Using Data to Prove Your Value

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It’s a challenge for the CCO, as well as any loyalty executive, to prove value and get it right in the first two years, much less the first.

Even though 67% of companies with CCOs outperformed their industry and markets in 2010 and continue to do so today, it is the most fragile member of the C-Suite, with an average tenure of 31 months based on research conducted by the CCO Council.

In my interviews with successful CCOs, one central thread running through our conversations has been the importance of using data to prove the CCO’s value in those first two years.

Even a seasoned executive can become overwhelmed or distracted by the job of managing and making data relevant, so here are three best practices to help ensure your data effectively improves your perceived value.

Let the Data Speak – Not Swallow You Up

Collecting and building data is a first essential step in connecting you to improved fiscal results. But rather than making data a central focus of your job, it should be used to inform you of the critical areas where your energy can be focused for greatest impact.

Analyzing data should not become the big black hole you lose yourself in. Padded with a little appreciative inquiry, quality data will paint a clear picture for where you can improve delivery of value to the customer.

Connect to the Customer Using Data

In some companies, the CCO has no direct ownership over processes that touch the customer, making it incredibly important for the CCO to connect his or her role to customer satisfaction. The CCO does that by constantly measuring and monitoring customer feedback, customer loyalty, and customer satisfaction.

Connecting to the customer allows you to figure out what drives customer satisfaction and repeat revenue. It gives you critical traction to deliver your point of view to an executive team. It helps you frame compelling messages to deliver to your teams and customers, and provides the needed borrowed authority to boost the perception of your value.

Own the Customer’s Voice and Make it Visible With Data

Successful CCOs are spending a lot of time communicating stories internally and externally; stories of revenue impact, turnarounds, customer loyalty improvements, etc.

At the end of the day nothing speaks more loudly than a great track record and excellent execution–so use your borrowed authority as the voice of the customer to create a buzz around customer or organizational successes, and to plot the road map for continuing relationships.

Data may change or disappear, but people will remember stories, and ultimately, the stories you collect persuade others to action.

Question to consider: how adept are you at translating/framing customer data for your executive team?

This was a guest article from Curtis Bingham.

Curtis Bingham is the recognized authority on CCOs and the first to promote this role as a catalyst for competitive advantage. Creator of the CCO Roadmap, a groundbreaking work containing 100+ strategies essential for customer centricity, as well as an international speaker, author, and consultant, Curtis is passionate about creating customer strategy to sustainably grow revenue, profit, and loyalty.

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Customer Engagement Models: Riot Games

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In the gaming world, strategy is everything. This is a quick look at how Riot Games manipulates its League of Legends product to change player behavior and increase customer engagement.

Many companies today have developed paths to greater engagement and greater profitability through recruiting the involvement of their customers. To restate the definition of engagement: it is the extent of a customer’s willingness to invest his/her discretionary time for a mutual benefit, and particularly for the benefit of a business.

Established in Southern California in 2006, Riot Games is a US-based publisher best known for its multiplayer online battle arena title, League of Legends. As a testament to the level of engagement Riot Games has achieved with its player base, today the average percentage of new players that come through word of mouth is between 85 and 90%.

A significant contributor to this engagement is structural: Riot created a game that’s simply more fun to play with friends. Players recruit their friends to play with them because they enjoy a better gaming experience.

Furthermore, Riot’s focus has never been: How can we influence people to talk about the game, talk about the product, and bring in friends? Rather, the focus is: How can we make something that’s worth talking about, worth bringing friends into, and worth sharing with a player’s social group?

There’s always a focus on the social aspects that influence player experience, but the company believes its success specifically derives from its efforts towards not manipulating player actions, but manipulating its product with the net effect that player actions change.

One of Riot’s most outstanding examples of player engagement can be found within the process by which it enables its player community to recognize and manage negative in-game behavior, called the Tribunal.

The game is played in sessions that last anywhere from 20 to 50 minutes at a time. At the end of each session, if a player behaved exhibited any unsportsmanlike behavior such as berating teammates or name calling, the other players can report him.

When enough reports are filed against an individual – a number based upon the ratio of reports filed to total games played – a case file comprised of chat logs (in game instant-messaging), statistics, game data, activity, etc. is generated.

This case is displayed at random to members of the tribunal; other players in the community who have voluntarily chosen to participate in regulating and weighing in on community behavior. Based upon the data available within the case file, tribunal members vote whether or not to punish the player involved.

In the case of repeat Tribunal cases, if the threshold of punishment becomes high enough, Riot takes action against the account; action that can escalate based upon the player’s previous history and punishment. But punishment is viewed as a last resort. Through the constructive feedback of peers, Riot attempts to optimize teamwork, cooperation and positive player experiences.

The best outcome is for a player to never show up at the tribunal again. Therefore, all systems are designed to adjust, not punish, behavior by allowing players equal ability to reward their peers for positive behavior by ‘honoring’ them after a game.

