How to Achieve a Great— and Profitable— Customer Experience - …viewer.media.bitpipe.com/1070398394_846/1300906820_385/Achiev… · CE should be pegged to business strategy and

FebrUArY 20111bloomberg bUsinessweek reseArch services

How to Achieve a Great—and Profitable—

Customer Experience

With companies shifting into the “experience” business,

they need to become adept at providing high-value,

relevant offerings that will translate into profits.

An exclusive survey and research report from Bloomberg Businessweek Research Services

FebrUArY 2011 2 bloomberg bUsinessweek reseArch services

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Table of Contents

Executive summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Moving Beyond Mediocre . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Financial Drivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Passionate Promoters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

narrowing the Delta . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

relevant Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Building a Business Case . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Conclusion: The Cost of Ignoring CE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

sponsor’s statement: The Key Elements of Customer Experience . . . . . . . . . . . . . . . . . . . . 12


Executive SummaryAmong survey respondents, 80 percent claim that customer experience (CE) is a top priority. At the same ▪▪time, most acknowledge their existing CE is somewhat mediocre.

Profitable CE strategies are holistic, sustainable and focused on creating competitive differentiation.▪▪

CE is not a single function but a practical and emotional manifestation of how a company delivers on the ▪▪promise it makes to its customers, through all encounters, on all channels.

A strong customer experience is just as important for B2B companies as B2C. Employees expect the same ▪▪level of CE from business partners that they expect as customers in their private lives.

The reward for successful CE is the development of loyal lifetime advocates for your brand, which may lead ▪▪to increased revenues, reduced costs, co-development and growth in new markets.

CE initiatives pose many challenges because they are transformative undertakings that often require ▪▪restructuring of the organization, business processes and policies, and underlying systems.

Passionate leadership is a must for CE, but it needs to be combined with specific financial goals and a ▪▪business case.

Two best practices for profitable CE are customer segmentation and focusing on areas to provide relevant, ▪▪recognizable added value to targeted customer groups.

CE should be pegged to business strategy and market position. ▪▪

Great CE is not necessarily expensive CE. often, getting the customer experience right the first time (via ▪▪fully functional processes) avoids costly customer service interactions down the road.

To be cost effective and sustainable, CE needs to be built on a sound IT infrastructure that affords everyone ▪▪a 360-degree view of the customer.

MethodologyBloomberg Businessweek research services (BBrs) launched a survey and research program in late 2010 to discover and analyze the views of C-level and line-of-business executives in north America on customer experience (CE). The research sought to determine these executives’ perceptions of the importance of creating competitive differentiation by providing powerful CE, thus growing the business. The research also sought to identify the importance of technology as a tool to maintain or even improve CE.

The goals of this program included:

Determining the level of recognition of the importance of a positive customer experience.▪▪

Defining the elements of a positive customer experience that contributes to the financial well being of the ▪▪company offering that experience.

Identifying the challenges of developing and maintaining a positive customer experience for the long term ▪▪while increasing profits.

Understanding the technological foundation for a positive and profitable customer experience.▪▪

Determining the impact of new technologies on the customer experience, such as data analytics, social ▪▪media and mobile computing.

This research program included both quantitative and qualitative components:

A survey of director-level or above executives at large and midsize B2B and B2C companies in north ▪▪America who are members of the Bloomberg Businessweek Market Advisory Board, an online panel of


25,000 business executives. A total of 307 director-, vice president- and C-level executives responded to the December 2010 survey. For more information about the demographics of this survey, refer to the “Methodology” charts below.

In-depth telephone interviews with C-level and other senior executives at large and midsize companies. The ▪▪companies involved include:

Arizona Cardinals Football Club ▪▪ ▪ CoopCardinal Health ▪▪ ▪ Disney InstituteColmobil Corp. ▪▪ ▪ The Lego GroupComcast ▪▪ ▪ Marriott International Inc.

