Dear CMO: Sorry, but we need a CVO (Customer Value Officer)

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Customer Value

Old-style CMOs, ill-equipped to navigate marketing in the digital age, face mounting pressure to prove their worth.  Which raises three problems for them:

  1. Which products and services will add the most customer value?
  2. What content and programs in which channels will best represent these?
  3. How should they align resources, execute marketing programs, and measure worth?

For years CMOs have handled traditional marketing roles such as branding, advertising, events, and lead generation.  And requests for budget increases to the CFO usually had a note attached that said, “Trust me.”

But in the digital age, with addressable channels, AI, hyper-personalization, and strategic assets such as customer data and insights, their mandate and measurement approach must change.  And there is growing evidence the trend to groom a new-style CMO, or someone to replace them as a CVO, is picking up steam. 

For example, CMOs roles have transmuted at places such as Uber, McDonalds, Hyatt, and Vodafone,[i]  and with the transfiguration, new titles have emerged, like Chief Growth Officer, CMO++, or SVP of Digital Marketing.  Title changes alone, however, are meaningless if not backed by people who transform the org they manage, driving clear performance improvements.  To do that, marketing needs a leader with an entirely new strategy.

Now more than ever, customers expect relevant connected conversations and value returned with every interaction, and care less about rebrands or catchy TV ads.  And regardless if it’s a customer buying snacks or a multimillion-dollar software system, they still evaluate the relationship based on similar factors like relevancy, consistency, and trust.   As such, every organization needs a C-level executive that understands this, champions it, and is accountable to that new strategy. 



So, does marketing have that leader?  That very much depends on the person raising their hand to assume not only a new title but a new mission. 

Recently, leaders in other functions, such as sales and human resources, outfitted themselves with fancy new titles like Chief Revenue Officer and Chief People Officer.  And in some companies, entirely new positions appeared like Chief Analytics Officer, Chief Experience Officer, and Chief Customer Officer.  Yet new titles alone aren’t proof anything has changed.  If the CMO is to own the customer value officer (CVO) role and lay rightful claim to that title, they must go beyond a rebrand, energizing marketing and the entire organization with a new data-driven and customer-centric mandate.  Most importantly, they should demand all initiatives run with new customer-centric strategies, demand strict quantitative measurement in terms of customer value-added, and endeavor to prove lift quickly.

To do this, next-gen CMOs need to fully understand customer value and how they can create greater amounts of it using data and analytics as strategic enablers.  This is what will separate the old-style CMO from a digital-savvy, customer-driven CVO; their focus on generating tangible value.

In the beginning, value was simple…

In the 1990s, the concept of customer value management (CVM) arose, particularly in businesses with exclusive customer relationships as in telecommunications firms.  CVM pioneers realized the game was zero-sum, where saving customers was paramount for two reasons:

  • It cost less to retain an existing customer than acquire a new one.
  • If they lost a customer, they lost the entire revenue stream to a competitor.  

They understood the basis for great growth: keeping customers and growing meaningful relationships.  In his period piece “Getting Everything You Can Out of All You’ve Got[ii],” Jay Abraham succinctly said there are only three ways to grow:

  • Increase the number of clients
  • Increase the average size of the sale per client
  • Increase the number of times clients return and buy again

Continuous relevance creates value

Since the 90’s we’ve learned that customers ring up value on their registers in many ways beyond low cost or perceived product quality.  They also measure factors like convenience, consistency, and whether a brand reflects their worldview.  They tally worth across all these categories and every time they interact.  And since switching costs and barriers have dropped thanks to better technology and more competition, customers defect unless the value is continuously increasing by their calculations.  

And out of those factors arguably the most important one is relevance in every interaction.  To be relevant, CMOs must demand all inbound and outbound customer engagements go through a single system to manage, measure, and optimize customer value – and keep these things in mind:

Customers are in control –

  • They control the relationship.  Companies can nudge them, but customers decide when, where, and how much they will engage.
  • Customers measure value during every interaction and keep a running tally. 
  • It’s the wrong mindset to think a brand can manage a customer’s assessment of the experience and its worth.  Products, services, and personalized experience must constantly improve and must stand on their own merits.

Businesses can respond in a balanced fashion –

  • It is the right mindset, however, to manage customers as strategic assets.  It’s okay to treat customers differently based on the value they’ve returned (and are forecasted to return), but in doing so, they must always be treated with empathy and as unique individuals.
  • To succeed, a business needs to continuously supply experiences, products, and services that add value in customers’ minds (that is, the value they get is high in relation to what they give up or could get elsewhere).
  • Businesses, therefore, should discriminate what they offer based on what customers need, what’s suitable for them, and the expected value exchange.
  • For the relationship to work, both parties need an equitable value exchange. For firms to achieve sustainable growth, they should balance the value they offer each customer with what they can afford to deliver for long-term profitability. 