When players do actually get punished, they are sent all the details in their case files: what they did, how others felt about it, why it had a negative impact on player experience, and why it was bad.

In Riot’s example, it is peers – fellow players – who are applying and enforcing standards of appropriate gaming behavior; they are devoting their discretionary time to preserve the quality of experience for everyone.

This strengthens the community, gives it greater credibility and authority, and at the same time frees company resources to be spent on more valuable opportunities. It also fosters greater engagement by players and a stronger commitment to the game’s ecosystem.

This was a guest article from Curtis Bingham.

Curtis Bingham is the recognized authority on CCOs and the first to promote this role as a catalyst for competitive advantage. Creator of the CCO Roadmap, a groundbreaking work containing 100+ strategies essential for customer centricity, as well as an international speaker, author, and consultant, Curtis is passionate about creating customer strategy to sustainably grow revenue, profit, and loyalty.

Five Ways CCOs Can Save Innovation

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Innovation failure rates are abysmal, ranging from 60-96%.

One explanation is that customers are typically not involved early enough (if at all) in the innovation cycle, yielding expensive, colossal failures.

Top customer executives from well-known brands and customer innovators such as Nationwide, Panasonic, Teradata, and more gathered at the CCO Council’s 2012 Summit to examine ways to include and engage customers in the innovation cycle.

Together we defined customer-centric innovation as the development of value through solutions that meet real customer needs in new ways. Customer-centric innovation can include different or more effective products, services, processes, technologies, ideas, and even business models.

It is clear that the most successful innovations directly involve customers in the articulation, design, implementation, testing, and launch.

It is also exceedingly clear that top executives must be intimately involved in innovation. When executives delegate innovation to managers, they end up with easy incremental opportunities, short-lived gains, and increased portfolio complexity.

Because of the way they are measured and rewarded, mid-level managers will focus on improving efficiencies and on solving problems with minimal risk. Some may even forsake the customer, albeit unintentionally.

Innovation is about risk, and only executives can take the kinds of risks required for truly transformative innovations; that is, innovations that yield the highest ROI and form the strongest competitive advantage.

How are the most successful customer executives driving customer-centric innovation?

Executives complain that ideas for innovation are plenty, but too often unfocused or even useless to customers. To foster real innovation, chief customer officers (CCO) need to identify the “North Star” that focuses innovation on real customer needs and inspires employees.

What matters most to customers AND the business?

Bob Greenberg, while CMO of Panasonic, identified the North Star as a human connection, which he institutionalized as the brand platform called “Ideas for Life.” Everyone had to answer the question, ‘What’s the idea from or for people’s lives?’ This question informed the company direction and especially its innovations.

Customer executives need to clearly set the opportunity bar and make transparent the scale and source of growth opportunities.

Effective customer executives are closest to the customer. They have the largest Rolodex and the strongest relationships with decision-makers. If company innovators aren’t asking for the CCO’s input before launching an innovation, the innovation failure rate will be needlessly high and customers will suffer.

CCOs need to form powerful alliances with internal innovators. Skunk works projects within a company are typically in the very early stages of developing a promising, innovative idea.

To ensure these are properly focused on customer needs, CCOs should form close alliances with team leads to help shape these early-stage innovations by sharing customer personas, megatrends, and real customer issues or scenarios.

As well, CCOs should share ideas borne from countless hours listening to, measuring, and analyzing customer needs, wants, and desires.

CCOs should also form strong alliances with established innovators to help create a conduit directly to customers. The CCO is uniquely qualified to identify customers with whom the company has strong, stable relationships; whose needs are relevant to the innovations in development; and who are most likely to provide candid insights and direction for those innovations.

Forming such alliances and subsequently facilitating such customer connections to ensure that customers are involved at the earliest stages, helps focus and refine the innovations and dramatically increases the likelihood of their successful launch and implementation.

To combat high innovation failure rates, many mature innovation processes employ tactics such as innovation reviews, stage gate processes, and venture capital or milestone-based funding decisions. And yet their success rates are still sub-par. It is tragic how frequently critical decisions are made in a customer vacuum.

CCOs need to inject the customer into innovation processes. Because he is personally involved in growth pipeline reviews and funding decisions, Teradata’s CCO Alan Chow can provide critical customer insight to innovators or throttle a poorly conceived idea before resources are wasted.

CCOs need to insist upon and help define customer-centric valuation metrics as innovation success criteria. For early projects this may be something as simple as alignment with customer personas and accepted megatrends, the preliminary evaluation of proofs-of-concept by consumers at select key accounts.

For mature projects additional funding could hinge upon customer value estimates, further customer testing with decision-makers, and consumers in more key accounts. The metrics and the levels of customer involvement should be dependent upon the investment and most especially upon the customer impact upon launch.

Conclusion

In summary, companies can no longer afford to experiment at customers’ expense and any innovation strategy that does not include customer participation deserves to fail. But with every customer dissatisfied there is an opportunity to reevaluate the business relationship, no matter how entrenched.

