Best Practices in Customer Experience (CX) Measurement and Analytics

The following are the top 10 concepts you will learn in this blog article:

  1. What are the most common set of metrics used to measure customer experience quality and effectiveness.

  2. What these common customer experience metrics are used for

  3. When are these best practice customer experience metrics best measured

  4. What a customer journey (a.k.a. customer life-cycle) is and how it related to customer experience metrics

  5. Why a balanced scorecard is better than any one single customer experience metric

  6. Why NPS is not sufficient to provide a comprehensive picture of your customer experience quality and effectiveness

  7. The top 10 best practices in developing a world-class customer experience measurement program and balanced scorecard

  8. Sample of what a customer journey looks like as well the customer experience analytics collected at each journey phase

  9. Examples of embedded detailed customer journey phase analytics paired with summary & executive level customer experience analytics

  10. How to develop customer experience analytics that also drive the development and support of a customer first, surprise and delight culture.

Peter Drucker once said “If you can’t measure it, you can’t manage it”. This ageless and famous quote applies to almost all situations and customer experience is no exception. There is virtually no way to determine how effectively your customers are being treated without a robust set of measures to gauge how well you are fulfilling their needs, wants, desires, etc. In this blog article, we will cover the specific metrics that best practice companies use to measure their customer experience delivery along with it is done.

 

Peter Drucker's Famous Measurement Quote

Peter Drucker’s Famous Measurement Quote

The Chart below illustrates some of the more commonly used customer experience (CX) metrics and how/where they are used in the customer journey continuum.

Commonly Used Best Practice Customer Experience (CX) Metrics

Commonly Used Best Practice Customer Experience (CX) Metrics

  • Customer satisfaction (CSAT) – one of the most common uses of customer satisfaction ratings is on ratings websites like Yelp, TripAdvisor, Facebook, Google, etc. using the now famous five star rating system seen below. Other customer satisfaction feedback mechanisms are more sophisticated, querying customers on an array of customer experience topics that are multi-dimensional in nature.

Customer Satisfaction Score Example

Customer Satisfaction Score Example

  • Customer Churn Rate: Customer churn rate is almost always expressed in terms of a percentage and is a product of the number of lost customers divided by the number of retained customers for any given period (day, week, month, Quarter, Year).

Customer Churn Rate Example Calculation

Customer Churn Rate Example Calculation

  • Customer Effort Score: Customer Effort Score is recorded to keep a pulse on how easy it is for a customer to accomplish certain transactions with your company (e.g. return a product, handle an issue, inquire about upgrades, etc.). It is obtained via surveying customers following a major interaction and is expressed in terms of a numeric, typically on a 1-10 or 1 to 7 scale. Here is a sample I developed for a client where the score is translated into a 1 to 7 scale (from “Strongly Disagree”=1 to “Strongly Agree”=7).

Customer Effort Score Example Quantification

Customer Effort Score Quantification Example 

  • Customer Average Time to Resolution (CATTR): This metric is a measure the average time it takes to resolve categories of customer interactions (inquiry, product issue, service issue, contract renewal, return, etc.). This is expressed in average time per interaction category as shown in this example

Customer Average Time to Resolution (CATTR) Example Calculation

Customer Average Time to Resolution (CATTR) Example Calculation

  • First Contact Resolution (FCR): All companies should strive for what is called “one and done” customer service, enabling the customer to handle any need with one short effort. The benefits of achieving this are endless including the following: Research I have read has indicated that a 1% increase in FCR rates translate into decreasing operating costs by 1%, increases of both customer satisfaction and employee scores by 1-3% as well as increasing customer loyalty (up to 20%). How companies measure FCR vastly differs including surveying customers, tracking it in a CRM system, tracking it in a contact center database or querying the customer at the end of a call. Many companies sadly do not track this metric and lose out on the visibility and resulting benefits this provides.

One & Done Customer Service

One & Done Customer Service Creates Elated Customers

  • Contract Renewal Rates: This metric is more company specific but, when applicable and used in conjunction with the other metrics, provides a great barometer on the health of the contract oriented business. For example, you might be experiencing great FCR and customer average time to resolution, but contract renewal rates might be lagging due to a perceived lack of value by the customer for the price paid. By using this metric in a balanced scorecard along with CSAT, FCR, CATTR you have a much more comprehensive view of total customer satisfaction than with just a few measures, allowing you to reduce business risk and potential revenue surprises.

High Contract Renewals = High Customer Satisfaction

High Contract Renewals = High Customer Satisfaction

  • Net Promoter Score (NPS): Net Promoter Score (NPS) is the most commonly used and simplest customer experience metric that exists.  NPS is typically measured by asking the following question:

How likely are you to recommend [business, service, product] to a friend or colleague?