The CMO must work to align many things to realize customer value optimization.  They won’t maximize value unless they have the right cultural, organizational, functional, data, and technology architecture all working in concert.

Are you making these three mistakes?

Every leader wants to succeed but too often many do not realize their approach is flawed.  Great leaders quickly sense this and plot a different course.  Here are three key indicators to test whether your corporation has a faulty methodology:

  1. The company doesn’t treat customers as unique people, but instead as members of segments, assigned pre-calculated offers.
  2. The firm doesn’t treat customers using current context data, such as location and inventory availability.
  3. The business views each interaction as an isolated transaction instead of as part of a continuous conversation with customers. 

If you agree with any of these statements, you’re not operating in a fully customer-centric fashion.  Every contact presents an opportunity to create more value.  Each moment is one of many in a journey, with customers constantly adding or subtracting from a value bank.  Over a lifetime, that calculation is known as customer lifetime value or CLV.  The CVO’s goal (and thus the new CMO’s goal) is maximizing that account balance across all customers.

If this all sounds high-level and un-actionable, here are the four essential tips to move toward optimizing customer value.

Essential 1: Custom tailor products, services, and content to solve an individual’s problems 

Your products and services will be popular only if they solve customer problems faster, better, and more economically than your competitors.

At every opportunity, you must treat customers as individuals and use your array of products, services, and content to mass customize what you offer to them – making sure to always treat them with the most relevant options at each moment of need.  To do this, you’ll want options which are customizable, with components sitting on physical or virtual inventory shelves that can be picked, assembled, and presented in real-time as tailored promotions, products, services, and experiences for each customer.

The only way to do this at scale is to have all products, services, and content categorized with attributes that correspond to customer preferences.  For instance, Netflix triangulates a person’s preferences for titles based on browsing, viewing, and search behavior.  Further, they can personalize the title’s artwork and imagery to highlight viewer preferences for certain actors, making new titles more enticing.  When factoring in titles, episodes, artwork, and other personalization factors, Netflix by some accounts has over 100 million different products to offer. [iii]



In most cases, categorizing services means grouping actions you can take to help customers with product issues.  For example, if a customer can’t use your product, needs it fixed, or wants to return it for another one, you must personalize these service recommendations to efficiently solve problems just as you personalized promotions to entice them to buy.

Essential 2: Architect the organization for customer value optimization

Most enterprises have scores of people tasked with devising customer engagement programs, like events, designing websites, and crafting emails.  But chances are instead of thinking about individual customers, these employees focus on large audiences and episodic campaigns.  

Deeper in the organization, there are entire business lines with incentives to push their products and pounding on the marketing teams to get air time. The trouble is marketing is stuck in the middle of a political battle over who gets to interrupt (and often confuse and annoy) the customer.

The only way to solve this problem is to ditch campaigning and let one objective decision-making authority arbitrate the next-best actions.  Taking this approach means a couple of radical but necessary organizational changes:

  • Each division, product team, or line of business gets to inject candidate offers and service actions into the decision-making system.  They don’t, however, get to rig the system so that they present their messages to customers at times they prescribe.  The AI will decide that based on the customer’s propensity to respond to and need them.
  • The people managing those creating and adjusting these offers and actions must re-organize into agile teams and change the incentives and metrics – so that those teams inject offers in the most efficient fashion; ceasing and desisting unnecessary campaign and audience planning.

For more details on this, check out Tip #4 in my article from last month, “A 6 pack of tips when replacing creaky MRM software.”

Essential 3: Organize data and insights for real-time interaction management

If the essential lifeblood of any enterprise is its product innovations and its marketing & sales promotional prowess, then connecting those together so the right customers get the right offers at the right time requires special sauce – a unique approach to mining customer data and insights and using that to dynamically connect customers to the right products and services.

Forrester has recognized this for years with their concept of systems of insights tied closely to systems of engagement.   In 2016 and then again in 2018, they astutely professed that “to deliver utility and guide the customer to the next-best interaction” firms need an engine that facilitates a “self-perpetuating loop that leverages data, analytics, and insights to automate interactions that generate additional contextual insights across the customer lifecycle.” [iv]

I wholeheartedly agree.  In my recent article titled, “The Final 4: MarTech Platforms and Ecosystems,” I contend that a customer insights platform is required for real-time customer relationship execution.  With this platform, you can match customer preferences with your best offers, building loyalty and lifetime value with customers.

