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The Business Case for Customer Experience
You've just completed your well prepared presentation to senior management emphasizing the need to implement a customer experience strategy, and it couldn't have gone any better. The participant's eyes lit up when they learned about strategies employed by the most customer-centric companies like Ritz Carlton and Nordstrom. Their ears perched when listening to supporting statistics, and quotes from customer experience gurus. Senior management nodded through slide after slide, no one protested any point, and all proclaimed their agreement to the plan. Things couldn't have gone any better. With management's agreement - it was off to the customer experience races!
I hate to be a party pooper but it's rarely that easy. When management doesn't challenge or question any element of your presentation, you should be worried.
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Document Transcript:
The Business Case for Customer Experience
By Lior Arussy
You've just completed your well prepared presentation to senior management
emphasizing the need to implement a customer experience strategy, and it couldn't have
gone any better. The participant's eyes lit up when they learned about strategies
employed by the most customer-centric companies like Ritz Carlton and Nordstrom.
Their ears perched when listening to supporting statistics, and quotes from customer
experience gurus. Senior management nodded through slide after slide, no one
protested any point, and all proclaimed their agreement to the plan. Things couldn't have
gone any better. With management's agreement - it was off to the customer experience
races!
I hate to be a party pooper but it's rarely that easy. When management doesn't
challenge or question any element of your presentation, you should be worried.
Universal nodding is not synonymous with agreement or acceptance for unanimous
nodding usually means one of two things:
1. They do not understand the magnitude of the strategy and what it entails; or
2. They believe that they can implement the strategy without any additional
investment or reallocation of existing organizational resources.
Management often believes that a customer-centric strategy is "common sense." While
many of us might agree with that assessment, the fact remains that customer experience
strategies are not common sense. If indeed they were, most companies would be
implementing them, rather than hemorrhaging customers.
Our firm is often called upon to save a failed customer experience initiative at the last
minute. What many of these failed initiatives share, as we quickly discover, is the
absence of a sound business case with predefined objectives and time frames. This is
the very reason why so many senior executives fail to take customer experience
initiatives and strategies seriously. Rather than taking ownership, senior executives will
delegate the initiative to some unlucky middle manager who tries for months on end to
build buy in and consensus from siloed functions who either claim that they are "already
doing it" or "have no time to do it" because end of the quarter is approaching, and they
are too busy trying to meet this or that number before its arrival. So after the customer
experience trial period ends, the unlucky middle manager has little to show for his efforts
besides some training sessions and the annual (or quarterly) customer survey. No
significant transformation took place and while there may be loads of customer survey
research, they are no closer to becoming a customer centric company like Ritz Carlton
than they were when they "launched the strategy."
How did things go so terribly wrong? What happened to the intentions and the support of
senior management? Again, in the absence of a financially driven business case, few
senior executives will be willing to invest new resources or reallocate existing resources
to this endeavor. While common sense might buy you some workshops, real
transformation will only take place with a proper budget, which in turn can only be
realized through a credible financially driven business case highlighting the economicbenefits of a customer experience strategy.
While you might be working in sales, marketing or IT, it's time to start speaking the
language of senior executive "buy-in" - the language of finance. Effective customer
experience strategies should both increase revenue and lower costs. They should
increase top line metrics such as revenue per customer, number of customer referrals,
and overall relationship longevity. On the cost side, customer strategies should lower the
costs relating to sales, service and customer acquisition.
The financial benefits of customer strategies can broadly be categorized into five
categories known as the 5Ps of customer actions:
· Preference of Company or Product - Involves product or service-related
purchases by new customers.
· Portion of Overall Customer Budget - involves gaining a larger portion of the
customer's total budget.
· Premium Price - is about the ability to charge a higher price, which signifies that
the product is perceived by customers as superior, differentiated, and worth their
business.
· Promotion of Company or Product - involves providing referrals to friends and
peers, as well as a willingness to support the product publicly. Public support
may include endorsements or press interviews, but is usually limited to sharing
opinions through blogs, social networks, and forums (public and private).
· Permanence of Overall Relationship Longevity - is the ultimate measure and
involves extending the length of customer relationships.
