loyalty (1-2 questions)
• Customer Experience Measures
– 7 Business area questions (e.g., product quality, support, responsiveness)
– 1-2 open-ended questions (e.g., what would you change?; one word to
describe company)
• Relative Performance Assessment - Competitive
Benchmarking (C-PeRk)
– 2-3 Questions
• Company-specific questions
– 5 Questions – Customer tenure, Decision influence, Job level, Job function

23. Customer Relationship Diagnostic
Customer Loyalty and Customer Addresses Business
Survey Questions Scores
Experience Indices / Measures1 Growth
Retention Loyalty Index (RLI) Will your customers remain Renew service contract, Scores can range from 0 (low
with / not leave you? Use competitor* retention loyalty) to 10 (high
retention loyalty)
Advocacy Loyalty Index (ALI) Will your customers Overall Satisfaction, Scores can range from 0 (low
promote you? Recommend, Continue advocacy loyalty to 10 (high
purchasing / using advocacy loyalty)
Purchasing Loyalty Index (PLI) Will your customers invest Purchase additional Scores can range from 0 (low
in additional product / services, Expand usage purchasing loyalty) to 10
service offerings? (high purchasing loyalty)
7 Customer Experience Measures Are your customers Customers provide Scores can range from 0
Ease of doing business, Overall Product receiving a great customer satisfaction rating for (high dissatisfaction) to 10
Quality, Responsiveness to Service Needs, experience? each of the 7 business (high satisfaction)
Responsiveness to Technical Problems, areas.
Ability to Resolve Technical Problems,
Communications from the Company, Future
Product/Company Direction
Competitive Benchmarking Are you ahead of the How does your company Scores can range from 0 (low
competition? perform relative to the ranking) to 100 (high
competition? ranking)

24. bob@tcelab.com
bob@businessoverbroadway.com
@tcelab @bobehayes