Because CCOs are uniquely positioned to incorporate customers into the innovation process and to do so in the earliest stages, they can provide opportunities for resources to be used more wisely and efficiently and for customers to receive greater value faster and with fewer relationship-damaging dissatisfiers.

Ultimately, without cancelled projects and write-downs from failed projects tainting its portfolio, the company realizes a much higher ROI on its innovation efforts.

Five Ways to Focus Innovation on Customers

1. Take ownership of Innovation at the highest level

2. Identify the “North Star” that focuses innovation on real customer needs and inspires employees

3. Form powerful alliances with both early and late-stage internal innovators

4. Create conduits to customers to enhance innovation efforts

5. Inject the customer into the innovation processes, including the innovation reviews, stage gates, and funding decisions

This was a guest article from Curtis Bingham.

Curtis Bingham is the recognized authority on CCOs and the first to promote this role as a catalyst for competitive advantage. Creator of the CCO Roadmap, a groundbreaking work containing 100+ strategies essential for customer centricity, as well as an international speaker, author, and consultant, Curtis is passionate about creating customer strategy to sustainably grow revenue, profit, and loyalty.

Engagement: The Key Metric for the Future

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Customers expect great service, superb experiences, and more recently, have begun to demand involvement in the brand and its strategy.

Welcome to the Age of Engagement!

Who Needs Customer Engagement?

When Wired’s editor-in-chief was asked, “How do you engage your customer communities in developing your strategy?” he responded, “We’re not involving them as much as they would like. I’m afraid that if we open up our communities widely to our customers, they would be so busy talking that they wouldn’t listen to us.”

Asked the same question, the CMO of Old Navy said, “I don’t advocate involving customers in the brand strategy. That’s like giving a 12-year-old the keys to the car.”

Sadly, many companies share this arrogant attitude, believing that customers are vessels of consumption and nothing more. Customers are taking charge, however.

They expect great service, superb experiences, and more recently, they have begun to demand involvement in the brand and its strategy. They penalize companies that remain distant and aloof.

Today’s arrogance will become tomorrow’s irrelevance. To remain relevant in the face of skyrocketing competition and activist customers, companies must strategically engage customers in acquisition, retention, innovation, operational efficiency, and in truth, in overall strategy.

Engagement extends loyalty, strategically involving the most valuable customers in the business. Because it is based on observable behavior, engagement is more easily measured than and serves as a leading indicator for loyalty.

As well, engagement is more easily correlated with revenue. For Oracle, engaged customers provide 33% greater revenue.

What Is Customer Engagement?

Customer Engagement Defined

Many companies view “engagement” as simply the amount of time a consumer was “interrupted” and spent viewing an on-screen advertisement. This view of engagement is highly restrictive and only minimally useful.

Customer engagement is properly defined as:

“The extent of a customer’s willingness to invest his/her discretionary time with a company for mutual benefit.”

The measurement of engagement is:

“The sum of the customer activities that build positive emotional attachments leading to greater customer involvement that positively impacts revenue and profits.”

There are two key components of customer engagement: advocacy and involvement. The most successful companies with an engagement strategy materially involve customers in their growth efforts, especially in marketing efforts such as acquisition and retention, operations, product and innovation, as well as overall business strategy.

To succeed, customer engagement efforts must have a correlation to growth metrics, especially revenue and profits.

Engagement: the key metric of the future

Engagement is intuitive. If customers are accepting sales calls, participating in innovation processes, speaking at conferences on behalf of the company, pinning products on Pinterest, and advocating company products on Facebook, they are clearly more likely to repurchase, increase company share of wallet, with reduced price sensitivity.

Engagement is a more accurate measure of customer perception and is a leading indicator of loyalty. Loyalty is a subjective measure of an emotional state, whereas engagement is an objective measure of actual behavior. One of loyalty’s greatest challenges is measurement of true loyalty.

Loyalty is typically measured once or twice annually via survey. But surveys merely capture a snapshot of the customer’s emotional wellbeing at that moment. This snapshot could be adversely affected by factors outside the company’s control. Survey granularity is often insufficient to discover crises in the making.

In addition, customers are experiencing survey fatigue and response rates are falling, further masking potential crises from view. By contrast, engagement is based on observable behavior: is a customer participating in relevant activities that lead to purchase/renewal?

By structuring metrics with sufficient granularity, a company can tell how often and to what degree a customer participates across a range of platforms and activities over time. Waning participation is a leading indicator that loyalty and future revenue may be at risk.

Engagement is highly correlated with revenue. Oracle’s most engaged customers generate 33% greater revenue. They are 4% more loyal and grant Oracle 12% greater share of wallet than transactional customers.

PeopleMetrics found that companies focusing on customer engagement realize a 13% revenue reward, compared to a 36% revenue penalty for those companies obstructing customer engagement.

