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CMO 2.0 Perspectives

October 7, 2013 Leave a comment

This post can also be seen on Inside CXM.

I have always been fascinated by how the best marketers combine the science and the art of marketing, and in today’s marketing 2.0 or CMO 2.0 world, successful marketers leverage both aspects to create new equations to address changing customer needs. In this era of empowerment, customers are shaping the experience, driving the brand, and deciding who to do business with more so than ever before. This has created an imperative for businesses of all sizes around the globe to reinvent how they think about and deliver the optimal customer experience.

As I engage with CMOs through a variety of organizations, both online and in person, I find that many of my peers are grappling with how to be a modern CMO and increase their influence on the customer. As the Internet has become the primary customer channel for many businesses, marketers have had to become fluent in and digital savvy with a wide range of internet technologies. What CMOs have been asked to do over the last several years is be more of a full business partner to their CEO, and a full-fledged peer in revenue generation with the head of sales, or Chief Revenue Officer.

In order to do that effectively, it’s become imperative that the CMO have both business acumen as well as the analytical and technological skills to be a peer with the other senior execs at that table. So for some, it’s been a reinvention, and for others it’s been evolving their capabilities and learning new skills in the area of marketing science and technology.

Many of my peers that I have talked to are certainly up for this bigger challenge. Not everybody, however, wants to have increased responsibility and accountability to drive predictable contributions to revenue growth. It takes a drive for understanding more than just the numbers and the data; you have to have the insights and the judgment to know what to pay attention to, what to change, and at what magnitude to act.

The most successful CMOs are also driving much closer alignment with their sales counterparts, from planning and prioritizing investments, to segmenting customers, and driving engagement, pipeline contribution, measurement, and continuous improvement. Alignment is not an event, it’s a process and it’s inevitable that you will get out of alignment, up and down and across the organization, so you have to keep focused on re-enforcing or refining alignment to maintain a solid working relationship with sales.

One of the more interesting challenges for marketers today is to drive the customer agenda. By that I mean, what is the strategy for targeting, acquiring, engaging with, retaining and growing customers? Paul Hagan at Forrester has written about the rise of the Chief Customer Officer. There may be 2,000 companies around the globe that have designated a Chief Customer Officer, but there are probably hundreds of thousands of companies that don’t have one, and marketing is better positioned than any other function to lead this charge. Marketing generally has control over significant budgets, communications, the web and social channels and consequently has the ability to extract the best information and insights about the customer. Marketing can’t do it alone, but can certainly lead the customer agenda at most companies.

In order to own the customer agenda, marketers need to become much more analytical and data-driven. Some CMOs have put a lot of this responsibility in their Director or VP of Market Operations. While it’s important to have this function at any company of scale, I don’t feel that the CMO should just delegate this responsibility. You have to be able to walk the walk, not just talk the talk, and so you have to dig in, get your hands dirty, and truly understand how all this works at a granular level.

Grasping the data alone, however, is not enough to get the leverage you need to outgrow the competition. You need to understand customers in depth and create customer profiles or personas to embellish behavioral and purchase data. You want to go deeper if you can and understand the whole person. For example: what do they like to do when they are not at work? What keeps them up at night? What do they think about when they have free time? Where do they hang out, and in particular, what social channels do they frequent? You’ve got to know what’s important to them, and then you can understand the holistic person and have a better chance of effectively communicating in a resonant fashion and ultimately build a mutually beneficial and lasting relationship.

In my view, there’s never been a better time to be a CMO and have a seat at the table with the rest of the executive team, to help drive innovation and growth of the company, and lead efforts to improve the customer experience. If you’re up for the challenge, it’s certainly going to be hard, but it should ultimately be rewarding as well.

Categories: CMO, Organization, Sales

Should the CMO be the Chief Customer Experience Officer?

September 18, 2013 Leave a comment

This post can also be seen on Inside CXM.

Given the rapidly evolving role of the CMO, it may be a natural extension for a CMO 2.0 to assume primary responsibility for customer experience management in an organization. Before assessing the merits and cautions associated with such an expanded customer responsibility, it’s worthwhile to first understand the market and structural drivers that are causing companies to rethink how customer experience is managed and who “owns” the customer experience.

