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Introduction 00
CEM Background 02
Financial Return 14
Implementing CEM 15
Management Commitment 16
Aligned Plan-Strategies-Methods-Goals 17
Conclusion 19
Bibliography 24
EXECUTIVE SUMMARY
Customer Experience Management (CEM) is a
atic effort.
and dimensions of customer satisfaction. CEM When done properly, however, these efforts do
provides businesses with a tool to systematically deliver significant benefits that include higher
internal business improvement. The CEM framework that must be in place to suc-
The better a business can align its operations • Capture the voice of the customer
to accurately match what customers want and • Analyze data to find meaning and useful
business becomes. Customers are also more • Integrate information; communicate to the
satisfied; reducing churn and increasing spend- right person at the right time
ing. Delivering this dual value improvement, for • Improve the organization by intelligently ap-
the business and for the customer, is truly a win- plying what is learned
adjustments/improvements as needed
Implementing the CEM framework in each orga- The importance of customers must be recog-
nization has its unique challenges. There are, nized. Using a proven CEM framework ensures a
however, some common obstacles that business- business is intelligently paying attention to its cus-
es encounter while beginning the CEM journey. tomers – the most critical part of any business.
iv | Executive Summary
CUSTOMER EXPERIENCE MANAGE-
MENT THAT IMPROVES THE BOTTOM
LINE: A FRAMEWORK FOR IMPLE-
MENTING CEM
00.
Are customers the most important part of a busi-
A majority of businesses have still not established can realize strong benefits including an excellent
a clear framework for ensuring that it meets cus- Return on Investment (ROI).
tomer’s needs.
Customer Experience Management (CEM) is a
Businesses are often too narrowly focused on systematic approach to improve customer satis-
internal operations and even more obsessed with faction by understanding customer feedback and
immediate financial results. Limited to this short customer behavior and applying what is learned
term view, making a determined effort to see the inside the organization. Customer satisfaction
business from the customer perspective seems is clearly linked, through both experience and
like a useless expense. This belief, however, research, to business success. Satisfied custom-
does not match reality. Businesses that succeed ers indicate that a business is doing a good job
in applying a more customer centric approach of effectively delivering what it promises. In turn,
Introduction | 00
01.
satisfied customers they stay longer and spend
line.
creased revenue, improved efficiency).
To improve customer satisfaction, CEM collects It is easy to see how delivering dual value is a
and applies customer feedback along with other recipe for success. The key ingredient, however,
basic customer information to more effectively is knowledge of the customer. Without an effort to
align business activities to customer’s wants and understand the customer perspective, a business
needs. This creates a positive customer experi- is only able to see to its own boundaries.
mately leads to better financial performance. CEM needs to have certain critical pieces in-
While improving customer satisfaction can in- ity to improve customer satisfaction. The CEM
crease revenue, a customer centric approach Framework presented here describes the basic
strengthens a business in other ways as well. components needed to use customer feedback
With more in-depth customer knowledge, CEM as an improvement tool capable of delivering the
gives a business the opportunity to improve from dual value that is strongly connected to long term
two directions: from the internal business per- success and growth.
01 | Introduction
CEM BACKGROUND
The development of CEM is relatively new.
to explain a significant change in business suc- customers is not always easy, though. Some
cess (for better or worse). Customer satisfaction researchers estimate an 80% failure rate for
was not even mentioned as a possible cause in a customer centric initiatives to improve satisfac-
single case during this 60 year span of published tion. Employing a proven framework is one way
research. The importance of customer satisfac- to improve the chances for success.
garner more attention during the 1990s. Interest customer experience to ensure a positive result.
in the topic was likely due to several notable CEM How the customers “experience” or perceive their
successes, to the increasing amount of business interactions with business is the biggest factor in
research that connected customer satisfaction determining customer satisfaction level. The in-
to success, and to the growth of Information teractions between a business and its customers
Technology (IT) capability. The advancement of are at the center of the customer experience and
IT made it feasible to collect and process large the business’ ability to mange it.
Introduction | 02
03.
