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:
- They do not understand the magnitude of the strategy and what it entails; or
- 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 economic benefits 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!
 | Lior Arussy is the president of Strativity Group and the author of several books. His new book is Excellence Every Day: Make the Daily Choice-Inspire Your Employees and Amaze Your Customers (Information Today, Inc. April, 2008). To learn more about customer strategies, visit www.Strativity.com.
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