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Customer Experience Management


Author: Peter Gurney

Reprinted from
February, 2002

Just when companies are becoming comfortable with the idea of Customer Relationship Management (CRM), a new term has emerged: Customer Experience Management (CEM). The two are similar in many ways, not least in that they are both difficult to define. Neither can be identified with a unique product or a specific technology; rather, they both comprise a group of applications, technologies and analytics that orbit around a central premise. The premises of CRM and CEM are quite different, however, and are best understood when compared side by side.

The idea at the center of CRM can be stated in the following way: Every time a company and a customer interact, the company learns something about the customer. By capturing, sharing, analyzing and acting upon this information, companies can better manage individual customer profitability.

CEM's premise is almost the mirror-image. It says that every time a company and a customer interact, the customer learns something about the company. Depending upon what is learned from each experience, customers may alter their behavior in ways that affect their individual profitability. Thus, by managing these experiences, companies can orchestrate more profitable relationships with their customers.

In a sense, this is a classic nature vs. nurture argument. CRM uses profiling, micro-segmentation and predictive analyses to identify each customer's figurative genetic structure. CRM thus uncovers the preferences and propensities of customers so that they can be nudged towards optimal profitability.

CEM, on the other hand, looks at the environment. It gathers and analyzes information about the dynamics of interactions between companies and customers. This information is fed back to the company in a self-calibrating system that (in theory) makes optimal use of every opportunity to influence customer behavior.

Obviously these are overlapping approaches, and both have merit if designed and applied intelligently. Up until now the spotlight has predominantly been on CRM, in part because it is technologically impressive (as well as astonishingly expensive). Unfortunately, CRM has not been nearly as effective as promised; according to some estimates, from 50% to 70% of CRM initiatives fail to achieve their goals.

As CRM is more widely used, its weaknesses become more apparent. Analysts have become fond of noting that there is no R in CRM (some go so far as to say there is no C, either). The idea of a "relationship" with customers seems hollow: CRM is very good at receiving, but not very good at giving. It asks customers to provide access and information without telling them what they will get in return. It pigeonholes customers based on past actions without informing them how to build a more advantageous profile. It prompts customers to become more valuable to the company without promising greater value from the company.

Furthermore, while CRM is fairly effective at measuring its own successes, it does not provide much information about its failures. It can record when customers respond positively to its automated prompting and prodding, but it doesn't give much insight when customers do not respond in the predicted way. CRM is thus unable to determine whether failures are the result of faulty assumptions, incorrect information or poor execution. It is also unable to tell how these "failed" interactions affect the customer relationship; it treats all failures as neutral, when in fact the fabric of the relationship may have been weakened or undermined by a poorly executed service encounter.

CEM's strengths lie in precisely the areas where CRM is weak. By focusing on the experiences of customers and how those experiences affect behavior, CEM examines both the quality of the company's execution and the efficacy of the result. It aligns customer needs with the company's ability to fulfill those needs, leading to business relationships that are mutually beneficial and that both parties - company and customer - are motivated to improve.

So what does CEM look like? At its most basic, a Customer Experience Management system captures information about individual service events and feeds it back to the organization. The information can be gathered from customers who provide their impressions of recent service experiences, as well as from objective observers who record specific details about service execution (such as mystery shoppers and call monitoring agents). More sophisticated systems integrate data from both sources so that company standards and execution can be continually calibrated with customer expectations and impressions. Unlike traditional market research reporting, which is delivered weeks after the data are collected, CEM systems feed back information within days or hours of the service event, allowing employees and managers to make small, effective adjustments on an on-going basis.

Capturing and integrating data about service execution and customer impressions is important, but it is only the first step. These data need to looped back to training and coaching content so that knowledge and performance deficiencies among employees are directly and continually addressed. Furthermore, CEM programs may extend the linkage to employee and manager incentives. Thus, front-line employees and supervisors continually receive feedback, training and rewards linked to their day-to-day interactions with customers.

Finally, a comprehensive CEM program also incorporates key metrics related to customer behavior and profitability, such as retention rates, average purchase amounts, store sales, complaint and resolution rates, etc. The strength of a CEM system is in its ability to continually align company performance with customer needs and behaviors, enabling companies to make small, day-to-day adjustments as well as enterprise-wide changes.

Peter Gurney is the Managing Director of Kinesis. Peter Gurney can be reached by calling 206-285-2900.

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