Customers rate your company, service, product, etc. on a scale of 0 to 10. Respondents are grouped in the following categories:

    • Customer Promoters (Score 9-10)

    • Customer Passives (Score 7-8)

    • Customer Detractors (Score 0-6)

Calculate Net Promoter Score is typically calculated by subtracting the percentage of net detractors from net promoters. Here is a great illustration on how this is determined, calculated:

Net Promoter Score Example Calculation

Net Promoter Score Example Calculation

It has been found that only those customers who provide a rating of a 9 or 10 on the NPS scale are those who will truly become adjunct volunteer company sales and marketing agents and are a result of experiencing surprise and delight levels of customer service. These same elated customers are the ones who tell everyone they meet about your exceptional company and your amazing, services, products, customer service, etc. More on this in a future blog that will address the topic of “Delivering Consistent Surprise and Delight Customer Service”.

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On this last point of NPS, there exist many misnomers about what to measure for customer experience effectiveness. Many professionals I have met in my consulting travels have the misconception that measuring one metric like Net Promoter Score (NPS) is sufficient to measure the quality of the customer experience you are delivering to their customers.  This is equivalent to believing that taking your body temperature is sufficient to determine your overall health when in actuality there are many measures taken together that help make this healthy/not healthy determination. The same is true for measuring the quality of your customer experience. While NPS is a good measure for helping to determine the quality of your customer experience effectiveness when used correctly, similar to body temperature, it must be augmented with many other measures to determine its overall effectiveness.

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Other customer experience metrics include employee turnover (a leading indicator of customer satisfaction), year-over-year same customer spend, customer loyalty and average longevity, customer acquisition rates over time, etc. I will go more into this when I cover the topic of customer journeys.

Customer Experience, Satisfaction Humor

Customer Experience, Satisfaction Humor

First, let’s examine my recommended top 10 best practices for measuring your customer experience delivery effectiveness.

  1. Monitor Customer Experience Metrics in Real Time and continuously improve customer experience programs based on actual CX metrics/program performance.

  2. Track top level Customer Experience (CX) Metrics for all customers (i.e. average customer satisfaction) and for individual customer segments (i.e. price sensitive customers or high value customers).

  3. Request both customer qualitative and quantitative ratings throughout the Customer Life-cycle during critical customer interactions. Accomplish this my providing a conduit for your customers to become brand partners who are invited to participate in providing program feedback prior to full launch, provide detailed focus group feedback on selected topics and for most valuable customers to participate in exclusive customer advisory boards.

  4. Ensure group appropriate customer experience metrics are being delivered to each layer of the organization (highest importance summary level for CEO – Chief Customer Experience officer, more granular metrics for tactical managers and line staff).

  5. Cultivate and measure your own internal customer metrics and calibrate against externally measured CX like the American Customer Satisfaction index or metrics collected by firms like the Service Management Group (Kansas City), Direct Opinions (Beachwood Ohio), C-Space (Boston), Engine Group (NYC), etc.

  6. Track customer experience effectiveness via a balanced scorecard of Customer Experience Metrics including customer satisfaction, NPS, Customer Churn and renewal rates, customer spend per year and employee turnover (a proven leading indicator of customer satisfaction).

  7. Ensure the collection and dissemination of Customer Experience metrics meet the golden rules of being seamless to your customers, easy to obtain and are ingrained as part of normal business operations.

  8. Review customer experience metrics during key management reviews like operational reviews, leadership team reviews and financial reviews. Ensure action plans are developed for metrics above and below expected performance levels.

  9. Ensure that the company culture and training is supported and in-line with customer experience metrics by making everyone’s KPIs metrics align to the performance of key customer metrics.

  10. Develop customer journeys (a.k.a. customer life-cycles) and develop customer experience metrics for each major step in the customer journey.

The last best practice is to identify key end-to-end customer journeys or paths of customer progression when engaging your company and then attach appropriate customer experience journey analytics along those customer paths. Once you understand the different touch-points and how they impact the overall customer journey, you will be in a far better position to pick the most appropriate metric to use at each touch-point. The best metric is company determined based on a developed set of customer experience standards and goals.

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In my example in the introduction, Net Promoter Score (NPS – which answers the question, “How likely are you to recommend [business, service, product] to a friend or colleague?” and is rated on a 0 to 10 score), is not a total customer experience solution metric. The reason is that NPS works best when measured at the end of a customer journey (a.k.a. customer life-cycle), such as at contract renewal time. For example, if a customer is getting frustrated returning a product or trying to resolve a service issue, then they will likely defect long before they are queried on NPS. It is better to measure customer satisfaction right after an interaction to have real-time insights into a customer’s experience satisfaction and not wait until NPS query time.

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Here is a sample customer journey I developed from a recent client consulting engagement along with the metrics they decided to collect at an aggregate level as well as along this customer journey. Some of the metrics and customer journey names have been changed to protect my client’s identity. In addition, this client wanted to err on the side of measuring many metric points frequently and not all clients are this exhaustive in measuring their program. Some of these metrics were already in place before we added many others.