In order to truly capture the financial benefit of customer strategies, it is important to
incorporate two important concepts - business at risk and business at growth. Business
at risk reflects revenue streams that a company stands to lose by providing customers
with inferior quality experiences. Business at growth reflects all additional revenue that
can be generated by providing customers with high quality experiences. Business cases
that incorporate both business at risk and business at growth will stand a greater chance
of gaining senior executive support.
However, despite the importance of customer-experience economics, few executives
know even the basic numbers that are so critical to establishing a financially driven
customer experience business case. As our annual global CEM benchmark study
highlights, the majority of executives still treat customer experience economics as an art
rather than as a science.
During a recent discussion with corporate executives, the topic of excessive and often
conflicting initiatives was brought up. Executives felt overwhelmed by the sheer volume
of leadership, engagement, product, service and customer initiatives, and were unsure
of the one or ones that they would need to prioritize. It was and remains my contention
that organizations should always concentrate their time and resources on the customer
initiative. I reminded the group that the customer experience should never be seen as
"one more initiative" but as the sole initiative driving the organization. Only when seen in
this context, could we begin to address questions such as "why do we need to lead?"
and "why do we want employees to be more engaged?" The answer to these and
related questions is "to deliver greater value to customers." Their failure to recognize this
eternal truth was linked to the absence of customer experience economics.So next time you are going to give a presentation to executives highlighting the need to
implement a customer experience strategy, imagine yourself appearing before a group
of investors trying to raise funds for a new venture. Recognize that this group of
investors is being courted by many individuals all of whom are seeking limited funds for
their own respective endeavors. You will be competing with these individuals, and your
success will ultimately be predicated in large part, on a credible business case
demonstrating the financial benefits of a customer strategy. When presenting this
business case, you'll likely receive fewer nods and more questions - but ultimately gain
true management buy in and commitment!
About the Author:
Lior Arussy is an author, visionary, consultant and creative catalyst in the areas of
creating delightful customer experiences and executing profitable customer strategies.
Arussy's company, Strativity Group, Inc., advises both Global 2000 companies as well
as emerging businesses around the world. Clients include Nokia, Computer Associates,
SAP, American Management Association, Seagate Technology, Honeywell, Siemens,
Lockheed Martin, Wyeth, University of Pennsylvania, FedEx, CATIC, and Nordea. For
his thought leadership and contribution to the industry, Arussy receive CRM Magazine
"2003 Influential Leaders" award and served as a juror on Fast Company's
Customer First Awards 2005.
www.strativity.com
By Lior Arussy
You've just completed your well prepared presentation to senior management
emphasizing the need to implement a customer experience strategy, and it couldn't have
gone any better. The participant's eyes lit up when they learned about strategies
employed by the most customer-centric companies like Ritz Carlton and Nordstrom.
Their ears perched when listening to supporting statistics, and quotes from customer
experience gurus. Senior management nodded through slide after slide, no one
protested any point, and all proclaimed their agreement to the plan. Things couldn't have
gone any better. With management's agreement - it was off to the customer experience
races!
I hate to be a party pooper but it's rarely that easy. When management doesn't
challenge or question any element of your presentation, you should be worried.
Universal nodding is not synonymous with agreement or acceptance for unanimous
nodding usually means one of two things:
1. They do not understand the magnitude of the strategy and what it entails; or
2. They believe that they can implement the strategy without any additional
investment or reallocation of existing organizational resources.
Management often believes that a customer-centric strategy is "common sense." While
many of us might agree with that assessment, the fact remains that customer experience
strategies are not common sense. If indeed they were, most companies would be
implementing them, rather than hemorrhaging customers.
Our firm is often called upon to save a failed customer experience initiative at the last
minute. What many of these failed initiatives share, as we quickly discover, is the
absence of a sound business case with predefined objectives and time frames. This is
the very reason why so many senior executives fail to take customer experience
initiatives and strategies seriously. Rather than taking ownership, senior executives will
delegate the initiative to some unlucky middle manager who tries for months on end to
build buy in and consensus from siloed functions who either claim that they are "already
doing it" or "have no time to do it" because end of the quarter is approaching, and they
are too busy trying to meet this or that number before its arrival. So after the customer
experience trial period ends, the unlucky middle manager has little to show for his efforts
besides some training sessions and the annual (or quarterly) customer survey. No
significant transformation took place and while there may be loads of customer survey
research, they are no closer to becoming a customer centric company like Ritz Carlton
than they were when they "launched the strategy."