This is the Age of Engagement. Customers are demanding to be heard and involved. The most successful companies will grow as they engage customers in customer acquisition, retention, operations, innovation, and even strategy.

This was a guest article from Curtis Bingham.

Curtis Bingham is the recognized authority on CCOs and the first to promote this role as a catalyst for competitive advantage. Creator of the CCO Roadmap, a groundbreaking work containing 100+ strategies essential for customer centricity, as well as an international speaker, author, and consultant, Curtis is passionate about creating customer strategy to sustainably grow revenue, profit, and loyalty.

Customer Engagement Models: MetLife

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MetLife sponsors, maintains and engages a robust customer community.

These are just a few of the stories that inform the company’s understanding of what customers value and allow it to optimize marketing efforts.

Many companies today have developed paths to greater engagement and greater profitability through recruiting the involvement of their customers. To restate the definition of engagement: it is the extent of a customer’s willingness to invest his/her discretionary time for a mutual benefit, and particularly for the benefit of a business.

MetLife sponsors and maintains a robust customer community with which it engages in many ways over time, from asking simple questions to testing ideas and products. In a simple yet powerful engagement exercise, the company asked community members to write a letter to a relative explaining why insurance is important.

The customer stories that resulted from this exercise were deeply moving and very powerful. They described experiences that enabled the marketing group to understand where and to what emotional extent insurance is a welcome relief rather than a necessary evil.

These stories continue to inform MetLife’s understanding of what customers value. They also enable MetLife to humanize and optimize its marketing and sales efforts.

MetLife has also leveraged stories that customers share with each other to drive advertising campaigns. In Poland, MetLife has low name recognition and market share but word of mouth promotion is unusually strong.

One popular story customers were sharing there told of a claim from an elderly woman whose signature did not match the one on her policy. Normally such claims are denied, but in this case, an agent tracked the woman down, found her in a nursing home, verified her identity, and paid her claim.

MetLife created a very successful television advertisement based on this story. And because real life customer stories like these increase authenticity and effectiveness, they give MetLife a significant edge over its competitors.

The insurance industry is replete with cumbersome product names such as, “Variable annuity with a guaranteed minimum withdrawal benefit,” or “Immediate lifetime annuity with return of principal.” The names attempt to describe function from a company perspective and end up confusing customers.

In anticipation of a new product launch, MetLife turned to its customer community to share the product’s purpose and benefits. Customers provided not only the name, but also the emotions to evoke and the messages to convey within the product’s marketing and advertising campaign. In May 2013, MetLife launched the customer-christened “Shield” insurance product.

MetLife has successfully engaged customers in product development and in customer acquisition and retention. As well, MetLife has demonstrated such value in engaging customers in process redesign pilot projects that the CEO has mandated leveraging customer engagement in order to eliminate $100M in costs from the business.

This was a guest article from Curtis Bingham.

Curtis Bingham is the recognized authority on CCOs and the first to promote this role as a catalyst for competitive advantage. Creator of the CCO Roadmap, a groundbreaking work containing 100+ strategies essential for customer centricity, as well as an international speaker, author, and consultant, Curtis is passionate about creating customer strategy to sustainably grow revenue, profit, and loyalty.

Has Social Media Grown Up Enough to Prove Its Value?

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This article discusses the implications of a study published earlier last year that is one of the first to correlate the effect of customer engagement via social media with the firm’s bottom line.

In March 2012 was published one of the very first quantitative analyses that I’m aware of to correlate the effect of customer engagement via social media with the firm’s bottom line.

In the article entitled, “The effect of customers’ social media participation on customer visit frequency and profitability: an empirical investigation[1],” academics examined the effect of customers’ participation in a firm’s social media efforts and found that social media engagement resulted in not only a stronger bond between the brand and the customers, but also discovered that engaged customers visited the store 5.2% more often and generated 5.6% greater revenue than the control group with similar shopping history, identified before the social media effort began.

As well, engaged customers as measured by frequency of posting had a stronger preference for premium products and lower price sensitivity, making them more profitable than their non-engaged counterparts.

The researchers examined a large retail wine seller and gathered information on customers’ demographics and spending habits including wine purchased from other outlets. They created a control group consisting of customers with similar purchase habits and who are not participating in social media.

One of the challenges that could easily get lost in a company’s social media experiments is whether the relationship is actually growing or the firm has actually provided greater accessibility to promotional coupons. In this study, the researchers weeded out “price buyers” who were using social media solely for the purpose of obtaining coupons.

The social media customers and the control group did not have significant differences in their purchase behavior prior to the firm’s social media experiment. Thus, they effectively isolated the effect of social media on a material segment of their customers.

However, these results are sometimes masked by the law of averages. To duplicate these results in your company you should carefully segment customers, observe their behavior, and compare such behavior with an appropriate control group.

Even more importantly, it appears that done properly, social media can be an effective tool for engaging customers.

As we see in this study, engaged customers spend more and more often, may have a higher predilection for premium products, and are therefore more profitable.