Customer Journey Analytics Illustration

Customer Journey Analytics Illustration

The above illustrates one of the main customer journeys (discover to renewal) in the life of a customer along with the Macro customer phases in that journey (i.e. 1-customer discovery, 2-customer sales & on-boarding, 3-customer support, 4-customer renewals) as well as the micro phases in that journey (product, service credibility evaluation).

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The above chart also illustrates the fact that it is important to track global/summary metrics at the top of the organization (i.e. total customer satisfaction) in order to gauge overall customer experience health and to balance these with more granular measures along the customer journey phases (i.e. First Contact Resolution in the on-boarding and support phases). While there is a recommended set of best practice metrics to collect for standard customer journeys, each company will make a different selection of the mix of metrics. For example, if a company’s life blood is contract renewals then the metrics will be more geared toward gauging the customer’s satisfaction for the existing contract experience (value for contract price, value of contract to client’s business, contract terms & ease of doing business vs. perhaps product return rates).

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One best practice embedded in the above is to report on the number of customer stars (in the 1st and 3rd phases above) per period whereby employees who have delivered exceptional “surprise and delight customer service” are recognized and rewarded. Customers of this company as well as executives from the company are provided incentives to recognize employees who went above and beyond in delivering exceptional customer service. This company tracks this via reports and recognizes top employee customer stars quarterly and annually with top company customer stars getting recognized, rewarded, etc. This helps build a culture of support for being customer exceptional with top stories being told over and over to teach employees what it means to be customer exceptional  and encourage others to emulate this valued behavior.

Summary:

In summary, measuring your customer experience quality/effectiveness must be guided by a set of best practices to be effective and comprehensive. The use of customer journeys as well as customer experience journey analytics, balanced by summary customer experience metrics comprises a customer experience balanced scorecard.  By not measuring or under-measuring your customer experience delivery effectiveness, you are flying blind and having to take guesses as to whether your program is delivering exceptional customer service to your customers or not. Only when you reach the level of consistently delivering exceptional “surprise and delight” customer service will you reap bottom line benefits of accelerated customer acquisition, reduced sales and marketing costs, increased customer loyalty and increased employee and customer satisfaction.

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With all this being true, there is no excuse to not actively work on creating the best customer experience program possible!!

If your organization is seeking experienced assistance in measuring and improving your customer service and customer experience, then give me a call or e-mail me at 518-339-5857 or stevenjeffes@gmail.com

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Lastly, this is just one article of nearly 50 articles I have written on Customer strategy, customer experience, CRM, marketing, product management, competitive intelligence, corporate innovation, change management – all of which I have significant experience in delivering for Fortune 500 companies.  In fact, my blog is now followed by nearly 121,000 world-wide and was just named one of the top 100 CRM blogs on the planet by Feedspot, alongside Salesforce.com, Infor, Microsoft, SAS, etc. – Reference this informative site here: https://blog.feedspot.com/crm_blogs/

The Top 10 Best Practices in the Development of Customer Experience (CX) Excellence Programs (CEEPs)

Customer Experience (CX) is becoming a greater focus for many companies world-wide. WHY? The development of Customer Experience Excellence has been demonstrated to enable marketplace competitive advantage and to create fiercely loyal customers who are willing to advocate for the company and its brands and are also willing to pay more for their products and services in exchange for uniquely excellent customer service. In addition, when customers are provided with truly exceptional/memorable customer service time and time again, they repeatedly tell positive stories about their amazing customer experience, telling as many people as they can influence about your company, how their experience made a positive difference in their lives and how your company cares about them vs. your competitors. In essence, delighted customers transition themselves into adjunct company marketing and sales agents for the company that is equal to millions in company paid efforts, plus their grass-root and viral influence is judged at least 5-10x more credible/believable vs. company paid advertising, marketing and sales.

 

The chart below is a small sample of the benefits gained by my clients and many other companies as a result of the systemic implementation of a customer experience excellence program. In addition to the above, employees are found to be much more content working for a company who truly cares about the well being of their customers and the service they are receiving.  It makes employees, as a client employee once said in a leadership meeting, “ I am Part of it, Proud of it”. In essence, making customers happy in turn makes employees feel satisfied.

Benefits of Having an Excellent Customer Experience
Benefits of Having an Excellent Customer Experience

As a result of my experience developing Customer Experience Excellence and CRM Programs for numerous Fortune 500 companies including {American Express, Intuit Software, HP, Ritz-Carlton, Pfizer, Wells Fargo, AT&T, Starwood Hotels, Marriott, JC Penney, Macy’s, Toyota of America, Nissan, General Motors, Lenox, Southwest Airlines, Astra-Zeneca, Bristol-Myers Squibb, Welch Allyn Medical Systems, Vanguard, Citibank, Allstate, AXA Insurance, SONY, Siebel & Oracle Systems, SAS Software, Unica Software, Neopost, Bank of America, Samsung, Chrysler, Toyota, Nissan, Hilton, etc.}, I have developed the following set of top 10 best practices in relation to the development of a customer experience excellence program:

 

1. The program must be advocated, supported and championed at the CxO level. This is evidenced by the increases in staffing of the position called the “Chief Customer Experience Officer” that most top companies now have.