In a simplified representation, Figure 1 shows
systems, manufacturing and/or office equipment) ATM, drives the car, or places a call. Another
and processes (people and/or systems execut- type of touchpoint is when customers have direct
ing steps to achieve a desired output) that make interactions with the business such as sales calls,
products, provide services, and interact with cus- service/product inquiries, order placement, prob-
tomers. Procedures and rules guide the systems lem resolution, technical support, and service
and processes in order to produce consistent termination. Properly managed touchpoints that
ers have expectations developed by their internal An emotional response will be most powerful and
requirements (wants/needs), by sales & market- lingering impression a customer has to the touch-
03 | Introduction
Therefore, a customer’s general level of satis-
customer has after a touchpoint, either positive, the customer perspective. Their methods are
negative, or neutral, will be their major takeaway. heavily driven by internal needs without much
customer satisfaction are also potent persuad- The CEM Framework uses a systematic approach
ers (as well as predictors) in determining future to collecting and using available information (es-
customer behavior. Will they remain a customer? pecially customer feedback) to improve the busi-
Will they delay payment? Will they increase use ness (i.e. systems, processes, rules) in ways that
or add more services? Usually these decisions consistently delivers a positive experience for the
are determined by how the customer “feels” about customer and a positive resulting response. This
a business as a result of his or her experience requires considering the interests of the customer
Introduction | 04
05.
THE CEM FRAMEWORK
The CEM Framework describes the critical ele-
2.
3.
4.
Capture the voice of the customer
mental functions have to be in place, regardless 5. Measure CEM Value and Effectiveness
achieve positive results: Simply starting a CEM program will not produce
customer input. CEM takes advantage of existing say exactly what they want and how they want.
opportunities to hear and capture the voice of the Touchpoints: A business is usually already inter-
customer as well as developing additional chan- acting with customers. With proper training and
nels and opportunities for customer feedback. tools, employees can serve as the eyes and ears
Successfully capturing the voice of the customer of the business and capture comments and ob-
typically requires a multi-prong approach that can servations for the CEM database. Current tech-
Surveys and Questionnaires: The most a business the opportunity to provide information,
basic way to collect customer feedback is to ask resolve a problem, or note positive satisfiers.
customer is surveyed after a touchpoint the more Touchpoints have other advantages for collecting
likely they will participate and provide accurate in- feedback as well. Customers are more likely to
formation. Advanced survey methods use target- answer a few questions when asked as part of
ed questions that vary according to the customer the purchase or service process than they are to
and the touchpoint. Effective questionnaires are complete questionnaires or participate in sur-
during touchpoints can provide a better represen- One-to-One Interviews: These are opportunities
Request Feedback: Once prepared, a business Optimally, targeted programs will contact selected
should communicate its commitment to cus- customers at critical points in the lifecycle. Intel-
tomer satisfaction and encourage feedback. Use ligent use of contact strategies gathers in-depth
multiple forums (advertising, web site, account feedback and can affect a customer’s attitude at a
by providing several contact options like phone, For example, a customer in the 10th month of
email, and social networks like Facebook and a 12 month contract who has had one negative
Twitter. Plus, have a straightforward and simple incident may be more likely to remain a customer
way to leave comments directly at the web site. if the business contacts them.
On-line Searches/Notifications: Search the web Accomplishing this first critical piece of the frame-
and social media for comments made about the work takes organizational effort and discipline.
Successfully capturing the voice of the customer Analyzing unstructured data requires techniques
will mean accumulating a significant amount of that may be less familiar. Learning to use un-
data. Plus, as the CEM program builds so will the structured data, however,
volume and the diversity of the data. The right is vital since it contains a wealth of useful cus-
methods to analyze data are needed in order to tomer information. Mining unstructured data can
The techniques used to analyze data should align ness, that go beyond the information that struc-
with the kinds of information being collected. tured data can provide.
delights a customer.
through the organization. When various pieces of
Unstructured data leads to unguided discoveries, plete facts and the lack of coordinated information
challenging assumptions, and identifying new ar- creates inconsistency and mixed messages to the
eas to explore with questionnaires and structured customer. An integrated approach provides syn-
The next step in the CEM Framework is gather- and customer service.
tomer feedback, customer account information, the right information to the right people at the right
call center statistics, and other data are combined time. Every employee interacting with a customer
in a central repository so it is readily available for has access to all the information needed to pro-
coordination, comparisons, connections, categori- vide a satisfactory result. Having coordinated and
Only when information is properly assimilated “memory” as the customer, which can be a criti-
can it be processed and meaningfully distributed cal piece of delivering a positive experience. This
service can easily see average call length and application. It takes intelligent use of technol-
average on-hold time for the day, the week, and ogy to integrate and communicate information
centric culture.
tion delivers products and services and how it A business that makes improvements in a stra-
interacts with customers. It is only when informa- tegic way to build organizational success and
tion is used to take meaningful action that CEM customer value will see more positive results.