What can you do to engage customers in your business? How can you go beyond preaching at them or pushing coupons to engaging them in a dialogue, and truly understanding what they need?

References: [1] Bezawada, R., Janakiraman, R., Kumar, A., Rishika, R. (2013, March) The Effect of Customers’ Social Media Participation on Customer Visit Frequency and Profitability: An Empirical Investigation. Information Systems Research, pp. 108-127. Retrieved March 3Article Submission, 2014 from http://pubsonline.informs.org/doi/abs/10.1287/isre.1120.0460.

This was a guest article from Curtis Bingham.

Curtis Bingham is a recognized authority on CCOs and the first to promote this role as a catalyst for competitive advantage. Creator of the CCO Roadmap, a groundbreaking work containing 100+ strategies essential for customer centricity, as well as an international speaker, author, and consultant, Curtis is passionate about creating customer strategy to sustainably grow revenue, profit, and loyalty.

Customer Strategy Basics

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By now, a disciplined focus on the customer has evolved from being “nice to have” to being mission critical. History and business literature are full of companies punished with ultimate failure for developing and deploying products and offerings in a vacuum of customer input or for ignoring customer trends within their markets until it was too late to change course. Many companies now regularly incorporate customer feedback in product development, though surprisingly, it’s still not all of them.

In more recent years, customer insight was a way of triaging customer problems to stem the tide of defecting customers at rates approaching the same as those newly acquired. And even today, an increased customer focus is still being used by some companies to diminish the alarming frequency and severity of customer lawsuits pursued by hugely dissatisfied customers whose business is severely impacted by underperforming and sometimes even misrepresented products and services.

In other words, although it has increased, customer focus has increased for the wrong reasons; it has been reactive, not proactive.

As a way of measuring and driving this increased customer focus, customer satisfaction surveys were born and customers were bombarded with survey after survey at the end of every transaction: online, via phone, at the register. Companies were horrified to learn that so–called “satisfied” customers were defecting to competitors at the same rate as those who were dissatisfied.

Enter the Loyalty movement; where satisfaction is but a precursor to loyalty. A loyal customer has an emotional connection to a company that drives repurchase and may forgive minor mistakes that would otherwise damage customer relationships.

A major manufacturer of fire prevention systems found that six years of investment had produced strongly improved satisfaction and loyalty scores. Yet, executives were vexed as to why, despite increased investment, scores hadn’t improved during recent years.

Like this manufacturer, many companies are finding that despite their best efforts, loyalty scores have plateaued. Continued investments in loyalty initiatives are not preventing customers from defecting. Profits are still under pressure. Competitors are still a constant threat.

Loyalty cannot overcome the possibility that your customers may be the wrong ones, or that you simply don’t have a viable product/service strategy, and even worse, that some customers will remain fickle and price conscious–and even unprofitable, no matter how much money is invested in changing their behavior.

Peter Drucker said in 1954: “The purpose of a business is to create and keep a customer.” It’s not revenue. It’s not profits. It’s not shareholder value. It’s not logistics. It’s not operational excellence. All of these things are ancillary. If you create and keep the right customers, the rest follow. A customer strategy will help you profitably acquire, serve, and retain your most valuable customers.

Properly defined, a customer strategy is the process by which you align yourself with your most profitable customer segments and maximize the value you deliver to and derive from each customer.

The customer strategy identifies the most valuable customers that must be attracted and retained at all costs, uncovers their most critical purchase drivers, and helps make sure the company is uniquely positioned to deliver products and services against these value drivers more effectively and profitably than competitors.

As well, this strategy orchestrates every facet of the customer’s experience with the company, ensuring the experience across all channels including marketing, sales, service, support, etc. is consistently reinforcing the value being provided the customer and the value of the customer to the company, creating loyal and profitable customers.

This was a guest article from Curtis Bingham.

Curtis Bingham is a recognized authority on CCOs and the first to promote this role as a catalyst for competitive advantage. Creator of the CCO Roadmap, a groundbreaking work containing 100+ strategies essential for customer centricity, as well as an international speaker, author, and consultant, Curtis is passionate about creating customer strategy to sustainably grow revenue, profit, and loyalty.

The Seven Greatest Challenges in Establishing Strategic Customer Centricity Metrics

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Many companies are recognizing that the key to continued survival is a strategic customer focus incorporated into foundational strategy, board commitments, executive officer objectives, and company-wide compensation. The enabler of this strategic focus is a universal metric, and this article examines the seven big challenges in establishing it.

I’ll never forget sitting in a car dealership, waiting to sign paperwork for a new car. I saw a sign posted prominently on the wall that read, “Give us a 10! If you can give us a “10” we would love to have you fill out a survey.”

Nor will I forget the brightly colored note in the hotel room carefully placed by the telephone with a heading in big bold letters “We Strive for Fives!”