In the always on, wirelessly connected, information rich world we live in, the customer is completely in charge of who they engage with, how and when. And their expectations of how they will be served—i.e. exactly in the manner they wish or they will go elsewhere—have risen to such a level that companies have no choice but to transform their entire approach to customer experience in order to attract and retain customers. This dramatic shift of power to the consumer has significant organizational ramifications, and companies are rethinking every aspect of how they deliver an optimal customer experience, from the technology they deploy, to their culture, value systems, business process, staffing and training philosophy and practices.

One thing is clear: having a fragmented organizational approach to delivering a unified, tailored and contextual relevant customer experience won’t work. Companies need to orchestrate all customer touch points across organizational silos and find ways to deliver experiences that demonstrate a connected approach rather than a disjointed one. Keep in mind, the customer never asked for a disjointed experience; it’s just that most companies are organized along functional lines (i.e., sales, marketing, services, support, finance, etc.), so it’s naturally difficult to have a coordinated, cross-functional approach that enables the organization to holistically manage the customer experience across the entire customer journey, from pre-purchase to post-purchase.

There are various organizational approaches that companies are adopting to attempt to solve this operational dysfunction. Some companies have appointed a Chief Customer Experience Officer or a Chief Customer Officer. These executives typically have either specific organizational responsibility or operate in more of an advisory role. In the former case, the “customer experience owner” who has staffing and budgetary resources is much better equipped to drive the organizational changes required to effect meaningful change in how customer experience is managed. In the latter case, an advisory position that has the mission to drive customer centricity and optimize the customer experience, but lacks staffing and budget, will struggle to effect change even if the individual is part of the senior executive team. This may depend in a large part on the influence or personal power of the individual chartered to “own” customer experience. However, without direct control over people, budgets and systems, the gravitational pull of functional imperatives to, for example, do what’s right for sales, marketing, or service inhibits the advisory executive’s potential impact on customer experience.

What’s a company to do when there is no designated company-wide customer experience owner? It is still possible to begin the journey towards customer centricity by aligning functional objectives across two or more functions, such as sales, marketing, and services. Someone needs to at least own the cross-functional responsibility to ensure that goals and benchmarks are established, and regular measurements (such as continuous or periodic tracking) are taken to record progress against the stated objectives. In many companies, since marketing owns key elements of the customer experience (e.g., communications, Web, social media, customer loyalty programs), it is a likely group to lead the effort to align functional groups and drive initiatives to integrate customer experience management. Customer experience ownership is a journey that has to start somewhere, and it often starts with one person raising their hand to tackle the inherent structural impediments of functional organizations vs. customer -centric ones, and to drive change that improves customer experience in every interaction.

Just because marketing is now empowered if not expected to drive more of the customer experience to help support customer acquisition, expansion, loyalty and retention goals, are they necessarily best suited to become the chief customer experience officer? I believe so. As one CMO I spoke to recently put it: “I need to prescribe the ideal customer experience at every touch point—Web, call center, product, store, etc.—regardless of organizational reporting structure, so I’m providing leadership and guidance on how to drive a better customer experience, so our company can optimize every interaction.”

There are many roles other than the CMO that could assume responsibility for becoming the de facto chief customer experience officer, including the COO, head of Sales or Service. The CMO, however, is in the best position to take on this responsibility due to the increasing influence they have on the entire customer experience across all touch points. So CMO, the opportunity awaits you and the question is, are you ready to take it on?

Categories: CMO, leadership, Organization

The Evolving Role of the CMO – Part II

This post can also be seen on 1to1 Media.

Part two of an ongoing series in which Pegasystems CMO Grant Johnson sits down with other CMOs and Industry experts to talk about burning issues that are top of mind for B2B and B2C marketers.

In the first part of this series published on February 8 I covered three of six key elements that define the new CMO. In this second part, I delve into the other three: achieving alignment, becoming a business partner, and being customer driven. As before, I include insights from three CMO thought leaders on what it takes to succeed in an increasingly digital world: David Cooperstein, vice president, CMO Practice Director, Forrester Research; John Ellett, CEO of nFusion and author of The CMO Manifesto; and John Neeson, managing director and co-founder, Sirius Decisions.

 

Achieving Alignment

Alignment used to mean that the CMO needed to inform sales on what new products or services were about to be announced, and what new marketing campaigns would be running in the quarter. We could approach alignment in a siloed fashion, seeking it where needed, such as for budget approval for major expenses, and avoiding it where unnecessary, such as testing messaging to increase response rates. It’s a lot different nowadays. Today, as John Ellett states, alignment means, “getting the rest of the C-suite unified around a central strategy. It’s about aligning sales, customer service, operations, and support around delivering a superior customer experience across every touch point.”

