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CUSTOMER
EXPERIENCE
MANAGEMENT
FOR STARTUPS
Bob E. Hayes, PhD
CCO, TCELab.com
President, 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 such
    topics as customer feedback program best
    practices, analytics, customer experience
    and 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 the
  sum of all experiences a
  customer has with a supplier
  of 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%*     100%
Percent Increase in Customer Value




                                          75%




                                          50%




                                          25%




                                           0%
                                                  Auto-service     Branch     Credit card      Credit     Insurance      Industrial    Industrial      Office  Software
                                                     chain        deposits                   insurance    brokerage     distribution    laundry       building
                                                                                                                                                    management

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


                                         Strategy
                              Overarching 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 data
      are used and by whom ); and change requests (how changes to the program are made)



                   Business Process Integration
                       Integration of customer feedback program (including
                   processes and data) into business operations and processes



      Method                            Reporting                            Research
    Data collection (social          How customer feedback data          Systematic research using
    media, surveys, brand              are analyzed, summarized          customer feedback data to
  communities); Measurement          and disseminated throughout          gain additional customer
         (experience/                        the company                           insight
      loyalty/sentiment)
Loyalty Leaders vs. Loyalty Laggards

                                                                  Adoption Rate
                                                                                                                    ∆ in
Customer Feedback                                                 Loyalty  Loyalty
                                                                                                                  Adoption
Program Component                                                Leaders1 Laggards
                                                                                                                    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

                                                         Industry percentile ranking
   Companies who Adopted Practice
                                                            of customer loyalty
   Companies who did not Adopt Practice
                                                    40     50        60         70     80
1. CF is as important as
   Customer feedback results are as important as
      financial measures in
financial measures in making business decisions.
      making business decisions
 Customer feedback is included in the company's
2. Included vision, mission and goals.
              strategic in vision/mission/

      goals feedback results are used in
           Customer
             executives' objectives and incentive
3. Executive incentive comp.      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.
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

                                                       Industry percentile ranking
    Companies who Adopted Practice
                                                          of customer loyalty
    Companies who did not Adopt Practice
                                                  40     50        60         70     80
1. CF included in
    executive dashboards
 Customer feedback results are included in the
                company/executive dashboards.
2. Program integrated
 Customer feedback program is integrated into
    into business process
 business processes and technology (e.g., CRM
    and technology system).
3. All areas of the customer feedback program
    Program processes/
   (e.g., process and goals) are communicated
    goalsregularly to the entire company.
                 communicated
    to resolution ofcompany that are
    The
          entire customer issues
 identified using the customer feedback program
     is integrated into the company's Customer…
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

                                                       Industry percentile ranking
  Companies who Adopted Practice
                                                          of customer loyalty
  Companies who did not Adopt Practice
                                                  40     50        60         70     80

1. Web surveysto collect customer…
    Web surveys are used

    Paper and Pencil surveys are used to collect…

 Customer satisfaction surveys are conducted by…

   The survey delivery is an automated process.

       Multiple methods of collecting customer…

        In-person interviews are used to collect…

 Telephone surveys are used to collect customer…

        Customer contact management process…
Reporting

                                                         Industry percentile ranking
   Companies who Adopted Practice
                                                            of customer loyalty
   Companies who did not Adopt Practice
                                                    40     50        60         70     80

1. CFCustomer feedback results are shared
       results shared
   throughout company
                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…
    Results of customer satisfaction research are
       presented internally (through employee…
   Customer feedback results are shared only at
                executive/management level.*
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

                                                            Industry percentile ranking
    Companies who Adopted Practice
                                                               of customer loyalty
    Companies who did not Adopt Practice
                                                       40     50        60         70     80
1. Operationalestablished between
 Statistical relationships are
                                linkage
       established
 customer feedback data and operational metrics
                 (e.g., turnaround time, hold time).
2. Applied research regularly
Applied research using customer feedback data is
       conducted regularly conducted.
3. Constituency attitude
 Statistical relationships are established between
  customer feedback data and other constituency
       linkage established
  metrics (e.g., employee satisfaction or partner…
 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).
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
                       Growth is all about:
                       Retention                                                             Profit from price premium
                       Advocacy
                                                                                             Profit from reduced
                       Purchasing                                                            operating costs
 Company Profit




                                                                                             Profit from referrals


                                                                                             Profit from increased
                                                                                             purchases and higher
                                                                                             balances

                                                                                             Base Profit


                  0         1         2        3        4          5         6         7     Customer acquisition cost
                                                   Years
                      Frederick Reichheld. The Loyalty Effect. Harvard Business School Press, 1996
Customer Loyalty and Business Growth