While these slogans are catchy, the message is clear: don’t bother giving us feedback unless it’s a perfect score. In the courtroom this is called leading the witness; where you give hints as to how you want someone to answer your questions. The short-sighted local branches look great with positive scores, but customers are not necessarily satisfied nor are they loyal.

With the leadership of chief customer officers and other customer executives, many companies are recognizing that the key to their continued survival is a strategic customer focus incorporated into foundational strategy, board commitments, executive officer objectives, and company-wide compensation. The enabler of this strategic focus is a universal metric that enables baseline measurement, prioritization of resources, and marked improvement to meet objectives.

Yet there are at least seven big challenges in establishing a strategic metric upon which all are measured. In this article I’ll examine these challenges. In the next article I’ll describe a number of ways that these challenges might be overcome so as to pave the way for a new metric that will effectively measure and guide improvements for this new strategic imperative. In the final article, I’ll outline reasons why customer engagement is the most appropriate metric for this purpose.

Challenge #1: Outcomes fail to impact strategic results

While it may seem obvious, it is worth reiterating: the universal metric must impact strategic results. What good is a metric that doesn’t result in increased revenue, decreased costs, or mitigated risk? As well, the metric should be a leading rather than lagging indicator.

Revenue and profit are lagging indicators–you don’t know if you are successful until after the quarter closes. One of the big challenges in many companies is that customer loyalty is not well-correlated to the company’s profitability. As well, some of the metrics used to measure it ensure that loyalty is mostly a lagging indicator, only measured once a year.

Challenge #2: Challenge of the methodology

Jeb Dasteel, Chief Customer Officer of Oracle, established two metrics: the Customer Loyalty Index and the Top 10 Customer Dissatisfiers. He initially faced extreme scrutiny of his methodology, which forced him to be very transparent about how the data were collected, analyzed, and validated.

When compensation (or any significant challenge to status quo) is at stake, pushback is guaranteed. If the methodology can be discredited, implementation will be delayed or thwarted altogether.

Challenge #3: Perceived inability to influence

I recall very early in my career my boss trying to explain why I was punished because the company missed their EVA (economic value added) goal. To this day I still don’t know what the metric was or how it was computed. I told him (probably not very nicely) what I thought of this silly “tax” on my earnings. This is perhaps the biggest challenge, and is certainly not limited to a customer-centricity metric.

As laboratory rats in a maze will give up trying for food when faced with conflicting stimuli even in the face of extreme hunger, so will employees become disaffected when they cannot determine how their work influences the metric they are rewarded for achieving.

People have varying degrees of influence over customers, which indicates the need for localized proxy measurements of both customer focus and the ability to enable the customer focus of others.

Challenge #4: Gaming of the system

In decades of doing primary research I found that is nearly impossible to obtain unvarnished customer feedback through the sales or support channel. Only the best customers are solicited, and those who have a negative opinion are either never approached or their feedback is never recorded.

Sometimes changing a digit in the stored phone number or intentionally mistyping an email address may make these customers inaccessible. I’ve even observed sales and service personnel begging for a positive rating, saying, “I’m going to get in trouble if I don’t get a 10. Can you help me out?”

Challenge #5: Unintended consequences

A major financial services company found that their well-intentioned use of an average call handle time metric backfired severely. Rather than solving the customer issues with readily available information, agents would hang up on customers as they approached their call time limit.

Customers were forced to call back, destroying customer satisfaction as well as agent profitability. Without care, employees at all levels can be seduced by a number on a dashboard and lose sight of the real goal, that of increasingly enduring, profitable customer relationships.

Challenge #6: Metric instability

Similar to Challenge #3, instability in the metric may cause similar disaffection and disengagement. If I strive to achieve a goal but the goal changes mid-stream or is sometimes unattainable, I may give up. Steady-state quarterly revenue targets sometimes suffer from this instability.

Sales teams pull out all the stops in the fourth quarter, creating incentives for customers to purchase sooner than later and leaving nothing for the first quarter. Bug fixes, call center volume, and similar metrics are going to vary depending on software releases, marketing pushes, etc.

Challenge #7: Excessive burden

Cisco was famous for automatically sending out a five-item questionnaire after every single service call. In the early days that might have been borderline excessive. Today, with everyone surveying all of their customers after every interaction, customers are suffering from survey fatigue.

Response rates are dropping precipitously. On the other side of the fence, some metrics might complicate operations and create excessive overhead. Successful metrics need to avoid excessive burden on operations and especially upon customers.

Many corporate metrics such as revenue growth, earnings per share improvement, etc. have been around for years and people have forgotten the difficulty involved in their establishment. Now, as CCOs and other customer executives are beginning to make customer centricity a part of corporate strategy, it is important to anticipate these challenges in order to help the organization succeed.

What are you doing to overcome these seven challenges? Do you have a particularly good example of any of these challenges that you can share? I’d love to include them (either properly attributed or sanitized as you desire) in my upcoming book!

This was a guest article from Curtis Bingham.