of CEM is to gain a financial benefit, it is improve- A business with a functioning CEM Framework
ments gained in performance, efficiency, reliabil- addresses systematic issues with interactions and
ity, friendliness, and service that result in satisfied with product/service, and it identifies and dis-
customers and in turn builds a strong business. seminates activities and approaches that achieve
The direction and activities for improvement matures and more accurately and purposefully
depends on the business and what is learned segments and categorizes customers, the mes-
through capturing and analyzing customer feed- sages and activities can be adapted for individual
back. Generally, improvement priorities are customers, better managing the customer life-
•
First Call Resolution (business
perspective)
Churn Rate
suring CEM results. A 360˚ approach includes As the CEM program grows and matures, more
Key Performance Indicators (KPIs) with both an advanced measurements can be used. For
outside-in (customer) perspective and an inside- example, an advanced CEM effort attempts to
out (business) perspective. KPIs should answer differentiate “good” customers from “bad” custom-
both questions of: How well is the business doing ers, focuses on keeping “good” customers, then
from the business prospective at meeting the measures how well it identifies and retains them.
• Cost of Incident
place.
cator, the recent surge in interest for CEM has led If CEM is not effectively achieving realistic objec-
to new ways to effectively measure customer at- tives, then as with any business process, ad-
titudes. These emerging CEM KPIs have shown justments and improvements to the framework
an even stronger correlation to revenue. For implementation are necessary. It may take some
instance, the more likely a customer is to recom- time to learn the CEM methods that work best for
mend a business to friends, family, or colleagues a particular business situation. Creating an ef-
(i.e. NPS), then the more emotionally connected fective CEM program is a journey, not a one time
or loyal they feel toward the business. A higher effort. With regular measurement and review,
NPS correlates directly to higher revenue. No the CEM program can build and improve using
single metric, however, paints a complete picture. objective facts instead of guesses and unproven
customers are important, so is the financial bottom line. A business also has to make a profit to survive.
The role of CEM is to make sure the business has the old business adage that it costs more to find
satisfied customers, which in turn, leads to better a new customer than it does to keep an existing
retention and higher loyalty. But ultimately the one. Also, when a business keeps customers lon-
goal of CEM is to have a direct impact on the bot- ger, new customers are not needed at the same
tom line through: rate. With lower customer churn, a business can
• Increased Customer Lifetime Value: Higher and advertising costs. Highly satisfied customers
customer retention means more revenue per are also much more likely to mention or recom-
customer as well as a better return on the cost mend a business (or product/service), providing
of getting and serving typical customers. Plus, free and highly effective advertising.
lifetime than other customers. CEM that focuses The impact some CEM programs have had on
on discovering and implementing methods to the bottom line were dramatic. Some businesses
deliver high levels of customer satisfaction can have experienced a 40% increase in revenue
lead directly to increased revenue. What could and an 80% reduction in marketing costs. These
be better for the bottom line? positive financial outcomes (as well as other
strategies.
Framework.
CEM must be tailored to fit individual organiza- priorities. Then CEM ends up as another expen-
tions, putting the elements of the framework into sive, abandoned management experiment.
place that best fits the circumstances. Management also has the authority to put in place
There are, however, additional factors that deter- the people and tools needed to make it operate,
mine how successful the CEM Framework can then the results will be anemic as well. To be
impact customer satisfaction and help the bottom effective, management must be involved and be
line. Careful consideration of the following issues committed to CEM by investing adequate resourc-
when implementing the framework can signifi- es. Also, a customer centric approach requires
cantly improve the chance for success. a cross-functional effort that includes Sales,
Implementing the CEM Framework takes man- involvement by top management creates the suc-
time, resources, and attention from the organiza- to achieve shared organizational CEM goals.
