Will CEM Ever Challenge its Rich Cousin CRM?

    September 14, 2006

Recently Customer Experience Management (CEM) has started to get more profile but it is still just a good idea emerging into an area of marketing thought currently dominated by Customer Relationship Management (CRM).

A quick check on Google cites approximately 250 times more listings for CRM as it does for CEM. According to Overture, for every one person searching on CEM almost 90 search on CRM.

Yes, CEM is currently a poor cousin to CRM. If it is to grow up and become a powerful business tool it must move out of marketing and directly link itself to business outcomes.

Having actively worked in CEM for the past three years I believe that there are four areas that are currently holding CEM back from its full potential:

1. Viewing customer experiences and business value in isolation

Bernd Schmitt’s, often quoted definition of CEM as “the process of strategically managing a customer’s entire experience with a product or a company(1)” is flawed to the extent that it doesn’t explicitly connect the experience to business outcomes.

Forget the motherhood statements, lets get practical. We are all trying to meet company goals, whether they be revenue, profit or market share. If we can’t demonstrate how our investment in customer experience improves those business outcomes then we’re not going to be here very long.

As an example of this type of gap we recently worked with a financial services organization that conducts tens of thousands of customer surveys a year, gathering a range of experience data. Yet at no time did they link the survey data with customer records and profitability patterns, even anonymously. As a result they could tell you volumes about the customer experience but nothing about the incremental business value of that experience. In order to get traction; the customer experience, the cost to implement and the business benefit need to be directly linked and stated in cold hard terms.

2. Companies still measure the wrong outcomes.

Thankfully, some companies are starting to see that customer satisfaction scores are almost meaningless in predicting customer behavior. However, even with a range of research to support this view(2) , many still swear by them. Customer satisfaction ratings will stay around for awhile because they are integrated into so many KPIs and bonus plans but satisfied customers are now just table stakes: you have to have them but they don’t differentiate you.

So what should you measure? Start with something useful: demonstrated customer loyalty, i.e. how do individual customers actually behave in terms of re-purchase, customer lifetime and customer profitability. They are a basis for understanding the value of each customer and in turn the value of their experience with your company. Remember, if you don’t measure the right outcomes you will be forever chasing the wrong drivers.

3. Companies don’t know what drives behavior

I’m still flabbergasted by the number of organizations that collect immense amounts of data (transactions, web stats, customer surveys) but fail to analyze it to understand which elements of the customer’s experience drive behavior. If you don’t know which customer experiences drive behavior how can you do any customer experience management?

One of our clients undertakes rolling six monthly customer surveys. A few surveys ago we identified that “documentation” was a key driver of client discontent and gave them some concrete suggestions on changes to make. Over the course of six or eight months they resolved the issues and their score lifted. This resolved customer discontent and reduced help desk support requirements.

In another case a credit card company was about to build a new call centre to reduce customer hold times because a survey indicted that it was a driver of customer satisfaction. Some additional focused research and analysis showed that yes customers did want the phone answered quickly and it was a driver of customer satisfaction but it was only a one percent driver of the key customer behavior: loyalty. There were many more important things to do first.

Understanding which customer experiences drive customer behavior allows you to focus your attention on the few important areas not the unimportant many areas.

4. Waiting for perfection

If I had 10cents for every customer that told me their data was no good or “we’re waiting until our new CRM/call centre/data matching/etc/ system to be implemented,” I could retire.

The truth is that there is always something that you can do with what you have now. Plus, if you get started immediately you will have some runs on the board and be better prepared when the CRM/call centre/data matching/etc/ system finally arrives.

These are certainly not insurmountable barriers. If we can get CEM over them, it will be a significant driver of company profitability and value in the medium term. If we can’t then it will become just another good idea that gathers dust.

References: 1. Schmitt, B. (2003) Customer Experience Management, The Free Press, New York, 2001. 2. Reichhel, F. (2002) The One Number you Need to Grow, Harvard Business Review, 2002

Adam Ramshaw is a cofounder and Director of Genroe . With practical global and local experience in measuring and managing customer retention he has advised a range of clients from large listed companies to small business on how best to leverage their customer information. Adam is a speaker domestically and internationally on developing and implementing customer focused programmes and data analytics.