CUSTOMEREXPERIENCEMANAGEMENTFOR STARTUPS

Bob E. Hayes, PhDCCO, TCELab.comPresident, businessoverbroadway.com@tcelab @bobehayes

© 2012 TCELab LLC. All rights reserved. Unauthorized duplication or distribution is prohibited.

Background

• Bob E. Hayes is Chief Customer Officer of TCELab and President of Business Over Broadway (B.O.B.). Received PhD in industrial-organizational psychology. Conducts research and provided consultation on how companies can use customer data to drive business growth

• Writes (e.g., books, blog, articles) on suchtopics as customer feedback program bestpractices, analytics, customer experienceand customer loyalty measurement

• Implements customer feedback programs and directs global customer feedback research projects for many enterprise companies:

Overview

• What is Customer Experience Management (CEM)?

• Impact of the Customer Experience on Customer Loyalty

• Building a World-class CEM program• The Key to Business Success is Customer

Loyalty• What can startups do?

Customer Experience Management (CEM)

• Customer experience is thesum of all experiences acustomer has with a supplierof goods/services

• Customer Experience Management (CEM) is the process of understanding and managing your customers’ interactions with and perceptions of your brand / company

Why Develop a CEM Strategy?

• Customer experience impacts customer loyalty

• Decreasing customer defections by 5% increases profits from 25% to 85%*

* Reichheld, F. F., & Sasser, W. E. Zero defections: Quality comes to service. Harvard Business Review, Sept-Oct. 1990.

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25%

50%

75%

100%

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Branchdeposits

Credit card Creditinsurance

Insurancebrokerage

Industrialdistribution

Industriallaundry

Officebuilding

management

Software

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Customer Experience Management Program

StrategyOverarching guidelines around the

company’s mission and vision regarding the company objectives/goals

Governance The guidelines and rules (how the program is directed); roles and responsibilities (how dataare used and by whom ); and change requests (how changes to the program are made)

Business Process IntegrationIntegration of customer feedback program (including

processes and data) into business operations and processes

MethodData collection (social media, surveys, brand communities);

Measurement (experience/ loyalty/sentiment)

ReportingHow customer feedback data are analyzed, summarized and disseminated throughout the

company

ResearchSystematic research using customer feedback data to gain additional customer

insight

Loyalty Leaders vs. Loyalty Laggards

Adoption Rate

Customer Feedback Program Component

Loyalty Leaders1

Loyalty Laggard

s

∆ in Adoption

Rate

Strategy/Governance 89% 71% 18%Business Process Integration

86% 59% 27%

Method 72% 60% 12%

Reporting 70% 60% 10%

Applied Research 80% 51% 31%1 Loyalty Leaders defined as respondents who have customer loyalty percentile ranking of 70% or higher. Loyalty Laggards defined as respondents who have customer loyalty percentile ranking lower than 70%.

Source: Hayes, B. E. (2009). Beyond the ultimate question: A systematic approach to improve customer loyalty. Quality Press. Milwaukee, WI.

Strategy/Governance

Customer feedback results are as important as financial measures in making business decisions.

Customer feedback is included in the company's strategic vision, mission and goals.

Customer feedback results are used in executives' objectives and incentive compensation.

A top executive (e.g., CEO, VP) is a champion of the customer feedback program.

Customer feedback results are used in front-line employees' objectives and incentive compensation.

40 50 60 70 80

Companies who did not Adopt PracticeCompanies who Adopted Practice

Industry percentile rankingof customer loyalty

1. CF is as important as financial measures in making business decisions

2. Included in vision/mission/ goals

3. Executive incentive comp.

Strategy/Governance

• Incorporate customer feedback into vision, mission, and goals– Include in employee on-boarding process– Use in setting company goals

• Include customer feedback in decision-making process– Executive reports customer results at executive

meetings– Present customer feedback data in company

meetings, official documents

• Use customer feedback when setting executive’s objectives and incentives– Use key metrics (business areas, customer loyalty)

Business Process Integration

Customer feedback results are included in the company/executive dashboards.

Customer feedback program is integrated into business processes and technology (e.g., CRM system).

All areas of the customer feedback program (e.g., process and goals) are communicated regularly to the entire company.

The resolution of customer issues that are identified using the customer feedback program is integrated into the company's Customer Relationship Management system.

40 50 60 70 80

Companies who did not Adopt PracticeCompanies who Adopted Practice

Industry percentile rankingof customer loyalty

1. CF included in executive dashboards

2. Program integrated into business process and technology

3. Program processes/ goals communicated to entire company

Business Process Integration

• Include results of customer feedback in executive dashboards– Track loyalty and customer experience

• Communicate customer feedback program processes/ goals to entire company– Include in newsletters, emails– Develop customer-related employee portal on

intranet site– Metrics/Methods used

Method

Web surveys are used to collect customer feedback.

Customer satisfaction surveys are conducted by our own employees using in-house developed tools.

Multiple methods of collecting customer feedback are used (e.g., Relationship survey, transactional survey,

Web site survey).

Telephone surveys are used to collect customer feedback.

40 50 60 70 80

Companies who did not Adopt PracticeCompanies who Adopted Practice

Industry percentile rankingof customer loyalty

1. Web surveys

Reporting

Customer feedback results are shared throughout the company.

Customer feedback results are benchmarked against competitors and industry averages.

Web-based reporting tools are used to report customer feedback results to employees.

Results of customer satisfaction research are presented externally (e.g., conferences, user groups, thought-leader events).

Results of customer satisfaction research are presented internally (through employee portal, newsletters).