WHY?:  Forrester reports that 76% of executives say improving CX is a high or critical priority and many companies have established a C-level position to oversee it. Great read, source: “Why every company needs a Chief Customer Experience Officer”, Harvard Business Review: https://hbr.org/2019/06/why-every-company-needs-a-chief-experience-officer

 

2. A set of balanced scorecard metrics must be developed to measure the ongoing effectiveness of the program so that it may be continuously improved. A heavy emphasis must be placed on customer ratings of the program and associated service delivery.

WHY?: The metrics are the vision of the program and without these, the program is flying blind on whether the program is resonating with the customer.

 

3. The customer must be invited, as a brand-company partner, to participate in the program development, roll-out and ongoing evolution.

WHY?: Without really asking the customer about what they want/need directly, all other attempts or approximation of customer needs through analytics or intuition based decision making are merely guesses of what the customer really needs and wants and are likely to miss their mark.

 

4. The program must be benchmarked against, and kept competitive with, all companies who are considered to be world-class customer experience companies.

WHY?: You might feel you have a great customer experience program, but without quantitatively benchmarking it against the best of the best companies, you will have no idea how really good it is, whether it is falling behind with current/leading practices, etc.

 

5. Customer Excellence procedures, policies (SOPs) and standards must be developed that are in total alignment with the customer service vision statement and overall strategy.

WHY?: Customer experience excellence procedures is the bridge and playbook that takes the higher level customer service vision and strategy and translates into the behaviors (culture) and major actions are needed on a daily, weekly, monthly, quarterly basis to bring this vision and strategy to life and make it real to every employee.

 

6. Employees must be supported in the delivery of customer experience excellence by a set of training and development programs that certify them to be able to deliver on the customer service and experience excellence standards, policies, SOPs, etc.

WHY?: The customer experience excellence training programs translate the higher-level customer experience excellence procedure and policies into a detailed playbook of specific and tactical employee actions and interactions that are required to deliver an exceptional customer service experience. In essence, these are the detailed ‘how-to’ of customer experience excellence delivery that makes the program real for front-line and customer facing employees.

 

7. The program must be underpinned and supported by best of breed technology infrastructure to capture customer knowledge and intelligence, mine customer information, automatically deliver relevant customer information real-time, allow customer to set preferences, etc.

WHY?: Technology will not only become the longitudinal memory for customer insights including needs, wants, preference, etc., but it will also serve to automate the delivery of intelligent customer interactions such that the program doesn’t become burdensome (vs. simple) to operate as it evolves and grows.

 

8. Related to #7 above, the program must be sophisticated in delivering on the various customer segment needs and wants, yet needs to be simple to engage and manage for customers and employees.

WHY?: People do business with companies that make it easy to do business with – fast, efficient, responsive companies are sought out more than those that are not. In addition, a program that is difficult to administer is at risk for execution errors by employees or by them short-cutting or avoiding the process.

 

9. The organizational culture at all levels must be created that is supportive of the customer experience excellence standards and all incentives must be aligned to encourage employee excellence in its delivery.

WHY?: Research by Gallup shows that work units in the top quartile in employee engagement outperformed bottom-quartile units by 10% on customer ratings, 22% in profitability, and 21% in productivity — and they experienced lower employee turnover, absenteeism, and safety incidents. In other words, it is difficult (impossible?) to deliver excellence customer service without a great corporate culture.  Original Source:  https://www.gallup.com/workplace/236927/employee-engagement-drives-growth.aspx

 

10. The CEE program must be viewed holistically that takes into consideration people, process, technology and culture (PPTC) capabilities as well as all customer segments across all customer preferred channels of interaction.

WHY?: Pure and simple, a great program is implemented with the full (holistic) spectrum of capabilities considered. Focusing on only 1 or 2 of the 3 pillars of CEE (refer to CEEF framework chart below) will sub-optimize its performance.

Symptoms of a Poor Customer Experience

Symptoms of a Poor Customer Experience

While the previous chart pointed to benefits of implementing customer experience excellence, the above chart, while self-explanatory, highlights a few negative impacts of having poor customer experience delivery. In addition to the above, companies that have a poor customer experience also experience the following:

  1. Market share erosion

  2. Declining customer acquisition success

  3. Declining cross-sell and up-sell success

  4. Customer social sentiment that is increasingly negative across an array of social media platforms

The above chart illustrates that in order to effectively gauge the effectiveness of your current customer experience program, you must be measuring across a number of company areas to determine what is working and what is not. Sound familiar?   2) ” A set of balanced scorecard metrics must be developed to measure the ongoing effectiveness of the program so that it may be continuously improved. A heavy emphasis must be placed on customer ratings of the program and associated service delivery.”