include a coherent strategy, defined implemen- be an expensive effort that lacks payback. The
tation methods, and realistic goals that provide CEM Framework is effective when objectives-
measurable benefits to the business. While strategies-methods are all aligned to achieve
technique, it is usually not a successful one. The START SMALL AND BUILD
best chance for success is when all the dots are Successful CEM programs frequently start small
connected and key elements of CEM are fleshed then build on success. Building an integrated
out. This includes complete plans for: CEM program has a significant level of difficulty,
• Data collection and entry methods for failure. The best implementation plan may be
• Employee buy in and training one that constructs the CEM program slowly in
• Identifying process owners Starting small will also allow a business to see
To be effective, these CEM efforts have to be basic approach can more readily show a positive
aligned to achieve particular business goals. Im- financial Return on Investment. In the begin-
proving customer satisfaction should be achieved ning, all CEM needs to produce positive results
On the other hand, getting started with a large in- sary delay. Mistakes will be made and learning
vestment and with complicated goals could mean curves have to be overcome - no matter when or
it is years before CEM shows a positive financial how CEM gets rolling. The sooner a business
return or real success. In this scenario, CEM takes steps to implement the framework, the
appears like an endless expense that is always in sooner positive benefits can be achieved. The
danger of the chopping block. Starting small and first step is to get started.
than a large business with a huge customer base. There are several vendors that provide CEM
A large business may be able to significantly applications and integrated CEM technologies.
invest in CEM over time and still see an excellent These include off-the-shelf packages for small
return with continued improvement in customer and medium sized businesses as well as custom
loyalty and retention.
CONCLUSION
Most business managers are familiar with the As Figure 3 shows, all the operational segments
principles described by Norton and Kaplan in their are a part of the value chain – the creation and
popular book, The Balanced Scorecard. They delivery of something of value to the customer.
suggest that successful organizations pay atten- The typical business has departments like Sales
tion to four key organizational segments: finance, & Marketing, Product Development, Production,
employee growth, internal processes, and cus- Shipping and Receiving, Customer Service/Tech-
Employing the CEM Framework is a very effec- These elements of the business are either add-
tive way to pay attention to customers as The ing value (contributing a feature or service that
Balanced Scorecard advises. But as this paper customers are willing to pay for) or removing
shows, the CEM Framework also provides valu- value (an expense that contributes nothing in
able input and benefits to all the areas covered terms of what customers want and are willing to
in The Balanced Scorecard, even employee pay for). Value has two main components – price
satisfaction, since interacting in ways that please and image. Obviously price is the actual cost to
19 | Conclusion
20.
Figure 3 : The CEM Value Chain
Conclusion | 20
21.
pay for). Value has two main components – price
of higher profitability.
an overall customer perception on value. A final Using the CEM Framework allows a business to
Value Score expresses this perception based on continuously improve customer experiences in
their touchpoint experiences. The Value Score ways that ultimately builds customer satisfaction
may be positive, negative, or neutral. and loyalty; improving the Value Score by improv-
havior over their customer lifecycle; in particular: Customers who are not happy tend to express
• Attraction - Bringing in new customers their money elsewhere. The best way to keep
• Enhance Relationships – Satisfied cus- customers happily opening their wallet is to make
• Retain Customers – Prevent defection and provement is done intelligently, strengthening the
lower churn rate value chain in ways that accounts for the needs
The linked chain of performance in various busi- growth and success will be the result.
which in turn affects customer behavior; bringing Who would have thought that customers, the
in more revenue (through more customers and people who actually pay, are the key to profitabil-
ity?
21 | Conclusion
ABOUT THE AUTHOR:
Federico Cesconi is the CEO of CustVox (http://
He was appointed to his current position in No- Award 2006 in Data Mining, the European Insight
vember 2010 with responsibility for both business Award 2007, and the 1-to-1 Gartner Award 2008.
insights and the customer insights area. Federico earned a Masters in Business Adminis-
the organization.
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<http://www.cesconi.com/?p=166>. October 18, 2010.
“Tools and Techniques to Deliver a 360˚ Customer Experience.” Presentation available at <http://www.
cesconi.com/documents/CX_EXCHANGE_2010.pdf>. November 22, 2010.
Cooper, Lou. “How to Retain Customers and Build Brand Loyalty.” Marketing Week Sept 9, 2010. 22-23.
Crosby, Lawrence and Brian Lunde. “When Loyalty Strategies Fail.” Marketing Management Sept/Oct
2008 12-13.
Dyche, Jill. “Suiting Up for CRM’s Next Wave.” Baseline July/Aug 2010 26-27.
Fawcus, Chris and Syed Hasan. “Managing Risk in a Customer Driven Economy.” CMA Management
Dec/Jan 2009 18-19.
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and Customer Profitability at the Individual Level.” Journal of Marketing Management 22 (2006): 245-66.
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22-29.
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tion.” Journal of Marketing Management 22 (2006): 135-68.
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23 | Bibliography
Customer Experience Management
that Improves the Bottom Line:
A Framework for Implementing CEM
Federico Cesconi
cesconi.com
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