Interviews with leading independent consultants, industry analysts and academics, in addition to survey ▪▪data from research firms, to provide context and additional insights. The experts include individuals from the following firms:

Denis Pombriant, Beagle research Inc.▪▪Convergys▪▪Paul D’Alessandro, Diamond Advisory services at ▪▪PricewaterhouseCoopers Forrester research Inc.▪▪David Gardner, Mass-customization-expert▪▪Don Peppers and Martha rogers, Peppers & rogers Group▪▪PricewaterhouseCoopers▪▪shaun smith, smith+co ▪▪Lior Arussy, strativity Group▪▪John Goodman, TArP Worldwide▪▪Bruce Temkin, Temkin Group▪▪Charles Patti, University of Denver▪▪

▪ A poll of 1,004 senior managers and directors from companies with at least $500 million in annual revenues. Two-thirds of those responding to the poll were at the vice president and executive levels. Approximately 30 percent of the respondents were from the United states, 30 percent from Europe, 30 percent from Asia and 10 percent from the rest of the world.

Triangle Publishing services Co. Inc. supported BBrs in the development of the survey questionnaire, in addition to providing the in-depth telephone interviews and the writing, editing and production of this report. BBrs and the author of this report, Lauren Gibbons Paul, are grateful to all of the executives who provided their time and insights for this project.

This research project was funded by a grant from sAP but was written independently of this sponsor. The editorial department of Bloomberg Businessweek magazine was not involved in this project.

For more information about this project, please contact samuel Gager of Bloomberg Businessweek research services at [email protected].

Respondents by Title

Respondent Company Size by Revenue

Respondents by Industry

Bloomberg Businessweek research services, 2010

Methodology

senior Vice President/Executive Vice President/ General Manager: 37%

Director/ Vice President: 39%C-Level: 23%

$1 billion- $4.9 billion: 29%

$5 billion plus: 40% $200 million-

$499.9 million: 17%

$500 million- $999.9 million: 14%

Manufacturing services: 28%

Financial services: 18%

Business services:11%

Healthcare/Pharmaceuticals: 8%

nonprofits: 5%

retail/Wholesale: 5%

other: 25%


IntroductionGlobalization. Consumerization of technology. Digitally engaged customers. Widespread use of social media. The proliferation of communication channels. Widespread commoditization. All of these factors—combined with a post-recession economy that offers few avenues for new growth—have shifted the familiar ground on which companies worldwide have differentiated themselves from competitors and interacted with customers. Consider, for instance:

Consumers and business buyers are in the driver’s seat, thanks ▪▪to online forums, social communities and social media sites.

The Web and mobile devices have increased expectations ▪▪for transparency, immediate response and intuitive business processes.

Differentiation is more difficult to maintain, with competitive ▪▪offerings just a mouse click and a “free-shipping” offer away.

Whereas customer relations used to be considered a sales or ▪▪service function, customer experience encompasses everything from the first impression of the brand all the way to sales, fulfillment, invoicing, billing, collections and after-sales service.

The result: Companies across all industries—B2C and B2B—are realizing it is no longer good enough to simply “treat customers well” and aim for customer satisfaction. Today, businesses are striving to develop loyal, engaged advocates who would not even consider a competitor because they are emotionally connected to, absorbed in and—maybe—even helped create the offerings they already receive (see Figure 1, “Customer Experience a Top Priority,” above). The most loyal of customers are also apt to spend more, pay higher prices and recommend the company, says Lior Arussy, president of strativity Group, a customer experience research, strategy design and implementation firm.

Companies are no longer in the business of selling products and services—they are selling a “customer experience.” And a customer experience is not one thing but many: It is the practical and emotional manifestation of how a company delivers on the promise it makes to its customers through its call center, Web site, products, services, social media presence and even word-of-mouth anecdotes—in short, every direct and indirect customer encounter a company has across all its customer or enterprise functions (see Figure 2, “Elements of Customer Experience,” on page 6).

The business world is outgrowing the strategy of using financial “perks” such as loyalty programs to discourage customers from switching to a competitor, says Paul D’Alessandro, partner at Diamond Advisory services at PricewaterhouseCoopers (PwC). Instead, new strategies are based on creating “psychological” incentives to stay. “In the past, companies have invested hundreds of millions of dollars into programs that financially handcuff customers to their solution,” he says. “Today, they need to build up a bank of appreciation by addressing customer needs exactly how they want them addressed, and that’s much more powerful than a loyalty program.”

