The interview, which was conducted in April 2005, was originally printed in the October 2005 CRMA newsletter.
Reprinted by permission of the Customer Relationship Management Association.
Define “Customer Experience Management” (CEM). In your opinion, is this just a new buzzword to replace CRM—since CRM has reached its maturity (same thing, new slant) —or is this a concept that will become a new, different and legitimate business focus over the next decade (will it really change how companies do business?)?
Actually, although it’s another acronym, Customer Experience Management reflects an increasingly important trend in CRM-related activity and business. The business ecosystem now has the customer at its core. That requires a business to begin to think in fully collaborative terms, because customers are now knowledgeable, empowered and volatile and have significant technological resources at hand to zap a business when they don’t want to deal with them, anymore.
Additionally, products and services are no longer the primary differentiator, since they are commoditized to a form of almost uniform blandness—meaning a similarity that doesn’t have any distinguishing characteristics. Consequently, the customer experience —the interaction at multiple levels between the customer and the company at all points of a transaction—is the distinguishing feature between companies. It now takes a village to provide that customer experience. However, the most important thing to remember when it comes to all this is that the customer experience isn’t just a hug and a kiss—it’s a business value exchange.
If you provide the customer with a lot of good feelings about how they are dealing with you—and with a set of tools and transparency so they can manage their own experience—then they will not only remain committed to you but also will advocate/evangelize for you. They need to be able to control their own choices about how they deal with you, using whatever technologies and communications channels they care to so that the experience works both seamlessly and comfortably for them. The customer’s experience—crafted in collaboration with you—has to feel like a pair of comfortable socks—but have sex appeal, too. The combination creates advocates who love what you do and who you are and can’t live without you—in a business sort of way!
CEM is a specific aspect of CRM that looks at how to create a consistent view of, and approach to, the customer. In some ways, CEM is nothing new. Disney, Amazon.com, Yahoo!, Nordstrom, Talbots, Chico’s and many others have been focused on delighting customers for a long time. But for 90 percent of businesses, delivering consistently satisfying customer experiences is a near impossibility.
There are two parts to the equation: Much of our IT infrastructure and applications in our organizations are siloed. We have, for example, one voice response for consumer affairs, another for sales and another for bill inquiries. We have multiple call centers. Some centers are internal; some are outsourced. Part of our business is through partners, and they have their own infrastructure and applications. We end up with a disconnected, unsynchronized approach to the customer, and this leaves their head spinning. A prime goal in becoming customer-centric is to attack this problem of a fragmented treatment of customer interaction.
The second part of the equation is business process design. We cannot use one application to support an end-to-end business process. This brings us into an integration and process design nightmare of creating point-to-point connections among multiple applications. And whenever we make a change to any part of one application, we need to redesign the workflow for that customer process. A focus on the customer experience is a good way to solve for these problems of inconsistent treatment of the customer and too much complexity in process design.
I like to think of CRM as the plumbing. We’ve spent many years and billions of dollars standardizing applications that essentially capture data and enable vendors to analyze it. Now what do we do?
Well, we could try to apply these operational technologies to actually improve our interactions with the customer. Why? Because customers tend to go where they are treated best. Notice the buzz in the last year is much less about customer satisfaction and much more about loyalty. Satisfaction simply means that the customer feels they got what they paid for, but it says nothing about whether they would buy more from the same vendor. Loyalty is about buying more and telling your friends. Competition in most markets today is fierce, and downward cost pressures mean the most profitable sales will be the ones requiring the least selling. Those sales are typically the cross-sells and up-sells to existing loyal customers. In that environment, CEM is not just a new moniker, it’s everything.
Relationships are in the eye of the beholder. I think CEM should be an integral part of CRM, because the health of a business-customer relationship depends on how good a job that business does in delivering on promises. In addition to the basics like the product or service that is being purchased and, of course, the price or cost of ownership, the customer is building an impression about the company based on interactions that occur during marketing, sales and service processes. CEM should be about managing these interactions to ensure the customer has a positive impression that contributes to their future loyalty.
CRM is, at its heart, a business process initiative: to get, keep and grow customers. As such, you could argue that anything that touches the customer with those goals is “CRM.” But Customer Experience Management is a very different—and complementary—approach. Where CRM software typically focused on managing accounts, making offers and delivering service—from the company out—CEM focuses, instead, on figuring out who your customers really are and making sure they’re getting what they need out of interactions with your touch-points like web sites, retail outlets, kiosks and call centers—from the customer in. To really get a handle on who their customers are, firms should craft customer personas and use them to educate a customer-centric design philosophy, like scenario design. Again, CRM analytics can play a role in understanding who the customer is—but scenario design applies that understanding to what customers do and how they do it to optimize how they interact with the company and the brand.