The customer insights platform isn’t a garden variety data lake, mart, or warehouse.  It’s a specialized data processing refinery for customer data (and insights) that feed into a real-time customer profile.  It produces insights and uses them to match customers with the next-best recommendations for instantaneous hyper-personalization.

Essential 4: Use next-best actions across the customer lifecycle

Now that you have a sense for customer value and how to create more of it, how do you operationalize and measure it in increasingly complex customer journeys?

The answer is using next-best-action strategies at every customer lifecycle stage, measuring incremental revenue lift and cost relief attained, and then summing this across customers and time.  

Figure 1 depicts examples of strategies employed at various stages.  Using a relationship execution engine tied to a system of insight, brands can run the right strategy during every customer interaction to deliver the next-best actions – and in large enterprises, this means millions of these decisions every day, each adding value that accumulates across the entire customer base.


Figure 1:  Next-Best-Action (NBA) Strategies by Journey Stage

next-best actions

To visualize how this approach begins to scale out, Figure 2 shows a simple example of 6 strategies being deployed in each journey stage – some providing revenue lift, cost relief, and some supplying both.  Of course, in a large business, this scales to thousands of customer treatments per second and millions per day.

Figure 2: Next-best actions reaching millions per day

journey stages

The next-best-action approach personalizes suggestions for customers, and customer-facing agents, for every interaction, and does so considering context, using real-time AI, producing incremental lift across all customers.  This accrues over the entire customer base over time, as shown in Figure 3.

Figure 3: Optimizing overall Customer Lifetime Value (CLV)

customer lifetime value (CLV)

Firms that understand how to optimize CLV using use next-best interactions and the right technology supporting it see improved profits, with ROI multiples from 4x to 12x.  For instance, RBS, a large bank in the UK, saw 10x ROI.[v]

Conclusion

Any business can vastly improve individual customer value and total customer equity with a next-best-action approach that improves relevancy, effectiveness, and efficiency in every interaction.  And in very tangible terms, firms can directly measure their performance improvements in terms of revenue lift, cost relief, and profit improvements.

We’ve learned to do this, companies must inject a steady stream of innovative products, services, offers, and service actions into an AI-powered arbitration engine, dynamically learning which treatments work best for individual customers every time they interact.  If you are a CMO, you have a critical decision to make.  You could continue using old-school qualitative stabs at improving customer value, or you can elevate your role to a CVO, using data, insights, an AI decision engine, and a defensible quantitative value measurement approach proving real impact.




[i] Marketing Week, https://www.marketingweek.com/mark-ritson-marketers-influence-embrace-cmo/, July 2019

[ii] Jay Abraham, https://www.abraham.com/knowledge_center/getting-everything-you-can-out-of-what-youve-got/, 2000

[iii] The Netflix Tech Blog, https://medium.com/netflix-techblog/artwork-personalization-c589f074ad76, December 2017

[iv] Forrester, “How to Build a Contextual Marketing Engine”, 2016 & 2018

[v] Pega.com, https://www.pega.com/customers/rbs, 2015

6 COMMENTS

  1. Hi Vince: It’s hard to know whether adding another C-[something]-Officer to the senior leadership team is the right thing to do – assuming that’s what you mean with a CVO, Customer Value Officer. Back in 2012, I wrote an article in response to what I perceived as an explosion of C-titles, some of which seemed frivolous (Chief Fun Officer, Chief Listening Officer). Are Companies Hiring Too Many Chiefs? http://customerthink.com/are_companies_hiring_too_many_chiefs/.

    For me, a new C-Level position might be needed if 1) there is an emerging or unmet need that is consequential to the company’s strategy or market viability, 2) strategy setting and planning for that need transcends organizational silos, 3) unique or specialized domain expertise is required, and 4) if goal conflicts within an existing department already compromise planning and execution.

    Based on this, I believe there is justificable need for Chief Logistics Officers, Chief Revenue Officers, Chief Customer Officers, and Chief Ethics / Compliance Officers – roles that might not have existed just 40 or 50 years ago. Each requires strategic vision that transcends organizational boundaries. But I struggle with making a case for Chief Strategy Officers and Customer Value Officers (and others), since to me, strategy and value delivery are inextricable components of what virtually every senior leader does (or should be doing) in performing his or her job. Wouldn’t splitting this out into yet another C-Level function be superfluous, increase complexity, slow decision-making time, and add bureaucracy at a time when speed of execution is crucial for competitive advantage?

  2. Hi Andrew, thanks for your comment. Great insights and a good topic to bat around. Really, I wasn’t advocating so much for an entirely new C-level position, but instead for the CMO to take charge of this, thus really changing their mission and the way they approach their role.

