Sent: 17-11-2009 08:19:01
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Customer Experience Management Part 1
Business is all about customers. They can be a pain but you simply cannot survive in business without them. So how to make sure they come to you, and then stay with you and ideally recommend you to others? The answer is of course to focus on the customer. In reality it is not always so simple.
I have prepared a series of three articles about this very topic for the ATC Monthly Digest. This is a brief summary of the first article which outlines the field and explains some important differences between two leading approaches.
Customer Relationship Management (CRM) was the approach that was going to make sure customers spent more of their hard earned money with your company. Sadly things have not quite worked out as was planned.
Many can no doubt remember having to work through countless menus when you ring up a company. Invariably, instead of talking to a person you end up talking to some pre-programmed system that forces you listen to lots of options before you eventually find out that you can't solve the problem without talking to someone, which is what you wanted to do in the first place!
You can thank CRM for that.
Now there is a new kid on the block. Customer Experience Management or CEM
What CEM recognizes is that customer experiences are created every time a customer interacts with a company and that each experience is an opportunity to delight or disappoint customers. Whilst CRM mostly managed internal marketing, sales, and customer service functions, CEM targets customer interactions and focuses on influencing customer behaviour.
CRM systems are about profiling and collecting customer data for marketing and cross selling purposes. CEM in contrast is highly customer-centric focused and utilizes systems, technologies, and simplified processes to improve the customers experience with the company. Indeed some would argue that CRM may tell you what the customer did, but CEM can tell you why. A very important distinction as it helps explain the customer's behaviour.
According to Nobel Prize winning psychologist Daniel Kahneman, we usually only remember two things from our experiences: how we feel at the peak (best or worst) and at the end. It is these memories that direct our next buying decisions. Obviously a pleasant experience can lead the person to not only come back, but to share their experience with others.
Fred Reichheld showed that exceptional customer experience creates loyalty and that a 5% increase in customer loyalty increases lifetime profits by up to 95%! He also revealed that companies who are customer advocacy leaders, outgrow their competitors by an average of 250%.
The CEM process audits the most profitable customers to understand what things they really value and what really drives their loyalty. With that collected information, a better customer experience is designed through improvements that ultimately lead to more and more advocates.
But advocacy alone is not enough according as it only measures whether a customer will recommend a business to friends or family. For advocacy to be effective it is necessary to add information about the customer experience: where it happened, when, with who or what. Only then can insight be gained into why customers are advocates or opponents, how to create more advocates and reduce opponents.
Building customer advocacy as part of a customer experience management program is a powerful way of improving any business. Adopting an advocacy-based approach to CEM provides employees throughout the organization with information that they need to influence the customer experience.
This is a brief version of the first article that will appear in a forthcoming edition of the ATC Digest.
Next time I will summarise part 2 which looks at what you need to do to make your business customer centric.
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