CEM involves the premise that the sooner companies understand their customers aren’t simply buying a product or service but participating in a mutual experience, the sooner they can improve those experiences and induce customers to buy more. It’s sort of heretical, but I believe that CEM should be a subset of a company’s CRM program. Why? Because every CRM effort should involve a discussion of how the customer’s experience will be affected at every touch-point—a major tenet of CEM. As we’ve said for several years, CRM isn’t CRM unless it improves the customer’s experience with the company. This is what differentiates CRM from database marketing: the fact that the company considers its interactions with customers a mutual one. In my firm, we call this the “push-pull” relationship: What is the client giving the customer? And what is it getting in return?
Who’s doing CEM?
Are any of your clients doing anything you would label as CEM? If so, tell us about it. If not, please provide an example of a company you’d label as being a forerunner in this area. What exactly is the organization doing that sets it apart in terms of measuring and optimizing the customer experience?
I really like Walker Information, Communispace and Proficient; each does something different, but each has an important angle on CEM; though none of them uses the CEM label. Walker is responsible for the distinction between satisfaction and loyalty cited above. Walker researches loyalty and advises companies on how to improve the loyalty of their customers. Frequently, that’s all about how the customer is treated, not about improving products, per se.
Communispace conducts online forums to capture the voice of the customer on a range of subjects that includes product features, messaging and other input. It’s too bad every customer can’t be part of a forum, but the information captured in these events enables vendors to tailor their products and services to the needs of the majority of their customers and influence CEM.
Proficient uses a lot of data gathering and analytics of web site use to help its vendor customers identify customers who might be having trouble figuring out a complex product or service offer. Think of online mortgage origination. Most people get stuck in the process and abandon the effort—a negative experience. Proficient identifies these people who need help and pops up an offer to help through chat, co-browsing or a phone call. The result is that people have an improved experience and the vendor’s success or close rate goes up, as well.
We see adoption of a CEM focus, and it is evident both in the way that leading businesses design customer interactions and in the way that internal IT standards are evolving. One of our clients is a leading provider of insurance and other financial services to both individual and institutional customers. The company serves individuals in approximately 13 million households in the United States and provides benefits to 37 million employees and family members through its plan sponsors. The company has approximately $19 billion in revenue and $365 billion in assets under management. It is not a small company. It has many different lines of business (LOBs), and its vision is to transition away from its historical product focus to be a financial services organization centered on its customers.
A key enabler for its strategy is to centralize customer information across the LOBs. This allows them to increase knowledge about the customer, understand the value of the relationship, increase retention and cross-sell opportunities and provide differentiated service. It also enables them both to increase efficiency by streamlining business processes and to differentiate and personalize new products. A solution the insurer chose was to create a new operational system of record. This approach has a higher upfront cost than alternatives, such as integration in front-end applications, and requires a large integration effort. On the other hand, it is more accurate and maintainable and provides a platform for long-term benefits. One of the benefits is to improve the customer experience and drive a true customer-centric culture across the lines of business and interaction channels.
Sadly, I would say no at this stage, but there are a couple of them considering it or preparing for it. There are few companies out there that have taken the lead in this domain, but one of the most interesting, because of the “hive-like” nature of the process is Skype. For those who don’t know it, Skype is VoIP (Voice over Internet Protocol) with a new paradigm based around the computer. [Skype was purchased by ebay in September 2005, after this interview took place.] It has become the pre-eminent VoIP vehicle with a PC version and a Pocket PC version and a Windows Mobile 2003 SE version in the works. Skype-to-Skype conversations are PC-to-PC VoIP via a mike and a voice card and are as good as the quality of the speakers in your computer.
For example, I had a 90-minute call to Thailand via Skype (the other user had it, too) that cost me a total of zero. Skype-to-Skype is free, and Skype-to-landline calls run about 2 cents a minute. What makes it revolutionary is both the new paradigm and the cultural paradigm and the quality of the customer experience. Since February 2004, 86 million people have downloaded Skype via word of mouth and word-of-mouse advertising. No traditional ads at all. At any given time, 2 million people are online waiting for this high quality voice conversation for free. There are web sites that are designed by Skype collaborators that have just sprung up that are aimed at providing customer ideas for features and functions to Skype. What is amazing is that these are not Skype-owned forums but sites that collaborate because it will be a benefit to customers.