As CMOs, we are expected to contribute to the shape and trajectory of the business and bring ideas, energy, and inspiration about how to grow more profitably and compete more effectively. It takes a lot more effort and cycles to drive companywide alignment than functional alignment, especially when any significant change is contemplated. It also takes someone with more business savvy (i.e. typically an MBA or advanced degree is required) than marketing may have been expected to possess in the past. It also takes a lot more gravitas today, both in and outside of the boardroom. As David Cooperstein says, today’s CMOs have to “earn the right to the C&O (chief and officer), and not just the ‘M’ part of our titles.”

It’s about achieving alignment as well as sustaining it. With increasingly dynamic markets and competitive pressures, it’s easy for an agreed-upon strategy to be compromised, so refining and re-aligning are required more frequently. Plus, CMOs must continually demonstrate not only well-conceived strategies, but also deliver consistent, predictable results. In a 2012 Sirius Decisions marketing survey, John Neeson found, not surprisingly, “that the top challenge was demonstrating marketing ROI.” CMOs are more accountable than ever and also better equipped, with proper executive alignment, to demonstrate the value that marketing delivers.

 

Business Partner

In order to fully achieve alignment, a CMO must be adept and proficient at becoming a full-fledged business partner. While the opportunity to impact business results has increased for CMOs, the expectations have also risen commensurately. As Cooperstein says, the CEO now expects the CMO “to tell them about the things that are coming down the pike and bring new ideas forward,” so they can better navigate fast-changing global markets and seize opportunities more rapidly, and to have “a constant pulse on the customer to gauge how they are reacting or changing, and what that means for the business.”

The CMO is uniquely qualified to optimize the customer experience, but to do so successfully requires substantive insight into customers to fully understand their preferences, predict their behaviors, and drive measurable outcomes to marketing initiatives.

In the past, marketing could sometimes speak in a slightly different language, just as engineering might have. Today, however, as Ellett believes, “the biggest thing that a CMO can do is to talk to what they do in the language of business results. They need to connect marketing language and programs to key corporate objectives and priorities.” They also need to spend more time in crafting, articulating, and refining strategy to be the business partner that others in the C-suite now expect. Neeson believes that the tide has shifted and more CMOs are coming to the table with “very good business skills and a more pragmatic view,” which is a lot different than when their role and scope was narrower.

He believes that the “CMO comes to this role because it’s the one place where you can touch every part of the business. You can change market perception, your business, and have an incredibly positive impact on the longevity of the business and really move the needle more than in any other place.”

CMOs also have to have complete command of the metrics that drive success for both the marketing organization and the business. They have to have facts and figures at the ready on every aspect of what they do, from cost per lead and relative program success to customer engagement levels and website effectiveness—all to instill confidence and demonstrate marketing ROI.

 

Customer Driven

As I’ve alluded to earlier, being connected to the customer is more critical than ever for today’s CMOs. As Cooperstein says, “the roles of marketing have been revised, and CMOs are much more customer focused than before. How customers consume messages is being considered more significantly now. It makes the role a lot more fun if you are customer driven, but not so much fun if you aren’t.” In mostly all companies, the CMO does not have direct control over the entire customer experience, but he or she must somehow understand every contact the customer and company have with each other and drive, or at least influence, how to shape and orchestrate the right experience at every moment.

Marketing has traditionally led cross-functional strategies and tactics around the customer lifecycle, from contact to acquisition and from cross-sell to retention. But leading an organizational shift to become truly customer driven is a much bigger undertaking, and one that requires both fortitude and stamina. But there’s no going back. In the Web 2.0 world, customer experience and loyalty have become the key differentiators between leaders and laggards. While the importance of delivering great experiences for customers is generally understood by most companies, executing well (and consistently) across all customer touchpoints remains a challenge and thus an opportunity for CMOs to make a major difference.

In today’s so-called customer-driven era, many companies are approaching this shift to a more empowered customer by driving greater integration in customer management across functions and systems. The CMO is naturally one of the primary executives that companies are asking to orchestrate a cross-functional, strategic initiative to enhance customer lifetime value and operational efficiencies across many functional areas, including sales, marketing, service, and support. Without appropriate department, process, and systems linkage, however, the impact will be diminished, so taking on this critical leadership role is no small task for CMOs. But that’s precisely why we are all evolving; figuring out how to increase our contribution to the business, what to do differently, what to discard, and what to amplify is what makes this role intellectually challenging and rewarding, both on a daily basis and over the long term.