Curtis Bingham is a recognized authority on CCOs and the first to promote this role as a catalyst for competitive advantage. Creator of the CCO Roadmap, a groundbreaking work containing 100+ strategies essential for customer centricity, as well as an international speaker, author, and consultant, Curtis is passionate about creating customer strategy to sustainably grow revenue, profit, and loyalty.

Loyalty is Dead. Long Live Engagement

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This article is a brief discussion of the virtues of customer engagement over customer loyalty as a preferred indicator of customer centricity and ultimately, profitability.

Customer loyalty is dead. Long live customer engagement.

Loyalty is an emotion notoriously difficult to measure, typically only by proxy, such as via surveys that capture the stated intention to recommend or repurchase. But it is tricky at best to overlay stated intent on actual behavior, which can be very different.

Consequently, loyalty as a business metric is often misleading and worse: difficult to correlate with other business management metrics used by executives to assess strategic decisions. This, in turn, makes loyalty problematic for justifying increased resources and credibility among customer executives.

Long live customer engagement. Customer engagement is an effective leading indicator of loyalty and profitability. It is easier to measure, easier to influence, and more strongly correlated with revenue and profits than loyalty measures such as Net Promoter (NPS), Customer Loyalty Index (CLI), or others that are poor proxies for revenue.

Effective engagement activities create emotional attachments that draw customers closer to protect them from competitors, encourage repurchase while lowering price sensitivity, gather insight to refine strategy, and ultimately promote evangelism.

Customer engagement is the sum of activities that build positive connections between a company and its customers and result in greater involvement that positively impacts revenue.

The engaged customers of one large technology company generate three times greater revenue than transactional customers of similar industry and size. And they are four percent more loyal and represent 12 percent greater share of wallet than transactional customers.

PeopleMetrics found that retail banks focusing on customer engagement realize a 13 percent revenue reward, compared to a 36 percent revenue penalty for peers with low levels of customer engagement.[1]

It is easy to identify engaged customers because they participate in discrete customer programs. Their transactional behaviors are easily observed and their relative profitability is easily calculated. Validated by such clear correlations with profit, customer engagement activities then clearly warrant greater priority, with a commensurate increase in funding.

Customer engagement activities might include mail or email notifications, post-purchase follow-up calls, participation in online communities, executive or industry advisory board participation, etc.

The CCO Council recently undertook an effort to characterize customer engagement and create a framework for its members to follow in adopting this new metric. Some of the key recommendations from this effort include:

1. Investments in customer engagement activities should be made according to their impact. The ROI of customer engagement activities can be plotted along an increasing trajectory with the least valuable (but likely necessary) activities being tactical and impersonal and the most valuable activities being those that are both strategic and personal. Personal activities increase engagement, and strategic activities drive longer-term business value.

2. Engage customers selectively. The most impactful customer engagement activities are typically the most resource-intense. Programs should therefore be carefully matched with those customers most likely to engage further.

3. Simple measurement approaches are sufficient to realize the strategic intent. Participation in select high-value activities and the crossing of thresholds to levels of involvement are two simple measures that can demonstrate engagement.

Engagement coupled with strategic business opportunity can provide a powerful guide to customers with greater business/revenue potential. Coupled with transactional satisfaction measures, engagement can further highlight those in need of rescue.

Customer engagement is a more easily measured and more accurate metric than the outmoded customer loyalty. It is also a powerful leading indicator that enables executive decision-making to drive increased revenue and profitability. Long live customer engagement.

[1] Feather, Kate, and Yvone Chun. Enhancing the Customer Experience and Engagement in Retail Banking. Philadelphia, PA: PeopleMetrics, 2008.

This was a guest article from Curtis Bingham.

Curtis Bingham is the recognized authority on CCOs and the first to promote this role as a catalyst for competitive advantage. Creator of the CCO Roadmap, a groundbreaking work containing 100+ strategies essential for customer centricity, as well as an international speaker, author, and consultant, Curtis is passionate about creating customer strategy to sustainably grow revenue, profit, and loyalty.

Keeping it Real With Customers

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Since stepping into her role as Vice President-and Chief Customer Advocate for Nationwide Insurance, Jasmine Green has helped the insurance and financial services organization focus on more personalized customer experiences, championing customers across all of Nationwide’s business units.

During her 25-year career with Nationwide, she served as associate vice president in the Office of the President for Nationwide Insurance Western Operations, a product director and in various other management roles.

In her current position, Green works as an advocate for both business-to-business and business-to-consumer customers and asks all associates to make a personal commitment to caring for customers as part of Nationwide’s “I Care” program. She shared these best practices for building customer loyalty and creating a customer-centric culture.

Keep Customers Top of Mind

For an organization to be truly customer-centric, associates need to understand that it’s not an 8 to 5 job. They represent the company 24/7: on the job, away from the job and everywhere in between. Remember how customers want to be treated and act accordingly.