There is a development community associated with Skype. Skype is signing deals with cell phone companies to provide VoIP in wireless areas via your cell phone. The customer experience is ubiquitous with Skype—or at least omnipresent—and it is at the right price, and it is comfortable, and Skype’s BtoC value proposition and the costs of it are not only reasonable but available to the public making the choices with the Skype-to-non-Skype “Skype Out” program. This is prime example of a self-managed, almost socially viral customer experience that creates advocates everywhere—obviously including me!
I’ve never had a client actually launch a CEM project. My best clients are aware that not only understanding but measuring the customer experience is high on the list of CRM goals. CEM is actually part of several current analytical CRM projects that measure past and current customer satisfaction scores and segment clients across an advocacy continuum.
A recent Forrester survey of 176 large North American firms found that only 24 percent have a single executive (besides the CEO) who is ultimately responsible for customer experience. Sixty-three percent of the firms we surveyed delegate responsibility for overall customer experience to either marketing or customer service.
Hewlett Packard has an internal team called the Total Customer Experience Group whose job is clear: They’re in charge of tracking customer experience across all of HP’s business units, brands, web sites and other touch-points. This consolidated approach is great, but it’s hardly the norm. Most firms handle customer experience strategy within marketing or customer service departments, not at an enterprise level.
In the financial services market, Fidelity, Discover, Wells Fargo and many other firms are now organizing around customer segments and conducting primary research about customers’ goals and how they want to accomplish those goals.
In addition, Forrester recently talked with 16 early adopters of customer data integration technology. Enhancing the customer experience was one of the top drivers of their CDI initiatives; there’s nothing like a web site to expose companies’ dirty customer data and fragmented customer knowledge. Companies in financial services, telco and high-tech are finally trying to get a common understanding of the customer and use it to take the right actions at the right time instead of just pushing products or collecting the same information over and over. For example, one financial services company is using preference data to have the ATMs present information in the customer language of choice, instead of asking every time whether they want English or Spanish.
The impact on B2B
In terms of creating a positive customer experience, the more obvious implications (and most of the examples I’ve seen to date) are for B2C companies. Will CEM have an equal impact for the B2B segment? Why or why not?
It could. Ultimately, it’s a matter of human beings dealing with human beings, regardless of which business environment they are dealing with each other in. Think about it for a minute. If you’re a business and you have a relationship to a supplier/vendor or a partner, it hinges not only on the goods or services they provide that either support or enhance your own offering but also on the relationships that you haven’t
Maybe, but it will be called something else. B2B customers have a smaller range of issues, and because of that, it’s more likely that their issues can be solved through more conventional technologies such as portals. But if the issue becomes whose portal is nicer or easier to use, for example, then CEM in the B2B space could become important.
I think B2B is equally important, but people can fill gaps where systems aren’t doing the right job. So I believe that B2C will be where most of the hype and IT investments will come, because it’s a clearer ROI story that process improvement and automation can pay off.
Our earlier example was for both consumer and business customers, but generally the impact of CEM is geared toward consumers. There are strong business reasons for this. In a business-to-business environment, key accounts have much more of a one-to-one relationship with their account managers. An individual account manager (aka sales person) might have between one and five accounts that they handle. Their livelihood depends on managing these few relationships. They also have sales support personnel, customized web portals and individualized marketing offers to further support them.
The entire B2B relationship is already about the customer experience. This is not feasible currently with the mass of consumers, and that makes B2C a rich area of focus. The best that can be achieved is segment-level personalization, real-time analytics of the customer’s value and previous interaction history and consistent treatment. This is where CEM comes in. A business that can map the customer touch-points and design consistent experiences for the customer across these touch-points is more likely to win their loyalty, not to mention a greater share of wallet.
The philosophies of customer-centricity, personas and scenario design are equally applicable in the B2C and B2B realms. Firms should treat all the parties they do business with as customers , whether they’re consumers shopping for a single book or manufacturers shopping for 10,000 ball bearings. The main difference is that the numbers of individual customers and unique transactions in the B2C sphere are orders of magnitude larger than in the B2B market. Also, firms tend to have good information about their individual B2B customers but have to rely on average group behavior and broad segmentations for the B2C customers. The underlying law is the same, though: Identify with your customers and give them what they need, or they’ll go elsewhere to get it.