‘Tis The Season

December 11, 2012 1 comment

As we move closer to the holidays, many things are once again cropping up, just like clockwork.  Some – including the airing of The Christmas Story and It’s a Wonderful Life – are always welcome.  Others, like frenzied mall traffic and egg nog, you want to forget.  And then there’s the blitz of year-end predictions – just like holiday songs, they can be a mixed bag.

I promise I won’t declare 2013 “The Year of fill in the blank”.  But as we look forward to the New Year, there are some trends that CMO.com highlighted earlier this year that are worth revisiting. In fact, it’s my view that three are going to be increasingly important for B2B CMOs to pay attention to as we look toward 2013:

1.      Show Me the Money – I mean it.

With the economy teetering on the edge of what many are calling a “Fiscal Cliff,” I can’t stress enough how important marketing ROI has become in our field.  As I noted previously, what matters most is what has the most measurable impact on sales and customer retention.  Did sales increase, did sales velocity increase, did average customer value increase? What about marketing to sales qualified lead conversion ratios and customer retention rates, and what was marketing’s measurable impact on any and all these numbers?  There are many ways to objectively demonstrate relative contribution by marketing.  Getting agreement on what to measure and what success looks like is key to showing the true value that marketing contributes.

2.      The Silos are Broken

Marketing is no longer viewed as a stand-alone function. It is now expected to strategically drive more of the customer experience to help support customer acquisition, expansion, loyalty and retention goals.  As one CMO recently told me, “I need to prescribe the ideal customer experience at every touch point – Web, call center, retail store, etc. – regardless of reporting structure.  I’m providing guidance on how to drive a better customer experience so our company can optimize every interaction and drive positive word-of-mouth momentum.”  This new dictate applies equally well to B2B and B2C marketers.

3.      Word of Mouth Spreads

As CMO.com notes, social has proven to have vast benefits for all companies that become adept at it.  While that’s a big “if” in some cases, the role of social media is relentlessly increasing as it becomes more prevalent.  Companies that once turned a blind eye to certain channels like mobile or Twitter or LinkedIn are now being forced to embrace them all – simultaneously. Or else they risk losing impatient customers who can go elsewhere for better customer experiences.

There’s little doubt that B2C organizations – especially those with millions of customers that come into daily contact with consumers – have more opportunities to show they’ve embraced this. At Pega, while our target-account approach differs from many other B2B organizations, social has become an integral and formidable medium for us to leverage throughout our marketing and communications. We’re active on Twitter, Facebook, and LinkedIn to ensure we’re engaging with our customers appropriately, but also so we can continue building our brand awareness. As we move into 2013, we’ll continue to increase participation in these areas, with the objective that we’ll be drawing more attention to our increasingly known brand.

For all organizations, the key to getting ahead in this area will not only be proactive listening.  Companies mastering social will be continually participating in opportunistic ways to drive customer engagement and improve business outcomes.  That ultimately impacts the way enterprises respond, what solutions they sell, how they sell them and their relative market success.

Sure, this is no easy task. But then again, neither is enduring those long lines and packed parking lots.

Are You a CMO 2.0?

October 5, 2012 1 comment

Over the past few years, I’ve connected with  dozens of CMOs via peer groups, such as The CMO CouncilThe CMO Club and Forrester’s CMO Group, and everyone I talk to is striving to become more “2.0.”   So what does it really mean to be CMO 2.0?

Conventional wisdom says that you have to embrace the mega trends, including big data, cloud, mobile, and social.  You need to immerse yourself into the new ways of pervasive computing and continuous communications that Generation C – or the connected generation – view as a way of life.  You need to be on Facebook, LinkedIn, Twitter, YouTube, etc.   You need to meld traditional competencies in communications and creative ideation with quantitative analysis and insight-producing analytics. But, while all this is true, it overlooks the change in operational approach and style that is equally important for a CMO 2.0.