                           1. Customer
                             Customer
     Business                 Renews
                            Acquisition
                           (Retention Loyalty)
     Programs
     Business
      Product
     Programs
    development                2. New
                             Customer              Customer
                            Customers                                  Firm
                           Development              Lifetime
      Marketing             (Acquire through                           Value
                          (cross/up-sell)
                            Advocacy Loyalty)        Value
        Sales
        Sales
       Service
       Service              3. Customer
                              Customer
                             Buys More
    Infrastructure            Retention
                          (cross/up-sell through
                           Purchasing loyalty)




• Different types of customer Loyalty
     Renew service agreement
          Buy from competitor         Retention
              Continue buying                                Read more about the
                  Recommend           Advocacy             RAPID loyalty approach
                     Buy more
         Buy different products       Purchasing
 Expand usage across company
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               Addresses Business
                                                                            Survey Questions                   Scores
   Experience Indices / Measures1                   Growth
Retention Loyalty Index (RLI)                Will your customers remain   Renew service contract,   Scores can range from 0 (low
                                             with / not leave you?        Use competitor*           retention loyalty) to 10 (high
                                                                                                    retention loyalty)

Advocacy Loyalty Index (ALI)                 Will your customers          Overall Satisfaction,     Scores can range from 0 (low
                                             promote you?                 Recommend, Continue       advocacy loyalty to 10 (high
                                                                          purchasing / using        advocacy loyalty)


Purchasing Loyalty Index (PLI)               Will your customers invest   Purchase additional       Scores can range from 0 (low
                                             in additional product /      services, Expand usage    purchasing loyalty) to 10
                                             service offerings?                                     (high purchasing loyalty)

7 Customer Experience Measures               Are your customers           Customers provide         Scores can range from 0
 Ease of doing business, Overall Product     receiving a great customer   satisfaction rating for   (high dissatisfaction) to 10
 Quality, Responsiveness to Service Needs,   experience?                  each of the 7 business    (high satisfaction)
 Responsiveness to Technical Problems,                                    areas.
 Ability to Resolve Technical Problems,
 Communications from the Company, Future
 Product/Company Direction

Competitive Benchmarking                     Are you ahead of the         How does your company     Scores can range from 0 (low
                                             competition?                 perform relative to the   ranking) to 100 (high
                                                                          competition?              ranking)
bob@tcelab.com
bob@businessoverbroadway.com
@tcelab @bobehayes

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Customer Experience Management for Startups