Which types of technologies are absolutely critical for purposes of launching a CEM initiative within a company? Beyond those, which would you recommend?
Most enabling technology for CEM has to do with gaining an understanding of who your customers are, what they need and what they do and don’t like about your current interactions with them. Good examples of this type of technology are web analytics packages, customer satisfaction surveys, usability tests and expert reviews.
Nothing is essential; it all depends on the product, the customer, the market, the cost structure and a hundred other variables. Rolls Royce has a very simple CEM strategy: They work one on one with customers to pamper them. That’s easy in a market for luxury goods, because the price structure can accommodate high cost service.
For the rest of us mortals, I would suggest the key ingredient will be tools and procedures for capturing customer input. Without a lot of input, you’ll simply be in a patronizing and prescriptive mode of “I know what’s best for you,” and that won’t get you far. People like being asked for input; it’s flattering, and it makes them the center of attention (it’s all about them). Making people the center of attention is, in my opinion, the key to a good customer experience.
Visionaries are beginning to design the customer experience based on what a given customer’s intent is in engaging the business. For example, in the automotive industry, the manufacturers have little or no knowledge about the consumer who has purchased their vehicle. They spend billions on marketing on the corporate level and share very little with the local dealer. The dealer salesperson shares little with the manufacturer’s finance arm, and none share information with the service department, which, in turn, shares little with sales or corporate. This is repeated in consumer electronics, airlines, wireless carriers, the cable industry, insurance and banking. Essentially, the customer’s evolving needs and intents are nowhere captured, maintained and managed. We see this “customer-intent driven” approach define customer experience management over the next 10 years. To make this really work, IT organizations are embracing five key technology initiatives:
- Business process modeling (BPM) tools
- Service Oriented Architectures (SOA) and Service Oriented Business Applications (SOBA)
- Predictive analytics
- Customer Interaction Hubs
- Customer Data Integration
Though some of these may sound esoteric today, they will be a standard part of our vocabulary within 36 months.
The shift in focus toward the customer’s intent and experience leads businesses to adopt BPM tools. But beyond modeling the key customer processes, an organization must also have the ability to build, assemble and/or compose the elements of that process. For this, an SOA is required. A “service” is never a complete application or a complete transaction. It is always a building block.
Think about a standard business process such as overdraft approval. Information from an external credit bureau is integrated with customer information spanning multiple internal systems, and a set of business rules must be applied. In an SOA, these elements would be “services,” defined by the interfaces that wrap their implementations (sometimes complex integrated flows, other times a simple single program). Most of our existing applications were not built to be service oriented, and IT organizations will need to be very creative while this 10-year transition to SOAs and SOBA is completed. During this period, there will also be a focus on integrating the information about the customer that currently is locked away across departments and using this for analysis and the basis of customer interactions. This Customer Data Integration effort is already under way under numerous names within businesses today.
Predictive analytics have been around for some time, but they have been too sophisticated for most lines of business to adopt broadly. We see this changing. We also see the gradual convergence of technologies for interacting with the customer. Instead of separate applications for the web, the call center, back-office employees, partners and kiosks, we will see these applications written for use on all platforms. The implication is enormous: Rather than application and communication silos, businesses will be able to create a consistent way of interacting with customers across channels. This is what is known as the Customer Interaction Hub.
All technologies are critical. Part of the best customer experience is the ability to access the possible interactions in any number of ways through any number of channels. That means that you could do it via the web, email, cell phone, landline, person to person, etc. All the technologies that support the interactions have to be present to optimize the experience. The “beyond those” are just technologies that appeal to the coolness factor I suppose. I’m not sure how, but I imagine if a podcast could enhance the customer experience, then an Ipod would be pretty important to this!
Companies need to have processes and tools to monitor customers’ satisfaction with their interactions and, more important, link those assessments to loyal attitudes and behavior. For example, the quality of customer service processes does have an impact on loyalty in the IT industry, according to a recent study by Walker Information. Unless business executives understand how the customer experience impacts “loyalty drivers,” they risk spending endless amounts of money on CEM with no clear ROI.
Of the companies you’re aware of that have considered CEM, what are the biggest hurdles?