Just because a CMO is in the “C-Suite” doesn’t mean he or she will be more successful at influencing peers than VPs of Marketing who are not part of the most senior executive group.   Success requires a commitment to building and maintaining strong ties to other C-Suite members, so you can count on their support for strategic initiatives.   As John Ellett, CEO of nFusion and Forbes blogger, said in a recent blog: “I found that effective marketing change agents take time early in their tenure to forge strong relationships with their C-suite peers. They don’t wait until they unveil their strategy and hope to build alliances at that time; they seek out their peers and develop the trust needed before it’s time to align on a plan for change.”  Leading change is a key success factor for CMOs, so this advice is critical to maximize the probability of success of any key initiative.

Another key dimension of being a CMO 2.0 is the ability to not only learn about and embrace mega trends, but also to determine how these trends are affecting your business, and how to use them as a catalyst to drive growth and revenue. Best-selling author and technology guru Geoffrey Moore definitely gets CMO 2.0.  In his talks about the future of IT, he articulates how systems of engagement are replacing systems of record, so that we are moving from an era of: command and control to collaboration; from transaction-oriented to interaction-oriented; from data-centric to user-experience centric; and from user learns system to system learns user.

To be CMO 2.0, you have to not only drive marketing, but also drive change in the systems the company uses to connect with and engage customers, and continually revise the policies and processes that govern all customer interactions, whether or not you have authority over these functions (e.g. sales, service, support) that touch customers.

Many observers have said that the CMO 2.0 is ideally suited to take on additional responsibility and have an increased impact on organizational success.  But this won’t happen by simply synthesizing the mega trends – it requires a deeper insight into what to do about them and the formulation of a transformative plan to drive organizational change.  In his recent book “Everywhere”, Larry Weber, Chairman of W2 Group and Pega board member, explains that you can’t just say your company is going to embrace social media, you actually have to change the company at the core:  “To develop a social enterprise, management has to be intentional about creating a culture that values openness, transparency, collaboration and innovation. Although many social forces are making this directional move inevitable, it often goes against the grain of how companies have traditionally been run.”  To be CMO 2.0, you therefore have to be just as involved in culture building and culture change as the head of HR and the CEO are.

So it’s clear that while embracing Web 2.0 technologies and understanding mega trends and their implications is important, it’s what you can do about this unrelenting wave of change to reshape your company and its operational parameters that will ultimately determine whether you are truly a CMO 2.0.

How to Successfully Brand or Rebrand a Company

June 11, 2012 1 comment

Q/A with Pega CMO Grant Johnson, appearing on Rieches Baird’s “Branding Business” Radio Show

 

Ray Baird: Obviously you’ve built many successful brands and re-branded many companies over the years. What’s your secret and what can our listeners learn from your experience:

Grant  Johnson: Having done re-branding successfully for nearly two decades, the first key principle is to tightly define the drivers and key objectives.  Are we looking for a brand refresh or brand transformation?  When I arrived at a company named Big Fish, I needed to drive a transformation which included a new company name, logo, positioning, messaging and brand identity.  At FileNet, it was a refresh to build on earlier brand progress and help drive brand differentiation vs. the big guys we were competing against, including IBM, EMC and Oracle.   At Pega, it encompassed creating an entire brand system and architecture.   The company had grown to more than $200 million in sales when I arrived with almost no systematic approach to brand identity, architecture, or brand management.   Pega had a working logo, the symbol for Pegasus the flying horse, so I left that alone. Everything else, including color palette, graphic style,  naming conventions and brand personality, needed to be either created or changed.  We came up with a simple way to help our 2,000 employees relate to our brand personality.   Our four brand key personality attributes leverage our shorted name, PEGA and stand for: Passionate, Engaging, Genuine and Adaptive.  I created a video entitled, “How PEGA are you?” in which employees from different regions discuss how they embody those four brand personality traits, and this helped them become true brand ambassadors.  Together with online brand education and training, this really helped get our employees behind the new brand. When you get brand advocacy to become synonymous with company advocacy, you can really harness the power of your people to build brand momentum.

Ray Baird: What are the biggest challenges companies face when re-branding?

Grant Johnson:  Once you’ve got the first question I mentioned resolved, (the purpose for rebranding), you need to get agreement on how to approach it.  What is the scope?  Over what time and at what cost?  Who will make decisions besides the CMO?  I’ve found that having a simple three-phase process is something my executive peers can easily understand and support, so in my rebranding approach for Pega, I defined Phase 1 as Brand Assessment, Phase 2 as Brand Development and Phase 3 as Brand Execution.   Under each phase I defined what we would do, who would be involved – i.e. customer, partners, board members – how we would report on findings, and a process to make the important decisions. .

