Sunday, December 10, 2006

Making the Case for Customer Experience Management

I’m still pondering the question of what it would take for Customer Experience Management to be the Next Big Thing. Clearly it comes down to becoming a “do this or die” proposition: as in, “your company must adopt Customer Experience Management or it will be overtaken by others who do”. That’s what worked for CRM, Six Sigma, Business Process Reengineering, and probably whatever came before; it’s working today for concepts like Innovation and technologies like RFID and Service Oriented Architectures.

It’s no mystery why “do or die” works: managers can only focus a handful of strategic initiatives at a time, so anything that isn’t a life or death matter will be trumped by something that is. (Do people still know what “trumped” means? Do they realize it comes from the card game of bridge, and not Donald Trump or trumpeting, either of which could be plausible sources for a concept of “making more noise than anything else”?)

So far I’ve come up with two arguments for Customer Experience Management that strike me as sufficiently frightening. One, which I mentioned last week, is that product and channel proliferation make it impossible to continue with conventional business organizations. The key phrase here is “make it impossible”. Given a choice between “change” and “no change”, most people will choose the status quo. It’s only after they are convinced that some change is inevitable that they’ll consider which change they find most appealing (or, least distasteful).

The proliferation argument is good because it’s clear to everyone that product and channel proliferation are real. That proliferation makes existing organizational structures obsolete is a bit harder to prove, although any business struggling to work out a sensible plan for multi-channel activities will be receptive. (The formal argument is that traditional organizations treat products and channels as independent profit centers, but now there are so many products and channels that they must be coordinated to be effective.) The biggest stretch is the claim that the new structure must be organized around customers and governed by Customer Experience Management principles. I happen to believe this is true and am perfectly willing to argue it. Some of the iconic business successes of the recent past—Google search, Apple iPod,Westin Starwood Heavenly Bed—can be explained in terms of customer experience.

The other argument I find promising just happens to match our positioning here at Client X Client: that the way to maximize business value is to increase the lifetime value of each customer, and the way to do that is to maximize the impact on lifetime value of each customer experience. As that statement illustrates, this is a somewhat complicated case to make, which weighs heavily against it. On the other hand, the argument does have pretty much irrefutable intellectual rigor. At least, I can’t find any logical flaws.

But you still have to show people why, if this is such a good idea, businesses haven’t been doing it for years. My answer is that the technology to do the measurements is only now becoming available. That’s also my answer when people ask why I can’t point to companies that have already adopted the strategy and succeeded with it.

The good news is, there are many cases where less comprehensive value measurements have proven fruitful. There are also industries where lifetime value is a well-established concept. So it’s relatively easy to portray this approach as the natural next step in an on-going evolution. Unfortunately, that argument appeals more to pioneers than followers. It’s also harder to link that argument to the all-important fear of being left behind. (Harder, but not impossible: you only have to convince people that adopters will gain real competitive advantage. It’s also early enough to promote the benefits of being first.)

I think both of these arguments have a chance at transforming Customer Experience Management from interesting to essential. If there are other, more compelling approaches I'd love to hear about them. What's certain is that unless Customer Experience Management becomes more than an exhortation to “be nice to your customers”, it will never have the impact it deserves.

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