Convincing Managers to Care about Customer Value Measures

I spoke earlier this week at the DAMA International Symposium and Wilshire Meta-Data Conference, which serves a primarily technical audience of data modelers and architects. My own talk was about applications for customer value metrics, which boiled down to lifetime value applications and building them with the Customer Experience Matrix. (In fact, preparation for this talk is what inspired my earlier series of posts on that topic.)

One of the questions that came up was how to convince business managers that this sort of framework is needed. I’m not sure I gave a particularly coherent answer at the time, but this is in fact something that Client X Client has given a fair amount of thought. The correct (if cliched) response is that different managers have different needs, so you have to address each person appropriately.

CEOs, COOs and other top managers are looking at company-wide issues. Benefits that matter to them include:

- understanding how customers are being treated across different parts of the organization. Of course, this “customer eye view” is the central proposition of both the Customer Experience Matrix and customer experience management in general. But in practice it’s still very hard to come by, and good CEOs and COOs recognize how desperately they need it.

- gaining metrics for customer experience management. I’ve made this point many times in this blog but I’ll say it again: the only way to focus an organization on customer experience is to measure the financial impact of that experience. Top managers understand this intuitively. If they really believe customer experience is important, they’ll eagerly adopt a solution that provides such measures.

- identify opportunities for improvement. Measuring results is essential, but managers want even more to know where they can do better. This comes back to the One Big Button I’ve been writing about all week. The Customer Experience Matrix and other customer value approaches offer specific techniques to surface experience improvement opportunities and estimate their value.

- optimize resource allocation. Choosing where to direct limited resources is arguably the central job of senior management. Impact on customer value is the one criterion that can meaningfully compare investments throughout the company. It offers senior managers both a tool for their own use and a communication mechanism to get others in the company thinking the same way.

Chief Financial Officers share the CEO’s a company-wide perspective but look at things from a financial viewpoint. For them, customer value approaches offer:

- new business insights from new metrics. Although the CFO’s job is to understand what’s happening in the business from financial data, the information from traditional financial systems is really quite limited. Customer value measures organize information in ways that reveal patterns and trends in customer behavior which traditional measures do not.

- better forecasting. Forecasts based on individual customers or customer segments can be significantly more accurate than simple projections based on aggregate trends or percentage changes. Forecast quality has always been important but it’s even more of a hot button because of Sarbanes-Oxley and other corporate governance requirements.

- cross-function Return on Investment measures. CFOs are ultimately responsible for ensuring that ROI estimates are accurate. Customer value metrics help them to identify the impact of investments across departments and over time. These effects are often hidden from departmental managers who would otherwise prepare estimates based only on the impact within their own area.

Marketing departments gain substantial operational benefits from customer value measurements and the Customer Experience Matrix. These include:

- better ways to visualize, control and coordinate customer treatments. Different departments and systems execute treatments in different channels and stages of the product life cycle. Bringing information about these together in one place is a major challenge that the Customer Experience Matrix in particular helps to meet. Applications range from setting general experience strategies to managing interactions with individual customers.

- monitor customer behavior for trends and opportunities. A rich set of customer value measures will highlight important changes as quickly as they occur. On a strategic level, the Customer Experience Matrix identifies the value (actual and potential) of every step in the purchase cycle to ensure companies get the greatest possible return from every customer-facing event.

- measure return on marketing investments. Customer value measurements give marketers the tools they need to prove the value of their expenditures. This improves the productivity of their spending while ensuring they can justify their budgets to the rest of the company.

Customer Service managers, like marketers, deal directly with customers and need tools to measure the effectiveness of their efforts. Benefits for them include:

- visualization of standard contact policies and of individual contact histories. The Customer Experience Matrix provides tools to track the flow of customers through product purchase and use stages, to see the specific treatments they receive, and to display individual event histories to an agent or self-service system as an interaction occurs. All this helps managers to understand and improve how customers are treated.

- identify best treatment rules based on long-term results. Customer value measurements can show the impact of each treatment on long-term value. Without them, managers are often stuck looking only at immediate results or have no result information at all. Having a good measurement system in place makes it easy for managers to continually test, evaluate and refine alternative treatments.

- recommend treatments during interactions. The optimal business rules discovered by customer value analysis can be deployed to operational systems for execution. A strong customer value framework will support on-the-fly calculations that can adjust treatment recommendations based on information gathered during the interaction itself.

If there’s a common theme to all this, it’s that customer value measurement gives managers at all levels a new and powerful tool to quantify the impact of business decisions on long-term value. Let me try that again: in plain English, it helps them make more money. If that’s not a compelling benefit, I don’t know what is.