How did things go so terribly wrong? What happened to the intentions and the support of
senior management? Again, in the absence of a financially driven business case, few
senior executives will be willing to invest new resources or reallocate existing resources
to this endeavor. While common sense might buy you some workshops, real
transformation will only take place with a proper budget, which in turn can only be
realized through a credible financially driven business case highlighting the economicbenefits of a customer experience strategy.
While you might be working in sales, marketing or IT, it's time to start speaking the
language of senior executive "buy-in" - the language of finance. Effective customer
experience strategies should both increase revenue and lower costs. They should
increase top line metrics such as revenue per customer, number of customer referrals,
and overall relationship longevity. On the cost side, customer strategies should lower the
costs relating to sales, service and customer acquisition.
The financial benefits of customer strategies can broadly be categorized into five
categories known as the 5Ps of customer actions:
· Preference of Company or Product - Involves product or service-related
purchases by new customers.
· Portion of Overall Customer Budget - involves gaining a larger portion of the
customer's total budget.
· Premium Price - is about the ability to charge a higher price, which signifies that
the product is perceived by customers as superior, differentiated, and worth their
business.
· Promotion of Company or Product - involves providing referrals to friends and
peers, as well as a willingness to support the product publicly. Public support
may include endorsements or press interviews, but is usually limited to sharing
opinions through blogs, social networks, and forums (public and private).
· Permanence of Overall Relationship Longevity - is the ultimate measure and
involves extending the length of customer relationships.
In order to truly capture the financial benefit of customer strategies, it is important to
incorporate two important concepts - business at risk and business at growth. Business
at risk reflects revenue streams that a company stands to lose by providing customers
with inferior quality experiences. Business at growth reflects all additional revenue that
can be generated by providing customers with high quality experiences. Business cases
that incorporate both business at risk and business at growth will stand a greater chance
of gaining senior executive support.
However, despite the importance of customer-experience economics, few executives
know even the basic numbers that are so critical to establishing a financially driven
customer experience business case. As our annual global CEM benchmark study
highlights, the majority of executives still treat customer experience economics as an art
rather than as a science.
During a recent discussion with corporate executives, the topic of excessive and often
conflicting initiatives was brought up. Executives felt overwhelmed by the sheer volume
of leadership, engagement, product, service and customer initiatives, and were unsure
of the one or ones that they would need to prioritize. It was and remains my contention
that organizations should always concentrate their time and resources on the customer
initiative. I reminded the group that the customer experience should never be seen as
"one more initiative" but as the sole initiative driving the organization. Only when seen in
this context, could we begin to address questions such as "why do we need to lead?"
and "why do we want employees to be more engaged?" The answer to these and
related questions is "to deliver greater value to customers." Their failure to recognize this
eternal truth was linked to the absence of customer experience economics.So next time you are going to give a presentation to executives highlighting the need to
implement a customer experience strategy, imagine yourself appearing before a group
of investors trying to raise funds for a new venture. Recognize that this group of
investors is being courted by many individuals all of whom are seeking limited funds for
their own respective endeavors. You will be competing with these individuals, and your
success will ultimately be predicated in large part, on a credible business case
demonstrating the financial benefits of a customer strategy. When presenting this
business case, you'll likely receive fewer nods and more questions - but ultimately gain
true management buy in and commitment!
About the Author:
Lior Arussy is an author, visionary, consultant and creative catalyst in the areas of
creating delightful customer experiences and executing profitable customer strategies.
Arussy's company, Strativity Group, Inc., advises both Global 2000 companies as well
as emerging businesses around the world. Clients include Nokia, Computer Associates,
SAP, American Management Association, Seagate Technology, Honeywell, Siemens,
Lockheed Martin, Wyeth, University of Pennsylvania, FedEx, CATIC, and Nordea. For
his thought leadership and contribution to the industry, Arussy receive CRM Magazine
"2003 Influential Leaders" award and served as a juror on Fast Company's
Customer First Awards 2005.
www.strativity.com