Best Practice Customer Experience Framework

Best Practice Customer Experience Framework

The above chart is a best practice Customer Experience Framework that depicts the major pillars that enable customer experience excellence.

  1. The first pillar is the customer knowledge and insights that enable you to provide the customer with the right interaction at the right time and by the right channel of their choice.

  2. The 2nd is a robust customer strategy and delivery model to define the desired level of customer service delivery and how you will enable it.

  3. The 3rd and last is the development of a customer oriented culture to nurture and expand customer relationships that not only provides a differentiated customer experience, but also drives increased sales, loyalty and spend per customer.

I use this chart above, along with others, to develop the customer strategy, vision, policies, etc. Sound familiar?  5) Customer Excellence procedures, policies (SOPs) and standards must be developed that are in total alignment with the over developed customer strategy.

Key Deliverables in the Development of a  Best Practice Customer Experience

Key Deliverables in the Development of a Best Practice Customer Experience

The above chart is the waterfall development method I use to develop customer experience excellence. With few exceptions, each of the top level items must be mostly developed before the following lower level items can be developed.

For example, the top level CEE program vision, strategy and goals must be developed first, to be used as a guide for the development of its supporting standards, policy and guidelines.  All of these customer experience excellence deliverables align with the ten (10) best practices we covered at the beginning of this article.

Best Practice Customer Experience Development Approach & Methodology

Best Practice Customer Experience Development Approach & Methodology

Above are the depicted major work-streams I employ to develop customer experience excellence for my clients. These major work-streams align to delivering the top 10 CEE best practices as well as my waterfall deliverable development schema in the previous chart.

Summary:

In summary, improving your customer experience delivery doesn’t have to cost a great deal, can start slowly, can now be measured and the return on investment is generally in multiples (2-10x+) of the cost. Without a delivering an exceptional customer experience (via an exceptional corporate culture),  you will be unable to acquire and retain great employees, will have more costly sales and marketing efforts and your customers will not be acquired as quickly or remain as loyal (vs. competitors). With all this being true, do you really have any excuse at all remaining not to actively work on ensuring you are delivering the best company customer experience possible as to create competitive marketplace advantage?!

If your organization is seeking experienced assistance in measuring and improving your customer service and customer experience, then give me a call or e-mail me at 518-339-5857 or stevenjeffes@gmail.com

Lastly, this is just one article of 40+ total I have written on customer strategy, customer experience, CRM, marketing, product management, competitive intelligence, corporate innovation, change management – all of which I have significant experience in delivering for Fortune 500 companies.  In fact, my blog is now followed by nearly 121,000 world-wide and was just named one of the top 100 CRM blogs on the planet by Feedspot, alongside Salesforce.com, Infor, Microsoft, SAS, etc. – Reference this informative site here: https://blog.feedspot.com/crm_blogs/

The Future of Marketing and Customer Engagement – Introducing the Emerging and Rapidly Growing Practice of the Customer Defined Experience

Did you ever consider the following questions related to the future of marketing and customer engagement?:

  • What are the levels of progression of an organization’s customer engagement and marketing capabilities – from the most basic to advanced?

  • What percentage of companies fall into each customer engagement & marketing capability level?

  • What is beyond the current advanced level of customer engagement and marketing capability and the wave of the future?

  • How do you simultaneously and significantly reduce the overall cost of customer engagement and marketing delivery while also significantly increasing your overall customer engagement and marketing effectiveness?

  • What does the future look like in terms of increased customer engagement and marketing ROI?

  • What is the most effective method for creating maximized customer engagement?

If you did, then this blog is for you as it succinctly answers these questions and more.

Future Leading Practice: The Customer Defined Experience
Future Leading Practice: The Customer Defined Experience

The above chart depicts the 3 primary & existing levels of customer engagement sophistication as well as the wave of the future which is The “Customer Defined Experience”. These four (4)  levels of organizational customer engagement capability are as follows:

1) Level 1 – “Shotgun Customer Experience”, very unsophisticated, yet inexpensive. Practiced by approximately 25% of companies.

2) Level 2 – “Segmented Customer Experience”, somewhat sophisticated and moderately expensive. Practiced by a majority of companies, approximately 70%.

3) Level 3 – “1-to-1 Customer Experience”, very sophisticated & expensive, Practiced by <5% of companies.

4) Level 4 – “Customer Defined Experience  which is an emerging leading practice, only practiced by <01% of companies, but the number of companies that are moving toward this capability level is growing fast. I am predicting that this will be, by far, the most effective method in terms of both ROI and cost effectiveness.