This “bank of appreciation” is built through the cumulative effect of three factors, according to D’Alessandro. First, the stories people hear through word-of-mouth and the media; second, through direct interaction; and finally, through “moments of truth,” which are profoundly positive or negative experiences that lead to long-lasting impressions. He cites a recent PricewaterhouseCoopers survey, “The PwC Experience radar,” in which a respondent described JetBlue Airways flight attendants handing out pizza during a flight delay. “This happened four years ago, and it was still a formative notion of this person’s experience of JetBlue,” he says.

Customer Experience a Top PriorityIn a recent survey, 80% of respondents said that getting closer to customers and providing them with a differentiated experience is one of their top strategic objectives. Here is a breakout by industry:

Base: 1,004 respondents from midsize to large companies, worldwide.

source: Bloomberg Businessweek research services, 2010

Figure 1

Telecom

High-Tech

Healthcare/ Pharmaceuticals

nonprofits

Travel

92%

90%

86%

73%

71%


Moving Beyond MediocreDespite general agreement among the majority of companies that customer experience is a high priority, most believe that, so far, they are not doing a very good job of providing CE (see Figure 3, “Differing Views,” on page 7).

It is no wonder. CE initiatives involve a wide range of challenges that many companies are still working to meet (see Figure 4, “obstacles to a Powerful Experience,” on page 8). For over two-thirds of respondents, a main obstacle is siloed operations and disconnected tools and technologies. For the majority of respondents, creating a backbone of integrated processes and applications is a key component to delivering a stronger customer experience. Indeed, customer experience work requires a process of transformation, according to strativity Group’s Arussy. The transformation includes assessing the customer journey, identifying loyalty drivers,

pinpointing the gaps between expectation and current performance, and then initiating innovative processes to address those gaps. “You need to develop a vision of what your CE should be, what you want to be known for, and then attach that to your brand promise and delivery and apply it across the whole organization,” he says.

This transformation often requires reorienting the whole of your organization—people, processes and technology—to focus on the customer. In fact, it flips the dynamic that has been in place forever. now, customers expect to tell you what they want, rather than passively receiving whatever you choose to offer.

such a major change is hard for any organization to assimilate. And yet this is just what some companies are doing. Take, for example, Colmobil, an automobile importer in Israel. As part of its transformation from to product-centric to customer-centric, Colmobil completely revamped not only its organizational structure but also its legacy systems, both of which were designed to support more traditional business processes.

“After many years of working this way, we started realizing the customer may touch the company in each and every division, and even in different divisions at the same time,” says Gil Katz, CIo at Colmobil. The company wanted to provide a consistent, personalized experience across all of these interactions.

Colmobil replaced its legacy system with an integrated platform of ErP, CrM and industry solutions. It restructured its brand-focused divisions to focus on how customers view the vehicles, in addition to doubling the size of its service division. “now, we’re built to face the market and the customers rather than the brand we’re selling,” Katz says.

Financial Goals These types of challenges make adopting a “customer first” philosophy impossible, “unless the leadership believes in the mission and has some fervor about it,” says Charles Patti, Professor of Customer Experience Management in the Daniels College of Business at the University of Denver. At the same time, embarking on a customer

Elements of Customer Experiencerespondents said their organizations considered the following as the most important elements of a positive experience for their customers (rating them a 4 or 5, on a scale of 1 to 5).

Base: 307 director-level and above executives at midsize and large companies.


Figure 2

Attribute Percent of Respondents

The quality and reliability of your company’s services 94%

The quality and reliability of your company’s products 92%

The perceived value of your company’s products and services—the importance of the customers’ perception that they feel they received value for their money

90%

The relevancy and timeliness of interactions with your customers 85%

The responsiveness of your company to customer feedback and acting on that feedback

84%

The ease of doing business with your company 82%

The consistency of your company’s support and treatment of customers across channels

82%


experience program does not mean investing endless money without knowing what the return will be. “You can’t go bankrupt trying to deliver great CE,” he says. “You need to calculate the roI.”