Build Psychological Currency

Customers want the best value for their money, especially given the economic climate of the past few years, but they also value soft skills like compassion. When service recovery happens, customers don’t always want a refund. A lot of times they simply want that psychological currency that happens when you say, “thank you for your business, I appreciate you, I apologize for this and I’m here to assist you.” Practice empathy

Encourage associates to personalize each customer relationship and show that they empathize with the customer’s point of view. Be polite and courteous, apologizing for any issues the customer has encountered and thanking them for the opportunity to help.

Treat customers like friends.

Many insurance companies focus on being careful but Nationwide strives to be full of care. When you’re full of care and understand things from the customer’s perspective, being careful comes naturally.

Partner with the Better Business Bureau

The Better Business Bureau is a customer-centric organization for consumers, so that’s an excellent resource. Don’t think of the Better Business Bureau simply for the compliance and regulatory perspectives. Also use it to monitor positive or negative feedback on your organization. What are the issues can you look at and resolve?

Take a Proactive Approach to Social Media

Find out where out where your customers are and how best to reach them. Increasingly, that means being accessible and proactive through blogs and social networks like Facebook. In addition to posting good news about partnerships or sponsorships, Nationwide surfs the internet for anything regarding the company and has a team reach out to individuals who have questions.

Someone might post, “I’m trying to get in contact with Nationwide about my auto policy and I don’t know whom to contact.” Nationwide’s team might respond with a message saying, “we’re available for you, please contact me at this telephone number or provide me with your number so that I can give you a call.” Customers are often impressed when you reach out to them before they call with a complaint.

Identify Patterns of Service Issues

Don’t treat complaints as isolated incidents. Often associates know about areas that need improvement, so engage your associates, tap into their knowledge and alert everyone in the organization about ongoing issues. Then work to resolve those issues as a team so that everyone is on board.

Engage and Empower Your Associates

Gallup has a study that says the more engaged your associates are, the happier they are. They’ll in turn spread that positive attitude to your customers. If you have the wrong approach internally, it shows externally as well. Make sure your associates feel empowered and have the authority to act in the best interests of the customer.

Nationwide uses Gallup’s 7 x 7 methodology where you communicate a message seven times in seven different ways. You want to make sure they understand it and hear it back. That has led to continuous improvement in employee engagement, which is also reflected in Nationwide’s customer enthusiasm metric.

Recognize Excellent Customer Interactions

As part of the “I Care” program, Nationwide presents “I Care” Awards to show gratitude for great service. It’s a special lapel pin presented to associates along with a thank you message from the CEO. Along with the awards, Nationwide has a blog to share the positive things that customers are saying about individual associates.

Sometimes posts include a photo or video of the associate, which is a wonderful way to acknowledge associates who embody that customer-centric mindset and show how associates in other divisions interact with customers.

Use Data to Tell Your Story

Whether looking at customer satisfaction surveys, customer enthusiasm metric scores or employee engagement metrics, many organizations have rich data available. Pull together that data and use it to tell your organization’s story. For instance, “if we had done this, this would have occurred.” Stories are often the most effective way to get leaders on board. True examples always trump hypothetical ones.

Tie Customer Data to Your Bottom Line

For an organization that is still making the shift to a customer-centric culture, collect customer insights and analysis and present it to the organization’s leadership. Include recommendations for improvement and relate those improvements to the bottom line, whether that means the customer retention rate, cost-loss ratio or expense ratio.

Also tie those customer insights into your organization’s mission and strategy so that it becomes embedded in every part of the organization. Without a great customer experience, your customers will go elsewhere.

Don’t Wait for Feedback

Always look to see what you could have done better or how you might have done something a little bit smarter as opposed to working harder. Don’t always wait for someone to give you the feedback. Go out and seek feedback, whether internally or externally. Continuously work on improvements.

Create a Customer Advocacy Council

Enable collaboration at the drop of a hat by putting together a customer advocacy council that includes representatives from different business divisions. They can share information on complaints, innovative ideas or even positive feedback from customers that you would like to spread across the organization. Also look at what you say, how say it and when you say it.

Understand That No Person or Department “Owns” the Customer

Some organizations have a tug of war between departments over whom “owns” customer relationships. That is the job of everyone in the organization, not just customer service or sales or marketing. Everyone needs to be on board with a customer-centric culture or it doesn’t work.

You can have one department that does customer insights and analytics, another department that does your business transformations and another that handles sales. Multiple departments might be involved in social media. Everyone owns a part of that customer, and everyone has to speak that same language from top down and bottom up. It has to be a collaborative process.

This was a guest article from Curtis Bingham.

Curtis Bingham is the recognized authority on CCOs and the first to promote this role as a catalyst for competitive advantage. Creator of the CCO Roadmap, a groundbreaking work containing 100+ strategies essential for customer centricity, as well as an international speaker, author, and consultant, Curtis is passionate about creating customer strategy to sustainably grow revenue, profit, and loyalty.