The Customer Defined Experience, Marketing Illustration

The Customer Defined Experience Using Marketing as an Example

We will now isolate marketing as a functional example (vs. customer service, sales, etc.) to illustrate how the customer defined experience will be different than traditional marketing practices. The above chart depicts the traditional levels of marketing sophistication and the expected ROI of each level. The newest trend in marketing and customer experience is also revealed in future level called “Customer Defined Experience, Marketing”. Each level consists of the following marketing practices:

  • Level 1: Primary focus on “Shotgun” marketing (approximately 25% of companies). In this approach, companies  send the same offer to as many people as possible with the hope that some of them might take the offer being put forth. With this practice, companies send the same offer to customers and prospects, regardless of their unique interests, needs, wants, history, etc.

  • Level 2: Primary focus on “Segment Marketing” (approximately 70% of companies). This approach models the behavior and history of customers in order to group them into unique ‘tagged’ needs groups. They are then sent offers that appeal to that distinct segment group.

  • Level 3: Primary focus on “1-to-1 marketing” (<5% of companies). This approach combines sophisticated modeling techniques and artificial intelligence to ascertain the unique needs of each customer or micro-segments (depending on the level of marketing technology sophistication, pure 1-to-1 marketing might not be able to be achieved). Companies that use this level of sophistication are few and we can point to major credit card companies, Amazon, Google as models utilizing this type of approach.

  • Level 4: Future Emerging Practice “User Defined Marketing”. (<.01% of companies, but growing fast) Companies like Bank of America, Wells Fargo, Marriott and Southwest Airlines are headed in this direction with the increasing querying of their customers on preferences, needs, wants, likes, etc. The extension of this is to allow customers to define their own experience – how/when they would like to be marketed to, by which channel, which content/tone they prefer, etc. As evidenced by increasing numbers of customer insights groups, this is the trend of the future. Instead of expending all of the effort in modeling/AI/etc. to attain 1-to-1 marketing which attains a 80+% match, why not ask your customers what they want/prefer which will ensure a 100% match to their needs nearly 100% of the time? Research I have conducted has indicated that 72% of customers want a more interactive ‘relationship’ with the companies they do business with, including defining their own customer-company experience – across all of their company touch-points: sales, marketing, customer service, warranty claims, etc. More on this point later in this article.

 

Customer Defined Experience, Marketing Example

Customer Defined Experience, Marketing Example

The above chart is arranged by the levels of marketing sophistication across the top with the following categories arranged on the left for each marketing level:

  • Primary Marketing Focus – What marketing activity do organizations at this level of capability primarily focus their efforts?

  • Marketing Proactivity, Analysis Main Focus: For each level of marketing capability, how proactive is the marketing organization and what is the major focus of their marketing analysis?

  • Primary Marketing Technology Enabler: For each level of marketing capability, what are the primary technology enablers in order for them to achieve their marketing goals?

  • Main Marketing Metric: For each level of marketing capability, what are the most important marketing metrics?

  • Expected Marketing Approach ROI: For each level of marketing capability, what is the expected ROI and return on marketing for following this approach.

Level 1 Capability -Shotgun Marketing

Level 1 Capability – Shotgun Marketing

Shotgun Marketing Practices

Shotgun Marketing Practices

 

Let’s examine the first level of marketing capability, that being Shotgun Marketing. These organizations have the following organizational characteristics:

Primary Marketing Focus: The primary focus for these organizations is to expand their pool of those who will receive their marketing promotions so that there will be likely someone in the mix who will be interested and respond to their canned & generic offer. I heard a comment from a marketing organization I worked for whereby the general manager (overall leader) of the business actually said to me – “just widen the list and I don’t care if Mickey Mouse is on the list, as long as we have 1,000,000’s of folks to send our e-mail to.”

Marketing Proactivity, Analysis Main Focus: The main orientation and focus for organizations at this level is generally a reactive,  whereby the main focus is post campaign execution analysis and ‘seeing how we did in terms of number of responses they had to their offer(s)’.

Primary Marketing Technology Enabler: As you would expect at this level of marketing capability, technology  is generally very basic, rudimentary and inexpensive and would typically include simple and flat file (i.e. Comma Separated Value (.CSV) files) list generation using MS Access or Excel for list generation and very similar and simple spreadsheet type tools for post campaign analysis.

Main Marketing Metric: Since the focus noted above is reactive and post campaign focused, the main metric almost obsessed on by organizations at this marketing capability level is response rates (vs. true sales lead creation rates and actual conversion rates).

Bottom Line with Shotgun marketing organizations: With approach you save $$ by relying on very unsophisticated marketing personnel, processes, technology but this approach rarely produces a high marketing ROI with response rates generally in the 1-2% range due to the inherent high outbound volume. This approach also annoys customers and marketing recipients with mostly irrelevant offerings, products, services, etc., customer risking opt-outs, complaints, ignoring any/all offers by customers/prospects from the same (annoying) company, etc.