The biggest hurdles are that most companies and few customers understand the process of creation of the collaborative and self-managed experience. Most companies barely understand their customer. Strativity did a study in late 2004 that was actually pretty shocking and reasonably disgusting in its findings. It got responses from 212 senior executives, 58 percent of whom said they didn’t deserve their customer’s loyalty; and 31 percent who said they actually had a commitment to the customers—meaning most executives don’t give a hoot about committing to those customers that they just gave such lip service to. That attitude and outlook in a customer-centered business ecosystem is the biggest hurdle by far. And I thought that unthinking dinosaurs died out when that comet hit Earth 65 million years ago.
The corporate paradigm. Companies are still largely in a mind set of “If we build it, they will buy it.” That’s not so and hasn’t been for a long time, but old habits die slow deaths. Today’s consumer is wealthier and better educated than any other in history. She (and it’s most often a female) is also time starved. Harvard Business School Prof. Shoshana Zuboff wrote a great book, The Support Economy , on the subject of how corporations still don’t get it when it comes to dealing with customers and seeing the world from a customer-centric perspective. If CEM is going to mean more than simply another three letters that describe an initiative to nowhere, vendors have to get customer centric.
In addition to the quantitative analyses that many of my clients have embarked on, there are also qualitative components of CEM. This involves measuring customers’ emotional responses to key experiences. Unlike the quantitative work where the hard part is gathering and integrating key data to analyze, the qualitative work usually means getting customers together in focus groups or panels and soliciting their feedback. Companies that do this are usually mature in the market research area, and one could argue that this is the “low-hanging fruit” of CEM.
However, very few companies are marrying the quantitative and the qualitative findings together, which would yield powerful insights into customer preferences. The data piece requires lots of skill and infrastructure. My prediction is that this is the next frontier.
The question any business has to ask itself is: Why excel at providing an excellent customer experience? Many of the world’s most profitable and/or biggest companies do not provide a great customer experience. They understand that the value proposition is mostly cost and convenience or sex appeal or chic. That is often the crux of the customer experience that the customer values. If the business messes up on technical support or botches a return or mishandles the order, the majority of customers are likely to forgive the business. Great customer experiences are part art and part science. Placing a monetary value on a given CEM initiative is not always easy, and initiatives that cannot be measured are far less likely to be approved. The advice to managers is to identify the specific financial cost of a poor experience and the expected financial benefit of improving the customer experience. It does not have to be an ROI statement, but it has to make sense to the person signing the checks.
As usual, the biggest problems have little to do with technology. The hardest part of adopting a customer-centric philosophy like CEM is getting corporate culture on board. The biggest hurdles: first, convincing management that customer experience is too big an issue to reside within a single department; second, convincing product teams, marketing, sales and service to enact possible changes that a customer-centric philosophy unearths—even when they sometimes run counter to the way they’ve been doing things for years.
Any final comments on CEM?
CEM—or the creation of the self-managed collaborative experience between a company and a customer—is becoming a necessary focal point for customer strategies as 2005 and beyond evolves. That means that it is not just something that would be cutting edge or provide competitive advantage but something that is of the essence for your business to progress and grow. If you don’t do anything about developing this customer experience so that you are teeming with advocates in an era where products and services are no longer the differentiator in a complete way, then you become one of the pack and die out—even without the benefit of the comet.
There’s a real danger here that CEM could turn into nothing more than a bad sequel to CRM. Dozens of vendors have already hopped on the new acronym bandwagon and are actively pushing what they call CEM software. The reality is that—just like CRM—CEM has much more to do with firms’ philosophy and organizational structure than technology. For example, even if the marketing department buys the best CEM software in the world, they’ve got no way of improving overall customer experience and customer satisfaction without collaborating with R&D, product development, customer service and sales. The point: Firms that buy into the idea of CEM shouldn’t buy a single new piece of software without organizing a CEM team and aligning it under an executive, above traditional departmental silos.
To make CEM real, it has to be systemic across all of the customer-facing departments. Customer feedback is hard to gather and often complex to interpret. To be successful, a business must first map out the specifics of the key interactions that matter most to customers, basing this map on the experiences of real customers. And don’t forget the feedback from two other sources: 1) customers who have fired you as their supplier of goods and services and 2) non-customers who have chosen the competition.
The last comment is that we as business leaders must become more savvy about the technologies that underlie and make possible the process changes we envision for better customer experiences. Concepts such as SOAP, HTTP, WSIF, BPEL, intra-enterprise web services, XML and WSDL are foreign ground for most of us. But for business leaders to partner with colleagues in the IT organization, there is no real option but to begin absorbing the new technologies and how they apply to solving real-world customer problems.
© 2005 Customer Relationship Management Association