Arussy from strativity Group agrees. “If there’s no financial driver, we don’t recommend companies do this,” he says. “It has to be something you can point to and say, ‘We have moved the needle on either revenues or expenses.’”

However, it is also a mistake to view customer experience management and similar technology as a direct path to increased revenue. “Most executives think, how can we use this technology to sell more stuff?” says Don Peppers, founding partner of Peppers & rogers Group, a CrM consulting company. “A better question is: How can we use this technology to deliver more value to our customers—better, faster and cheaper?”

Companies that are known for customer experience “put purpose before profit,” says shaun smith, president of CE consultancy smith+co. “They believe that by focusing on customer value, they can become more profitable and sustain these profits longer than the competition.”

Passionate Promoters The value that gets passed on to customers can come back to a company in a number of ways, including a willingness to recommend the company or product to a friend. This is a key customer experience metric (often called the “net promoter” measure). For some companies, such as The Lego Group, loyalty and engagement grows to the point where an elite group of super-users forms and co-develops your next generation of products while ensuring new offerings match real-world demand.

Lego Ambassadors comprise 42 of the world’s top aficionados, representing 24 countries. The broader Lego community nominates the most influential individuals to attain this status, according to Conny Kalcher, Lego vice president of consumer experiences. Lego hatched the idea as a productive way to harness the considerable expertise of their most passionate customers.

Lego brings its Ambassadors on-site to different locations globally to participate in special projects, be it Web involvement, game development or community development. “They can demonstrate the potential for the brand much more powerfully than we can,” Kalcher says.

Lego’s CE initiative is profitable. It is based on the practice of customer segmentation, wherein every customer enjoys the Lego experience best suited to them while the highest value experience is reserved for the highest value customers.

Narrowing the Delta Although CE presents a total value proposition to all customers, experts still advise companies to combine that more populist approach with the use of customer segmentation, fueled by customer data analytics (see Figure 5, “Target Customers,” on page 9). The idea is to ensure you are concentrating your resources on high-worth customers who will repay the investment—now or via an expanded lifetime value.

Differing ViewsThe average rating that companies give the customer experience they provide is 3.62 on a scale of 1 to 5, although there are variations by industry sector.

Base: 1,004 respondents from midsize to large companies, worldwide.


Figure 3

High-Tech

Professional services

Healthcare/Pharmaceuticals

Manufacturing

Telecomm

4.07

3.76

3.47

3.47

2.94


some companies offer customers perks, whether that makes business sense or not. “When you fail to treat different customers differently, you are going to spend too much money on customer service” while not focusing enough on high-value customers, says Martha rogers, co-founder of Peppers & rogers Group. Zappos, a company often cited for superior customer experience, gives all of its customers free shipping and free returns. However, this may not be a sustainable practice going forward. “If you give everyone the same benefits, you are asking your best customers to subsidize your worst customers,” rogers says.

A recent study by relationship management firm Convergys bears this out. The company found that while 89 percent of surveyed customers said they are loyal, only 46 percent of this group makes more frequent purchases and about one-third do not recommend the company to others. However, about 15 percent of surveyed customers

were identified as “super-loyalists” or “advocates,” exhibiting more profit-inducing behaviors such as recommending the company, making more frequent purchases, not shopping at competitors and responding to requests for feedback, special offers/discounts and new products/upgrades.

Marriott International Inc. has done customer segmentation for many years, via its 27-year-old rewards Program. Half of the hospitality giant’s revenue is from rewards members, and a smaller sub-segment of top-value customers—Platinum members who stay in a Marriott brand hotel 75 nights or more per year—provide a significant revenue base, according to Mike Keppler, senior vice president, Marriott sales, marketing and revenue management systems.

“We work to provide an excellent experience for all of our guests but also to provide more specialized services for our top-value guests, using information we gather about them,” says Ed French, senior vice president of Marriott rewards.