  • 1. CUSTOMER EXPERIENCE MANAGEMENT FOR STARTUPS Bob E. Hayes, PhD CCO, TCELab.com President, businessoverbroadway.com @tcelab @bobehayes © 2012 TCELab LLC. All rights reserved. Unauthorized duplication or distribution is prohibited.
  • 2. 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 such topics as customer feedback program best practices, analytics, customer experience and customer loyalty measurement • Implements customer feedback programs and directs global customer feedback research projects for many enterprise companies:
  • 3. 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?
  • 4. Customer Experience Management (CEM) • Customer experience is the sum of all experiences a customer has with a supplier of goods/services • Customer Experience Management (CEM) is the process of understanding and managing your customers’ interactions with and perceptions of your brand / company
  • 5. Why Develop a CEM Strategy? • Customer experience impacts customer loyalty • Decreasing customer defections by 5% increases profits from 25% to 85%* 100% Percent Increase in Customer Value 75% 50% 25% 0% Auto-service Branch Credit card Credit Insurance Industrial Industrial Office Software chain deposits insurance brokerage distribution laundry building management * Reichheld, F. F., & Sasser, W. E. Zero defections: Quality comes to service. Harvard Business Review, Sept-Oct. 1990.
  • 6. Customer Experience Management Program Strategy Overarching 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 data are used and by whom ); and change requests (how changes to the program are made) Business Process Integration Integration of customer feedback program (including processes and data) into business operations and processes Method Reporting Research Data collection (social How customer feedback data Systematic research using media, surveys, brand are analyzed, summarized customer feedback data to communities); Measurement and disseminated throughout gain additional customer (experience/ the company insight loyalty/sentiment)
  • 7. Loyalty Leaders vs. Loyalty Laggards Adoption Rate ∆ in Customer Feedback Loyalty Loyalty Adoption Program Component Leaders1 Laggards 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.
  • 8. Strategy/Governance Industry percentile ranking Companies who Adopted Practice of customer loyalty Companies who did not Adopt Practice 40 50 60 70 80 1. CF is as important as Customer feedback results are as important as financial measures in financial measures in making business decisions. making business decisions Customer feedback is included in the company's 2. Included vision, mission and goals. strategic in vision/mission/ goals feedback results are used in Customer executives' objectives and incentive 3. Executive incentive comp. 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.
  • 9. 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)
  • 10. Business Process Integration Industry percentile ranking Companies who Adopted Practice of customer loyalty Companies who did not Adopt Practice 40 50 60 70 80 1. CF included in executive dashboards Customer feedback results are included in the company/executive dashboards. 2. Program integrated Customer feedback program is integrated into into business process business processes and technology (e.g., CRM and technology system). 3. All areas of the customer feedback program Program processes/ (e.g., process and goals) are communicated goalsregularly to the entire company. communicated to resolution ofcompany that are The entire customer issues identified using the customer feedback program is integrated into the company's Customer…
  • 11. 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
  • 12. Method Industry percentile ranking Companies who Adopted Practice of customer loyalty Companies who did not Adopt Practice 40 50 60 70 80 1. Web surveysto collect customer… Web surveys are used Paper and Pencil surveys are used to collect… Customer satisfaction surveys are conducted by… The survey delivery is an automated process. Multiple methods of collecting customer… In-person interviews are used to collect… Telephone surveys are used to collect customer… Customer contact management process…
  • 13. Reporting Industry percentile ranking Companies who Adopted Practice of customer loyalty Companies who did not Adopt Practice 40 50 60 70 80 1. CFCustomer feedback results are shared results shared throughout company 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… Results of customer satisfaction research are presented internally (through employee… Customer feedback results are shared only at executive/management level.*
  • 14. 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
  • 15. Research Industry percentile ranking Companies who Adopted Practice of customer loyalty Companies who did not Adopt Practice 40 50 60 70 80 1. Operationalestablished between Statistical relationships are linkage established customer feedback data and operational metrics (e.g., turnaround time, hold time). 2. Applied research regularly Applied research using customer feedback data is conducted regularly conducted. 3. Constituency attitude Statistical relationships are established between customer feedback data and other constituency linkage established metrics (e.g., employee satisfaction or partner… 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).
  • 16. 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
  • 17. 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
  • 18. 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
  • 19. Customer Loyalty and Growth • Business growth relies on three types of customer loyalty Growth is all about: Retention Profit from price premium Advocacy Profit from reduced Purchasing operating costs Company Profit Profit from referrals Profit from increased purchases and higher balances Base Profit 0 1 2 3 4 5 6 7 Customer acquisition cost Years Frederick Reichheld. The Loyalty Effect. Harvard Business School Press, 1996
  • 20. Customer Loyalty and Business Growth 1. Customer Customer Business Renews Acquisition (Retention Loyalty) Programs Business Product Programs development 2. New Customer Customer Customers Firm Development Lifetime Marketing (Acquire through Value (cross/up-sell) Advocacy Loyalty) Value Sales Sales Service Service 3. Customer Customer Buys More Infrastructure Retention (cross/up-sell through Purchasing loyalty) • Different types of customer Loyalty Renew service agreement Buy from competitor Retention Continue buying Read more about the Recommend Advocacy RAPID loyalty approach Buy more Buy different products Purchasing Expand usage across company
  • 21. 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
  • 22. 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
  • 23. Customer Relationship Diagnostic Customer Loyalty and Customer Addresses Business Survey Questions Scores Experience Indices / Measures1 Growth Retention Loyalty Index (RLI) Will your customers remain Renew service contract, Scores can range from 0 (low with / not leave you? Use competitor* retention loyalty) to 10 (high retention loyalty) Advocacy Loyalty Index (ALI) Will your customers Overall Satisfaction, Scores can range from 0 (low promote you? Recommend, Continue advocacy loyalty to 10 (high purchasing / using advocacy loyalty) Purchasing Loyalty Index (PLI) Will your customers invest Purchase additional Scores can range from 0 (low in additional product / services, Expand usage purchasing loyalty) to 10 service offerings? (high purchasing loyalty) 7 Customer Experience Measures Are your customers Customers provide Scores can range from 0 Ease of doing business, Overall Product receiving a great customer satisfaction rating for (high dissatisfaction) to 10 Quality, Responsiveness to Service Needs, experience? each of the 7 business (high satisfaction) Responsiveness to Technical Problems, areas. Ability to Resolve Technical Problems, Communications from the Company, Future Product/Company Direction Competitive Benchmarking Are you ahead of the How does your company Scores can range from 0 (low competition? perform relative to the ranking) to 100 (high competition? ranking)