A second major challenge is developing consensus on what to change.  This can be somewhat controversial because after the brand assessment, obvious inconsistencies and variance in brand quality and standards will emerge, and sometimes you have to throw out what others have already created.  It’s like saying “your baby is ugly,” so it’s never easy to deliver a change message because after all, most of these decisions are subjective.

The biggest challenge, however, is getting agreement on specific changes.  In past practice, a lot of options that I’ve created around brand identity, personality, and promise were well received.  The hard part was getting agreement on which of the various desirable alternatives to choose.  At Pega, we came up with three alternatives for our brand promise:  “we help you drive continuous business improvement”; “we help you become more customer centric; “we transform the way your business works.” Our customer research and most of my team favored the transformative expression, also the most aspirational. However, many stakeholders thought such a brand promise would over-reach our ability to deliver.  So we landed on helping organizations become more customer centric.  This is working quite well for us, especially since we keep enhancing our product line to better deliver on this promise.

Ray Baird:  How do you manage the areas you don’t control on the brand, e.g. the touch points?

Grant Johnson: That’s a great question and something I’ve dialogued about with many of my CMO peers.  At most companies, B2B or B2C, the CMO doesn’t control all the touch points, such as Web, Storefront, Call Center, Services, Partner or others, which can lead to an inconsistent brand experience at best, and brand dilution at worse.   What works is for marketing, as the chief brand architect, to define what the brand and customer experience should be at each touch point.  That’s not enough, however.  Marketing needs to get feedback, reports and measures in either a systematic or ad hoc manner to determine if the brand vision is being delivered or if refinements or major changes are needed.   In today’s customer-driven world, none of us owns the brand. Our customers do.  The best we can do is shape it.  We can do a better job of shaping if we monitor all touch points, whether 1:1 interaction, via social media, or the Web, so we can continually reinforce what’s working and abandon what’s not.

Ray Baird: Technology companies bring a complexity to branding and create a plethora of products names, which can be overwhelming to prospective customers.  What’s the best way for B2B companies to have the right philosophy and brand architecture, especially in regards to brand naming?

Grant Johnson:The best way to deal with this is to create a coherent brand architecture that provides structure and consistency to the branding process   A company must first decide if they will adopt and perpetuate a master brand strategy (Lexus), a house of brands (P&G), or an endorsed approach (Microsoft).  Next, brand architecture is a useful metaphor because successful brand building requires some level of hierarchy to define the relationship between the company brand and all the product lines or sub-brands.  One key structural consideration is to not create too many levels in brand architecture.  Most people have difficulty keeping more than two levels in their heads, so it’s best to manage to a more streamlined brand structure.   After all, today’s consumer is more inundated than ever with information and thus their attention level to any piece of information is brief, so you want to make it easier for a customer to identify with and understand your brand.

A second and related issue is product naming.  If you’re P&G and you can afford to spend $100 million to launch a new product or brand, go ahead and create a proprietary name.  If you’re like most companies I’ve worked with, such an investment is inconceivable, so I recommend having either descriptive product names or perhaps suggestive ones.  This also supports brand or product extension goals because customers can more easily relate to an existing frame of reference than a new one.  Simplicity and customer understanding should be the driving force in naming decisions.

Ray Baird: If you had one critical piece of advice for companies going through the rebranding process, what would it be?

Grant Johnson: You should hire an outside branding firm to help.  I’ve done this five times and while I personally have the expertise to figure it all out myself, having senior level, independent and objective branding experts to help you shape, propose and close on brand changes helps enormously.  The way I see it, I can have someone like Ray Baird tell my detracting? peers, “you have to go this way if you really want to stand out from the competition,” or “your ideas won’t work and here’s why.”  If I say that same thing, I might put them on the defensive or disenfranchise them during the critical change process.   To riff on one of my favorite past taglines from American Express, the #1 service brand in the world, don’t go on this journey alone.

The Customer is Truly King – A Look at Why Customer Obsession Needs to be Your Organization’s New Business Imperative

March 2, 2012 1 comment

In their classic book, “The Discipline of Market Leaders,” authors Michael Treacy and Fred Wiersema described three basic “value disciplines” that can create customer value and provide a competitive advantage: operational excellence, product leadership, and customer intimacy.  For a long time since the book’s publication in 1983, many companies successfully adopted a customer intimacy strategy by “continually shaping products and services tailored to specific customer needs.”