Customer feedback results are shared only at executive/management level.*

40 50 60 70 80

Companies who did not Adopt PracticeCompanies who Adopted Practice

Industry percentile rankingof customer loyalty

1. CF results shared throughout company

Method and Reporting

• Use Web-based surveys to collect customer feedback– Facilitates communication through automation– Improves ease of integration with other

business systems (e.g., CRM)

• Share customer feedback results throughout the company– Keeps employees focused on customer-

centric goals– Facilitates customer-centric culture

Research

Statistical relationships are established between customer feedback data and operational metrics (e.g., turnaround time, hold time).

Applied research using customer feedback data is regularly conducted.

Statistical relationships are established between customer feedback data and other constituency metrics (e.g., employee satisfaction or partner satisfaction metrics).

Existing information from customer databases is used to help segment customer feedback data.

Statistical relationships are established between customer feedback data and business metrics (e.g., revenue, margin).

40 50 60 70 80

Companies who did not Adopt PracticeCompanies who Adopted Practice

Industry percentile rankingof customer loyalty

1. Operational linkage established

2. Applied research regularly conducted

3. Constituency attitude linkage established

Research

• Validate customer feedback program– Ensure results are reliable, valid and useful– One of first research projects that need to be conducted

• Develop programmatic research around customer• Establish statistical relationships between customer

feedback data and operational metrics (e.g., turnaround time, hold time) and other constituency metrics (e.g., employee satisfaction or partner satisfaction metrics)– Manage customer relationships using operational

metrics– Expand customer ecosystem; manage all constituencies

Summary of Best Practices

• Loyalty leaders build a customer-centric culture by:

1. Using customer feedback to set vision and manage business

2. Integrating customer feedback into business processes

3. Communicating process, goals and results of all customer programs to entire company

4. Conducting in-depth customer research– Integrate different business data (operational,

financial, customer feedback), to reveal deep customer insights

What can startups do?

• Start at the top– Executive education about CEM– Consider including in mission statement

• Formalize customer feedback– Web site, Annual customer survey

• CRD; see remaining slides• Surveygizmo.com, surveymonkey.com,

limesurvey.org

• Share feedback companywide

Customer Loyalty and Growth

• Business growth relies on three types of customer loyalty

0 1 2 3 4 5 6 7

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Frederick Reichheld. The Loyalty Effect. Harvard Business School Press, 1996

Base Profit

Profit from increased purchases and higher balances

Profit from reduced operating costs

Profit from referrals

Profit from price premium

Customer acquisition cost

Growth is all about:RetentionAdvocacyPurchasing

Years

Customer Loyalty and Business Growth

• Different types of customer Loyalty

BusinessPrograms

MarketingSales

Service

CustomerDevelopment

(cross/up-sell)

FirmValue

CustomerLifetime

Value

CustomerAcquisition

CustomerRetention

BusinessPrograms

Marketing

Sales

Service

2. NewCustomers(Acquire through Advocacy Loyalty)

FirmValue

CustomerLifetime

Value

1. CustomerRenews

(Retention Loyalty)

3. CustomerBuys More

(cross/up-sell throughPurchasing loyalty)

Productdevelopment

Infrastructure

Read more about the RAPID loyalty approach

Renew service agreementBuy from competitor

Continue buyingRecommend

Buy moreBuy different products

Expand usage across company

Retention

Advocacy

Purchasing

Customer Relationship Diagnostic (CRD)

• Measures critical components of the health of the customer relationship– Customer loyalty– Customer experience (e.g., product, ease, support, communication)

• Quantifies the value of different types of customer loyalty– Annual revenue growth through word-of-mouth– Annual revenue growth through up/cross-selling– Annual revenue at risk due to churn

• Identifies customer experience improvement solutions that will improve customer loyalty while maximizing ROI/Net revenue

• Provides competitive benchmarking information - See where you rank against competitors

CRD: Asks only essential questions

• Loyalty-based survey with less than 20 questions

• RAPID Loyalty Measurement– Retention Loyalty (1-2 questions)– Advocacy Loyalty (1-3 questions)– Purchasing Loyalty (1-2 questions)

• Customer Experience Measures– 7 Business area questions (e.g., product quality, support, responsiveness)– 1-2 open-ended questions (e.g., what would you change?; one word to

describe company)

• Relative Performance Assessment - Competitive Benchmarking (C-PeRk)– 2-3 Questions

• Company-specific questions– 5 Questions – Customer tenure, Decision influence, Job level, Job function

Customer Relationship Diagnostic

Customer Loyalty and Customer Experience Indices / Measures1

Addresses Business Growth Survey Questions Scores

Retention Loyalty Index (RLI) Will your customers remain with / not leave you?

Renew service contract, Use competitor*

Scores can range from 0 (low retention loyalty) to 10 (high retention loyalty)

Advocacy Loyalty Index (ALI) Will your customers promote you?

Overall Satisfaction, Recommend, Continue purchasing / using

Scores can range from 0 (low advocacy loyalty to 10 (high advocacy loyalty)

Purchasing Loyalty Index (PLI) Will your customers invest in additional product / service offerings?

Purchase additional services, Expand usage

Scores can range from 0 (low purchasing loyalty) to 10 (high purchasing loyalty)

7 Customer Experience MeasuresEase of doing business, Overall Product Quality, Responsiveness to Service Needs, Responsiveness to Technical Problems, Ability to Resolve Technical Problems, Communications from the Company, Future Product/Company Direction

Are your customers receiving a great customer experience?

Customers provide satisfaction rating for each of the 7 business areas.

Scores can range from 0 (high dissatisfaction) to 10 (high satisfaction)

Competitive Benchmarking Are you ahead of the competition?

How does your company perform relative to the competition?

Scores can range from 0 (low ranking) to 100 (high ranking)

bob@tcelab.combob@businessoverbroadway.com @tcelab @bobehayes