What is different today is the growth in the variety of customer touchpoints, which are increasingly digital, in addition to the growing demands for access and control among all of Marriott’s guests. “our

guests spend more than three million hours per year on our Web site, which is 15 times more than the calls our reservation office handles,” Keppler says.

For its top-value guests, Marriott’s system capabilities allow all touchpoints to recognize these customers and tailor the service, including self-service, to the guest’s value, history and preferences. For instance, top-value guest calls are routed to a special team of agents based on the incoming phone number and other information. Agents are provided with a variety of options to ensure quick service, with pre-negotiated rates, room preferences and, in some cases, special requests for the hotel.

In addition, if Marriott sees a decline in a top-value customer’s total revenue or number of reservations, an agent calls or e-mails that customer to see if there are issues to resolve. “It’s usually that their personal situation has changed,” French says, “but in 10 percent of the cases, there is an issue we can take action on. What has been surprising is how effective simply reaching out to the guest can be.”

“We found that even in the tough economy, our rewards members continue to stay with us, and we saw their business stay strong worldwide,” Keppler says.

Obstacles to a Powerful Experiencerespondents named the following as “major” and “frequent” obstacles to improving the customer experience.

Base: 307 director-level and above executives at midsize and large companies.


Figure 4

Percent of Respondents

organizational and process silos in our company 73%

Lack of coordination across channels to ensure consistency 72%

Large number of disconnected tools, technologies and applications 71%

Lack of a complete view of the customer to better understand their needs and make interactions more relevant and customized

66%


Relevant Value In addition to customer segmentation, a second key element of profitable customer experience is identifying the make-or-break customer interaction points and applying highly relevant and valued experiences to those moments of interaction. Understanding what a relevant and valuable experience is, once again, a matter of analyzing data on customer behavior, needs and preferences.

To truly optimize relevant, highly valued experiences, companies need to understand which experiences customers are actually willing to pay for, Diamond Advisory services’ D’Alessandro says. This means knowing not only how highly they value attributes such as accessibility, trust and innovation but also whether are they willing to pay for them. “Companies need to get to a point where they know the actionable things to tackle and the economic return,” he says.

An example he cites is southwest Airlines’ “early-bird check-in” offering, where customers can pay extra to move to the front of the check-in line. The company framed this offering in such a way that customers could understand its value, in addition to offering it at strategic moments, he says. so while traditional ticket purchasers would automatically go for the lowest price offering, the system now looks for certain behaviors, demographics or situations—tickets purchased close to departing time, complex routes, business travelers—and pops up the offering in the moment.

Another good example is Coop, a grocer in switzerland that recently began offering customers an iPhone grocery-shopping application that is tightly integrated with its back-end ErP applications. Coop paid close attention to demographics and customer needs. With about 13 percent of the swiss population owning an iPhone, and stores typically closing at 6:00 PM on weekdays and all day on sundays, the iPhone application represents both relevance and convenience. Coop’s back-end integration means the application shows real-time price changes and product availability, which is a prime differentiator from the chain’s nearest competitor, which also recently began offering an iPhone application.

Building a Business Case To be profitable, your customer experience strategy must match your corporate business objectives and market, and your business case should explicitly spell out this linkage. For example, a provider of low-end but reliable lodging will not have the same type of customer experience as a four-star resort.

“Companies are not obligated to wow their customers every time,” says Bruce Temkin, managing director of consulting firm Temkin Group. “They should have an appropriate customer experience strategy to support their business strategy.”

Target Customers While most companies with CE initiatives clearly define target customers and communicate the importance of serving them, fewer have practices in place to monitor interactions with those customers and apply decision-making processes with their needs in mind.

Base: 69 companies with a CE executive and 62 companies without a CE executive.source: Forrester research, “The state of Customer Experience, 2010”

Figure 5

Clearly defined set of target

customer segments

Primary research used to fully understand the needs and

behaviors of target customers

Quality of interactions with target customers

is closely monitored

Decision-making processes systematically incorporate needs of target customers

n▪Percent of Companies with a CE Executive n▪Percent of Companies Without a CE Executive

62%

56%

48%

39%

38%

21%

35%

23%


When developing a business case, the financial drivers of CE will, in most cases, come down to the following areas:

Increased revenue.▪▪ In addition to data that shows loyal customers spending more, the revenue benefits of improvements in customer service are also well documented, reaching 10 to 20 times the cost implications, according to John Goodman, founder of customer experience agency TArP Worldwide.