Level 2: Segment Marketing
Level 2 Capability: Segment Marketing
Segment Marketing Practices

Segment Marketing Practices

The 2nd level of marketing capability, is Segment Marketing. These organizations have the following organizational characteristics:

Primary Marketing Focus: The primary focus for these organizations is to ensure that the right marketing and sales offers are deployed against the appropriate segment group in order to ensure a marketing lift vs. shotgun marketing practices. An example of this is sending the frugal buyer segment offers for saving $$ by buying quantity of product or by sending offers for products that are discounted (i.e about to be discontinued products) vs. full price products.

Marketing Proactivity, Analysis Main Focus: The main orientation and focus for organizations at this level is generally what I call a ‘retrospective plus’ organization whereby the main focus is post campaign execution analysis and determining the quantitative results (response metrics, plus  perhaps ROI metrics) PLUS the main root cause analysis as to why the campaign yielded in these quantitative results.

Primary Marketing Technology Enabler: At this level of marketing capability, technology in use is fairly sophisticated such as using SAS for building segment models and customer deciles and tools for campaign execution like Salesforce.com and post campaign analysis tools like Adobe and Tableau.

Main Marketing Metric: Since the focus noted above is quasi-reactive and post campaign, the main metric  obsessed on by organizations is overall campaign and segment level response rates as well as ROI if the organization has built a direct response attribution model for campaigns (matching campaign responses to actual customer purchases).

Bottom Line with Segment marketing organizations: By utilizing this approach you spend more $$ by relying on somewhat sophisticated marketing personnel, processes and technology.  This  approach also produces a higher marketing ROI than basic shotgun marketing with response rates generally greater than the 3% range. This approach also ensures segments and marketing recipients within those segments are receiving mostly relevant offerings, products, services, etc. in respect to their needs, wants, preferences, etc.

Level 3 Capability: 1-to-1 Marketing
Level 3 Capability: 1-to-1 Marketing

1-to-1 Marketing Practices

The 3rd level of marketing capability is 1-to-1 Marketing. These organizations have the following organizational characteristics:

Primary Marketing Focus: This strategy strives to ensure that the right marketing and sales offers are deployed against the appropriate individual customer (vs. segment groups)  in order to ensure additional marketing lift vs. segment marketing practices. An example of this is recommending a product that uniquely suits and individual customer’s needs when they are your website for another reason (customer service, billing, warranty claim, etc.).

Marketing Proactivity, Analysis Main Focus: The label is place on organizations at this capability level is generally what I call a ‘proactive predictive’ organization whereby they are recommending items to customers in real-time based on their specific needs profile. The analysis focus of this type of organization is real-time algorithmic learning by analyzing the effect of the real-time offers and then adapting algorithms to further refine the offer (e.g. slightly different product, slightly different price, better warranty coverage, etc.)

Primary Marketing Technology Enabler:  The technology in use for 1-to-1 marketing is very sophisticated and correspondingly expensive.  The goal is to use artificial intelligence for building individual customer profiles based on observed customer behavior.  Automated response engines are then used for real-time customer interactions and offer generation as well as ‘adaptive learning’ algorithms based on offer acceptance/rejection.

Main Marketing Metric: Since the focus noted in 1-to-1 marketing is proactive and real-time, the main metric is customer longitudinal behavior and associated key metrics like lifetime value, loyalty rates, etc.

Bottom Line with 1-to-1 marketing organizations: With this approach you spend a great deal more $$ up-front by relying on very sophisticated artificial intelligence with automated customer analytics and offer engine technology.  This approach does produce a much higher marketing ROI than segment marketing with response rates conservatively greater than the 8-10+% range.  This approach also ensures customers and marketing recipients are receiving extremely relevant offerings, products, services, etc. in respect to their needs, wants, preferences, etc.

Level 4 Capability: Customer Defined Marketing

Level 4 Capability: Customer Defined Marketing

Customer Defined Marketing Practices

Customer Defined Marketing Practices

The 4th level of marketing capability is The Customer Defined Marketing (& Experience). These organizations have the following organizational characteristics:

Primary Marketing Focus: The primary focus here is to ensure, for those customers who are willing to co-define their own experience with your company and brands, that there is an opt-in conduit whereby customers can self-define what type of marketing and customer experience they will have across all touch-points. Examples of this is allowing customers to define, through their own personalized ‘preference portals’, customer experience parameters such as the following:

1) Their tolerable periodicity of how often they want to be marketed to;

2) Selecting the channels they prefer for marketing, customer service, product recalls, etc. ;

3) Preferred time of day, week that they would like to receive marketing, communications;

4) When it is warranted to override their current opt-out settings (i.e. critical product defects notifications).

5) The specific types of content customers are interested in subscribing to;

6) The types of offers customers would like to receive – closeouts, higher end products, types of products/services, etc.;

7) …Many more customer defined parameters.

