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The Next Generation of Customer Management? Customer Experience Management 

Bob Thompson | Jun 25, 2006 259 views No Comments

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Since I founded CRMGuru.com in January 2000, interest in CRM has blown hot and cold. Now Gartner says that the good times are rolling: CRM software revenue jumped 13.7 percent in 2005 to $5.7 billion. One factor, the analyst firm says, it that buyers recognize that CRM applications are "key drivers of customer acquisition and retention."

Oh, really?

If that’s true, why doesn’t CRM improve customer relationships from the customer point of view? I recall an emailed question from a writer in India a few months ago, asking why, if banks there were investing in CRM and contact center technologies, banking experiences were not getting any better. My reply: because the investments weren’t made with that intent.

And that, my friends, is why the first generation of CRM has fallen short of fulfilling its strategic promise: competitive differentiation, improved profitability and higher degrees of customer loyalty. To get those benefits, as I’ve argued many times, requires a truly customer-centric approach. In short, it means giving customers more value to drive profit-building loyal behavior.

What’s CRM got to do with … me?
Last year, I began to hear more and more about customer experience management (CEM). At first, I didn’t pay much attention. After all, vendors and consultants are famous for inventing terms to stand out in the market. In the end, "CRM" always seems to win out as the umbrella term that’s recognized worldwide.

But I decided to dig deeper and became more and more intrigued. CEM, I learned, was about mapping, improving and delivering valuable experiences to the customer. You can call these "moments of truth," a term coined by former Scandinavian Airlines CEO Jan Carlzon in the 1980s as he turned around the struggling airline.



CEM is concerned with all customer interactions, not just those that lend themselves to automation. And it deals with the customer’s perception of value, which has both functional—"Did it do what it was supposed to do?"—and emotional—"Did I enjoy how I was treated?"—components.

Some CEM proponents, most notably CEM author and professor Bernd Schmitt, go so far as to say that products can be turned into experiences. I’d have to agree that’s one of the reasons I have an iPod and spend too much money at my local Starbucks.

Observing my own experiences, I couldn’t help but ask: What does CRM—as it’s commonly practiced—have to do with the wonderful time my wife and I had a local restaurant, when we were surprised with a free dessert? Or does CRM explain why we drive 30 minutes to visit those friendly and competent people at our dentist, when other dentists are much closer?

Or did CRM make any contribution whatsoever to the skillful way a sales rep sold me a car by not selling me at all? I doubt it. Or, to use a brand most everyone will recognize, has CRM helped the local Starbucks become my office away from my home office because it’s a relaxing and fun place to meet people or read the paper while sipping on a grande latte?

All of these experiences and many more influence my feelings and behavior. That’s the point of customer experience management. That’s what CRM should be about but often isn’t.

Beyond systems
In the CRM revolution of the past decade, businesses embraced information technology as the answer to improving relationships with their customers. But instead of forging better relationships, many just implemented customer databases and automated processes.

In the ideal world, CEM should be part of CRM as a business strategy, but that’s rarely the case. That’s why, in the chart here, I use the term "customer management" to encompass both as-practiced CRM and the new-age CEM.


CEM helps the enterprise see the customer with the "right brain"—concerned with perceptions, feelings and interactions that are harder to quantify but oh so valuable, nonetheless. Instead of just looking at how valuable the customer is to the enterprise, CEM requires an inspection of the enterprise’s value to the customer. Rather than recording transactional information like leads, opportunities and average handle times, as many CRM systems do, CEM maps the experience from the customer point of view.

Technology to support CEM could take you far from conventional CRM software, which tends to focus on internal processes. CEM is also more creative, where well-trained, helpful and friendly people play a critical role. In CRM, people are said to be important, but somehow CRM projects are mostly about IT investments that do little to improve the customer experience.

In practice, the dividing line between CRM and CEM is blurred. In our research, we found that 80 percent of the "best practices" recommended by CEM experts are the same as those that we’ve proven deliver ROI in CRM projects. For example, the No. 1 driver of CRM success is developing a customer-centric plan. That is also the starting point for CEM.

Whatever labels you prefer, rest assured that top-performing companies are adept at left- and right-brained customer management. Forrester’s CRM analyst Bill Band agrees that CEM is "what CRM should have been." He also told me that clients calling to solve CRM problems are calling them "customer experience" problems now.

In a survey of customers CRMGuru.com conducted in April 2006, only 22 percent of customer respondents agreed that companies "currently provide an excellent customer experience." That’s a tremendous opportunity for competitive differentiation, given that our survey also found that customers rate the quality of interactions as equally important in earning their loyalty as the products and services they purchased.

Does CEM really work? You bet it does. In our recent study we measured CEM effectiveness with a 25-question survey on strategy development practices, goals and metrics definitions and usage, organizational alignment, experience redesign and technology usage. We found that CEM scores "predicted" improved business performance (profitable growth) and that growth leaders earned CEM scores 29 percent higher than laggards.

Across the grain
I’ve always been puzzled why "CRM" technology has been painted into the process automation corner, when there are so many clever ways that technology can help improve relationships. Use IT for upfront customer analysis, for monitoring systems and throughout marketing, sales and service processes to provide both high-quality and efficient experiences. Here are a few examples:

  • To measure customer satisfaction and loyalty, CustomerSat and Satmetrix provide suites of on-demand tools. Tony Gaughan, vice president of Products at Satmetrix, says the "idea is to foster a continuous process to get feedback and drive change." Another interesting company, Tell Us About Us, provides a service that enables customer feedback over the phone or on the web and includes TUAU agents standing ready to nip customer satisfaction problems in the bud.
  • In the online world, you’ll find innovative vendors like TeaLeaf Technology or Keynote Systems, which monitor and record end-user experiences. Geoff Galat, TeaLeaf’s vice president of Marketing and Product Strategy, says TeaLeaf "enables companies to see their customer’s application through the eyes of their customer."
  • Wells Fargo uses TeaLeaf to record 52 million online sessions per month, Galat says. Forrester’s CEM analyst Jean-Pierre Garbani writes in Managing Performance From the End User Perspective (2005) that companies want "more detailed information about application errors, performance problems and user behavior"—all issues that impact the online experience.
  • Contact centers are ripe for customer experience improvements. Our recent study found that off-shoring and those #$%@% IVR systems have not been popular with customers. Speech recognition applications such as those offered by Nuance and Voxify could be just the ticket to get contact center efficiencies without the bad experience aftertaste. Bruce Withers, vice president of Contact Center Technology at Wells Fargo, says the company made a major investment to revamp disparate call centers using Genesys technology, based on the premise that satisfied customers would be more loyal and receptive to considering additional products.
  • Software companies formerly known as CRM are jumping on the experience bandwagon, too. Aly Richards, head of CRM Strategy and Architecture at U.K. mobile services provider O2, uses a solution from Chordiant, recently rebranded as "The Customer Experience Company." Richards says that O2 can run up to 36 "propensity models" in real time to deliver relevant offers—the key to delivering the "best customer experience."
  • Amdocs, which digested former CRM software vendor Clarify in 2001, says it helps "shape the creation of a €˜differentiated intentional customer experience’ for top-tier communication service providers" and other industries. RightNow Technologies recently repositioned itself as providing "a strategic solution to drive superior customer experiences," a move that builds on the company’s culture and leadership position in customer service.

I’m sure we’re at the beginning of another hype cycle, but maybe this time it will be different. We’ve learned a lot from CRM pratfalls in the past decade. Let’s hope we build on that experience to make customer experience management a win for customers and enterprises.

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