Sounds weird, but I mean it. After years of developing customer experience management (CEM) projects, I found consistently that companies with mediocre margins and profits produced also only a mediocre customer experience.
It’s the other way round!, may be your objection. It’s great CEM that generates the profits!
My experience is different: Companies with a true long-term commitment to producing shareholder value are consistently best at generating excellent value for customers. They truly understand what value means for both parties.
Companies that are offering a great customer experience, but without a strong focus on ROI, are also frequently lacking a focus on what really matters to the customer. They typically enter crisis mode sooner or later, either because they invest into building a great experience for the wrong, unprofitable customer segments, or because low margins force management to cut down services, initiating a vicious downwards cycle. Positive change at private companues is always profit optimization driven, never by good intentions.
CEM itself has aged. Talk nowadays in any at least semi-developed country or organization about customer experience and expect to see rolling eyes. “We are doing that already”, is one typical response. “Our customers experience already top ranked service” is another one. “We appointed a CXO already 3 years ago” may be the most challenging one.
How can we overcome this self-complacency, particularly as the results continue to trickle in in homeopathic quantities, if at all?
The first step is: stop that “customer centricity” talk NOW, defend profit centricity!
While it was a brave attempt to make the customer the center of corporate strategy, the fact is that most boards, CEOs and top executives just don’t understand it, despite their verbal endorsements. The word “customer” distracts them and makes them delegate “the customer thing” down to where no strategic decisions can be taken. And CEM, that can not execute deep change in a corporate structure and culture is basically wasted money.
When we (the avionline guys) developed the segment/touchpoint value generation matrix to give CEM a simple yet powerful strategic management methodic backbone, we made an interesting discovery. While the CEM pitch nowadays makes most directors yawn, changing the perspective from “customer experience” to “value generation” suddenly allowed to get CFOs and CEOs seriously engaged.
CEM was often perceived as one of many “nice to have” items that lacked one fundamental aspect: profit centricity. While it is true that the customer generates the revenue, this can only be turned into a profit with a full understanding of the company’s strategic vision, its cost and income structures, its financial strategies and its will and ability to change (all are CEO/CFO territories).
Only if the organization understands how to make a customer profitable it will be willing and able to generate the value that will convert that customer into a loyal follower and promoter of its value propositions. A company, by definition, is profit centric. Only if we manage to (re)connect profits with customers, we will regain the momentum for “the real CEM”, which is the strategic management discipline (not a set of operational solutions) of simultaneously generating and optimizing value for the customer and profits for the shareholders.
This is why I propose to rechristen CEM to VGM, Value Generation Management. The term CEM has been discredited by too many partial, opportunistic and arbitrary projects.
VGM works. In our latest project, the leadership of the CFO proved crucial. A great starting point are methodologies, like our touchpoint/segment matrix, that connect value with profits, customers with margins. Analyzing the value generated at every single service touchpoint, as well as holistically, looking at the whole service chain, not only helps to optimize the value contribution of the current process to every customer segment. This methodology also allows discovering untapped revenue potentials and loss making customer segments.
Additionally, it forces the company to assume a long-term customer-value generation perspective. These financial CEM, or VGM oriented methods therefor combine the identification and execution of short-term opportunities that do not hurt long-term customer equity (a frequent disconnect between commercial and financial strategies in a company) and to increment the long term value of the customer base.
VGM converts CEM into a universal strategic management methodology that helps to integrate corporate silos and translate the data generated by traditional approaches, like the Balanced Scorecard, into actionable plans.
You may have a look at a previous post about the ROI of CEM here.
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