Premium pricing.▪▪ Closely related is the ability to charge loyal customers higher prices for experiences they value. According to a recent strativity Group survey, loyal customers who feel they are getting a superior experience are willing to pay premium prices of 10 percent or more vs. dissatisfied customers (see Figure 6, “Financial rewards,” below).

Customer retention.▪▪ When a customer encounters a problem, there is an average 20 percent drop in loyalty, Goodman says. This can vary from 2 percent to 70 percent, depending on problem type (for example, a torn package might be 2 percent while infestation of a food item would be 70 percent). In the average market, for every five customers with problems, you will likely lose one of them—along with their revenue. on the flip side, if you can prevent or fix five problems, you will retain one customer (and his revenue) who otherwise would have been lost, he says.

D’Alessandro cites similar statistics. In the insurance industry, normal churn is about 9 percent, he says. But according to a study Diamond Advisory services conducted, that jumps to 17 percent if a customer has one bad customer experience or, more specifically, a “moment of truth.”

Improved reputation.▪▪ on average, double the number of people will hear about someone’s bad experience as will hear about a person’s good experience. This outcome is even more dramatic on the Web, where four times as many people hear about a negative experience vs. a positive one, according to Goodman.

on the other hand, the mere existence of a sensational negative Web site or Facebook page is generally not enough in itself to sway consumer opinion, at least not over the long haul, if other aspects of customer experience and customer service are solid. “What ultimately erodes customer loyalty is how you treat customers and interact with them, not those outrageous social media sites,” such as “Comcast Must Die,” Temkin says.

▪ Reduced costs. In some cases, a shift to customer-centric processes may create efficiencies that translate into reduced costs. At Comcast, Frank Eliason (now senior vice president of social at Citi) famously helped the company manage an online forum for customers to help each other with troubleshooting. The cost savings of this approach can be extended if you take that peer-to-peer support information and create a knowledgebase for your phone agents, he says.

“At Comcast, we found that 80 percent of forum participants got the answer they needed through the forum,” Eliason says. “If we were traditionally getting 14.5 million calls per month and 80 percent are taken care of in the forums, how many calls does that avoid? Even conservatively, at $8 dollars per phone call, there are huge savings in just one month.”

Financial Rewards In a recent survey, consumers clearly stated that a superior customer experience delivers superior financial results.

* Base: 930 consumers in north America, 2010. ** Base: “Dissatisfied customers” are those who gave a ranking of 1 to 3 for “likelihood to recommend the company to others.” The base in this case is 62 respondents.

source: strativity Group, in partnership with Customer service Experts

Figure 6

Expand purchases by 10% or more

recommend the company to others

remain a customer for 10 years or more

Pay a premium price of 10% or more

Expect discounts of 5% or more to continue doing

business with company

n▪Percent of Loyal Customers* n▪Percent of Dissatisfied Customers**

73%65%

58%

55%12%

29%11%

19%66%

n/A; this question is used to qualify dissatisfied customers


smith+co’s shaun smith also points to the process changes at Progressive Insurance, which created the practice of mobile claims assessors for automobile accidents. This program cut the administrative cost of claims processing and reduced the amount of an average settlement because people are willing to accept less when they do not have to wait longer.

Conclusion: The Cost of Ignoring CE The consequences of ignoring customer experience will be dire, sooner or later. As with all negatives, the cost of not doing CE is hard to measure but cannot be underestimated—the stakes are as high as extinction.

A good example is Dell Inc., which in 2005 saw its customer satisfaction score slip five points, according to ratings by the American Customer satisfaction score Index, which is conducted by the University of Michigan. The dip was largely attributed to the viral response to the blog postings of an unhappy customer, along with Dell’s slow response to the beating it was taking online. The following year, Dell hired a vice president of communities and conversations to monitor and manage social media activities.