But in this Web/mobile/social-driven era of customer empowerment, a customer-focused approach alone is no longer adequate.   Those who don’t agree will find it increasingly harder to survive, never mind thrive.

In their February 1  article in the Financial Times, Kyle McNabb and Suresh Vittal observe that technology-fueled disruption has undermined prior approaches to customer focus:  “Old models of channel and product specific ‘command and control’ just don’t cut it. These anachronistic approaches, in which channel owners can’t see beyond the channel de jour and product owners build from the inside out, don’t set the organisation up for success in a customer-driven world. Customer obsessed marketers (must) rethink business structures, reward methods and organisational design.”

Due to this fundamental change in the balance of power which has shifted irretrievably to the customer, the authors propose that marketing should lead the company shift to becoming customer obsessed.   Marketing has traditionally led cross-functional strategies and tactics around the customer lifecycle, from contact to acquisition to cross-sell and retention.  But leading an organizational shift to customer obsession is a much bigger consideration than who leads the charge; it’s the new business imperative defining what all functions in a company should do about it, both from a philosophical and operational perspective.

Some companies understand the difference between these two perspectives and some don’t.  In his recent book “The Ultimate Question 2.0,” Fred Reichheld provides a wealth of examples of companies which confuse their profit obsession with customer obsession and don’t value the difference, and thus, become obsessed with profits, i.e., adopting “customer unfriendly” business practices to maximize profits (and produce what he calls “bad profits”) that over time can undermine customer loyalty.   By embracing both the philosophical approach (i.e. following the Golden Rule and treating customers how you’d like to be treated), and the operational perspective (i.e. continually adapting  business processes and practices to create and increase net promoters), companies such as American Express, Charles Schwab, Verizon and Farmers Insurance  have become truly customer obsessed and distanced themselves from the competition.  This chasm will only become larger over the next several years.

At the Forrester Customer Experience Forum last June, Jim Bush, EVP of World Service at American Express, delivered a keynote titled “A Relationship-driven Approach to Service” where he talked about how when he took over World Service he drove the company’s transformation of customer service into a customer-obsessed organization delivering extraordinary customer service, from a traditional call center previously focused on reducing average handling time and cutting costs.   To accomplish this goal, American Express adopted a holistic approach of “serving relationships, not transactions”.  There was both a philosophical shift to regarding customer service as a source of competitive advantage rather than being a cost center: “each moment of truth” or customer interaction became an opportunity to compete and improve service delivery.  Mr. Bush also flipped the traditional approach of 70% of a reps’ training on technical content to 70% dedicated to customer handling training, and the results have been extraordinary. Between 2006 and 2011, his group more than doubled their net promoter score, delivered a 20-25% increase in card member spend, lowered attrition by six-fold, and, despite not focusing on reducing expenses, decreased service costs by 10%.  Those achievements are even more impressive when you consider the size and scale of American Express – which boasted $25.6 Billion in revenue for FY 2010.

In his October 3, 2011 research note, “CMOs Must Lead The Customer-Obsessed Revolution,” Forrester analyst Chris Stutzman writes that in “the age of the customer, empowered customers are disrupting traditional sources of competitive advantage.”  In order to thrive in this new era, companies must abandon the outdated customer approach where “workgroups focus solely on their view of the customer to develop silo-based strategies” and replace with a customer obsessed approach where “the customer’s needs permeate the company’s culture and operations facilitating the sharing of customer insights across the enterprise to develop cross-discipline strategy.”  It’s clear that the most successful companies today, and in the future, will fully embrace the philosophy and practice of customer obsession. They are not satisfied by merely focusing on the customer, but relentlessly adapting their customer engagement strategies, investment priorities, business processes and policies to ensure that they create more net promoters and engender fewer detractors.   Before Web 2.0 and the power of social media and mobile channel proliferation, traditional customer focus approaches may have worked.  But today, any company that fails to adapt their business process to serve the customer specifically how they demand to be served will likely suffer the consequences.  The smart companies have figured this out and are busy creating competitive distance.

Meanwhile, those in denial of this new customer reality are falling behind faster than they can run the numbers. By the time they realize just how bad things are, their customers will have already defected in droves.