    I will say I have seen separate roles such as CAO (Chief Analytics Officer) or Chief Data Officer take on this role, especially in orgs where the CMO didn’t, and there was a clear mandate to use data & analytics as strategic enablers and to drive better CX and new monetization opportunities by using a new approach to customer engagement that goes beyond functional boundaries (boundaries that say marketing just promotes; sales just sells, and customer support just services).

    This is the kind of role that does cut across those boundaries, as you rightfully point out is so important. Whether the CMO can really be this person is certainly a debate. But I think they should consider it if they really want to help create and optimize customer value.

  3. Hi Vince,
    This is a great article, I agree with you on this. In particular your comments about just reinventing a new title doesn’t mean there will be adequate skills and capabilities in place to improve customer value and build the trust required to drive improved customer loyalty. As you say, campaigns and other marketing activities that nudge customers to purchase their products aren’t truly going to build trust, as the focus is very much around one-sided gains for the company, rather than demonstrating an understanding of what the actual customer values. In relation to your point about the need to build true customer-centricity, I think this needs to be fully embedded across each function of the business and integrated into an organisation’s strategy, culture and operations. Therefore, should there by a true Chief Customer Officer with the capabilities spanning strategy, process improvement, innovation, customer insights, data and financial skills, rather than a CMO that has been promoted into a new title? Or should there be collective accountability at the C-level to ensure all facets are aligned and the customer is embedded across the business?
    What do you think? Where have you found true customer-centricity work well?

  4. Hi Ellie: I agree with your points. For customer interests to be truly prioritized and protected, an executive with C-Level strategic and operational parity must be in place. That person would be like an Esther Peterson (please see https://en.wikipedia.org/wiki/Esther_Peterson), who was an early national consumer advocate, who served as Vice President of Consumer Affairs at Giant Food, the dominant grocery store chain in the Washington, DC metropolitan area. Giant was iconoclastic in appointing her as VP. At the time, few companies paid attention to protecting consumer rights.

    In the 1980’s, I served on two consumer boards chaired by Peterson’s successor, Odonna Matthews (please see https://progressivegrocer.com/odonna-mathews-giant-landovers-veteran-consumer-exec-retire) , and during that time, I got a rare opportunity to experience firsthand how a company in a highly-competitive retail market organizes itself to not only listen to its customers, but to advocate for them, and act on their behalf. I think the advocacy in particular set Giant far apart from its competitors. While executives promote the guise of customer-centricity, too few companies today truly practice what Giant figured out how to do over 40 years ago.

  5. Hi Andrew,
    I agree and it’s interesting this was happening as long ago as 40 years ago but not being practiced today. The only other thing I would add is that ensuring internal procurement processes, investment decision-making process and overall governance is aligned to ensure customer outcomes are delivered. For example, ensuring the customer attribute is a key consideration in a business case decision-making process and also that procurement practices are value oriented, rather than focused on cost-reduction/optimisation due to the impact this can have indirectly or directly on the customer experience. How can the C-level responsible for the customer and the C-level as a collective ensure there is this alignment and collective accountability? i.e., the way this is embedded in their decision-making process and performance management process, starting with Exec incentives and KPIs. Was this something that Giant did well?

  6. Hi Ellie & Andrew, thanks so much to both of you for continued discussion on this topic. I think it’s extraordinarily interesting.

    Ellie’s calling out the point about the need to have customer-centricity infused across the organization shows that when she highlights something in yellow, pay attention! I am a proponent of a person in the C-suite that either explicitly & officially owns this (that could be the role of CCO), or if that vacuum exists and this role is unlikely to be separately created, just takes up the future mantle and assumes the role vs the alternative (do nothing different).

    I think “just doing it” is less optimal, and probably shows the org hasn’t fully matured yet around the customer-centric concept. But I believe change happens this way and it’s a good opportunity for a CMO to fill this void. He or she should absolutely in that assumed role advocate for cross-functional alignment and calling on the org to apply the “ultimate customer-centric litmus test.” That is, take every big initiative and ask, “How does this improve CX and customer value?” At a somewhat more tactical level, having an NBA system as I describe can help be a forcing function for the current tactics in play.

    I agree with Ellie & Andrew that true customer-centricity is not one function’s responsibility but ultimately has to be in the operating fabric of the firm. But how to get there when the org didn’t have that initial DNA is the 64k question. I love Andrew’s example of Giant (I grew up in Rockville, MD and was a loyal customer) and the story of Esther and Odonna. Thanks for sharing! It’s obvious this topic is extremely important and one that not that many brands have figured out, even though some (as Andrew points out) figured this out eons ago.

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