Even if you do not get caught in a viral episode of this magnitude, customer experience ultimately solves the business problem of how to differentiate your offering in a way not easily copied by a competitor. This is especially important in an age of increasing commoditization, according to David Gardner, founder and principal of consultancy Mass-customization-expert. He points to the early days of the MP3 player as an example of how this can play out. Though widely considered as one of the weaker market entries, the Apple iPod succeeded in differentiating itself via design, the streamlining of music sales through iTunes, an innovative retail experience and emotional appeal. The others were left to compete anemically on price.

You also need to consider the costs of customers themselves—the cost of a complaint, a bad experience and customer churn—and how much money you are leaving on the table by not providing customer experience tailored to business objectives, strativity Group’s Arussy says. “Companies are accustomed to treating the customer relationship more like an art than a science, so they’re making decisions without real information,” he says. An example is a $300 million cost-reduction effort that could lead to a $1 billion loss of revenue because you have become irrelevant to customers, Arussy says.

Taken further, because of the emotional appeal of a powerful customer experience, even if all companies began to compete on this basis, their differentiation and competitive advantage would not be sustainable in the long term.

“The world is very competitive—our competitors see and emulate our success over time,” Marriott rewards’ French says. However, the two elements that can keep companies perpetually ahead of the game are a laser-like focus on taking care of customers and staying ahead of the curve in managing their experience, he says.

If annihilation is the ultimate price of not doing customer experience, the potential benefits of successful CE are legion. If you can deliver highly valuable experiences to your customers, in a sustainable way, the reward will be loyal, engaged advocates who help you grow your business. n

11


The Key Elements of Customer Experience Demolish boundaries between functions to create transparent and efficient customer-facing processes.

To better understand how companies can provide a superlative customer experience and still make a profit, Bloomberg Businessweek Research Services interviewed Reza Soudagar, Senior Director of CRM Solutions at SAP. He has two decades of experience developing and implementing CRM solutions. Soudagar is also a co-author of a new book on customer experience, to be published by McGraw-Hill in September 2011. An edited Q&A of that discussion follows.

SPOnSOR’S STATEmEnT

FebrUArY 2011bUsinessweek reseArch services

What are the key attributes of a customer experience solution?Customer experience is defined by every touchpoint in the enterprise, not just the traditional customer relationship management components—sales, service and marketing. Today, organizations need

to think about how all their customer-facing processes can be transparent, from start to finish. In the modern age, there should be no boundary between ErP and CrM. To do that, integration is crucial.

What types of integration are important?Process and data integration. Customer-facing processes must be flawlessly integrated, from

beginning to end. The process integration we offer makes sure there are no breakdowns. Data integration basically means there will be a single source of truth. Accurate data delivered in real time to the customer and the customer service reps provides positive moments of truth, when a customer wants to make a purchase or resolve a problem.

Where are companies most vulnerable to damaging the customer experience if their systems and data aren’t integrated?Customer service. After-sales support is one of those moments of truth. When a customer needs help, our service functionality takes the request and delivers

results—usually enabling organizations to resolve the issue in the first contact. We have the ability to coordinate the dispatch of a repair person and the spare part from a warehouse after checking on availability; it’s all incorporated into the sAP CrM service suite.

How important are mobile devices in customer experience?The reality out there is that a multi-channel approach is really important. Many times, customers choose many channels for one transaction. A service request may start via a smartphone and then go to an online chat or e-mail. We see more transactions being conducted via smartphone.

The proliferation of channels adds to the complexity. We provide the capability to incorporate a mobile platform, to enable companies to create applications for any device and integrate those applications with their sAP back-office system. The sybase mobility platform also enables organizations to write the application once and then deploy it for multiple mobile devices. n

Reza SoudagarSAP CRm Solution management

For More InformationsAP’s Web site offers a wealth of information about how to provide a superb customer experience at a profit. Go to www.sap.com/crm for more information.

Documents

How to Achieve a Great— and Profitable— Customer Experience - …viewer.media.bitpipe.com/1070398394_846/1300906820_385/Achiev… · CE should be pegged to business strategy and