By enabling these customer-defined preferences above, you are approaching 100% in terms of ensuring the customer receives the right offer, by the right channel, at the right time, etc.

Marketing Proactivity, Analysis Main Focus: The main orientation and focus for organizations at this level of (future) capability is generally what I call a ‘proactive, holistic, continuous’ organization whereby the company is continuously seeking to deliver the desired customer experience with the goal from each customer is rating the company as being rated as extremely open, engaging, encouraging proactive listening, is a good and reliable brand partner, drives high levels of customer satisfaction, etc.

Primary Marketing Technology Enablers: With this level of marketing capability, the technology is not as sophisticated (or expensive) as in 1-to-1 marketing, but requires a paradigm shift back to aligning with the basic premise that the customer is always right and enabling customers to self-define their preferred marketing and overall customer experience through preference portals (enabling the self-defined experience) and through business process rule workflow engines like Pega Systems to deliver the customer defined experience.

Main Marketing Metric: Since the organizational orientation as noted above is proactive and continuous, the main metric almost obsessed on by organizations at this marketing capability level will be ongoing levels of customer engagement, satisfaction and loyalty.

Bottom Line with Customer Defined Marketing (& Experience) organizations: With this approach you spend less $$ by relying on sophisticated marketing personnel, processes, and technology.  The strategy  is expected to produce a much higher marketing ROI than all other marketing capability levels by enabling the customer defined experience and inherently having 100% accuracy rate (customer defined needs/preference = delivered customer marketing/experience).  This approach also ensures customers and marketing recipients are receiving TOTALLY (self-defined)  relevant and preferred offerings, products, services, and communications.

In implementing this solution, companies will have to take into account the following considerations:

1) Not all customers will want to opt into defining their own experience. By using lucrative opt-in incentives companies have been able to achieve nearly 70% participation rates by customers. The remaining customers can be managed by simultaneously utilizing any of the two previous capability levels of segment marketing and/or 1-to-1 side-by-side with customer defined marketing.

2) Delivering a unique customer experience, once defined, will be difficult. By utilizing automated work-flow and business rules engines in conjunction with marketing automation and service automation tools, pathways (e.g. customer use cases) can be set up to automatically deliver the desired customer experience for sets of customers with the same defined preferences.

3) The customer really doesn’t know what they want. I constantly hear  from business leaders and CxOs that the customer doesn’t really know what they want/need so why waste the time and expense to ask them. These are the same executives who are shocked when I provide customer insights or focus group feedback that consistently and totally contradicts their own perception of how the customer perceives their company and brand(s). I applaud the business leader brave enough to ask for these insights since the majority of business leader tout their great pulse on their customer base to internal stakeholders without ever validating these claims with actual customers. In addition, customers today are extremely savvy, sophisticated and aware and want to be in control of their own company/brand experience.

4) Customer won’t really spend the time to tell us what they need/want. A customer insights group I helped developed has 5,000 current members who are required to volunteer several hours a week providing a Tier 1 US bank with feedback on different pre-market launch products, services and approaches. There are another several thousand on a waiting list waiting to join this insights group to volunteer several hours a week to provide company/brand insights. Additionally, the loyalty level of this insights group toward the bank is 57% higher than non-members with members providing verbatim feedback on their participation in the insights group as follows:

1) “Finally a bank that listens to its customers”

2) “We consider bank {xyz} to be a great brand partner”

3) “{xyz} bank totally breaks the paradigm of most ivory tower banks just throwing products at you to buy, they actually care about our opinions and listen to us”

4) “They actually give us feedback on how our suggestions are shaping their future products and services – WOW!”

Therefore, the bottom line is that customers today are very eager to become a brand-partner provided you ask them, allow their direct company-brand participation.

Expected Marketing ROI Per Capability Level
Expected Marketing ROI Per Capability Level

The above graphic points to the fact that, with every increase in marketing sophistication and accuracy in providing your customers and prospects what they need/prefer, the increase in ROI also rises dramatically. The holy grail of this is the practice of Customer Defined Marketing and the abandonment of the expense and exercise of hypothesis building and refinement (iteratively guessing at what your customers want/need) and simply providing a conduit in order that your customers tell you precisely what they want/need/prefer. My research has shown that over 70% of a typical sophisticated customer base is more than willing to tell you what they want/need from your company.

Join the ranks of market leader like Wells Fargo, Marriott, Southwest Airlines, Ritz-Carlton, Bank of America and many more joining the customer defined experience future who query their customers on their wants, needs, preferences, likes/dislikes, etc.

Therefore, instead of your company spending a great deal of $$ on ever more sophisticated hypothesis building (intelligent guessing) what your customers want and prefer, just simply ask them and join the ranks of these market leaders that are participating in the emerging practice of the future – the customer defined experience.

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