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WHEN Do You Need a Chief Customer Officer?

Wednesday, June 11, 2014

I am often approached by senior level executives and asked whether their company really needs a chief customer officer. Their idea seems to be that some companies need a CCO and some don't. My answer is often in the form of a correction. Hiring a chief customer officer is not an issue of if, but of when. Every company needs a CCO. However, timing is essential if the role is to be successful. Here are six key criteria to help answer the question, "When?"

Does top leadership have an appetite for developing customer centricity?
I have seen CCOs hired for all kinds of good reasons. Yet most of them failed miserably. Why? Because they were out of alignment with company strategy and didn't have explicit support from the CEO. This criterion trumps all the rest.

Is there a recognized strategic business imperative for the CCO?
Customer centricity is often viewed as a "nice to have" rather than a strategic business imperative. What is your burning platform that will galvanize people to action? The CCO is going to be tasked with making huge changes in the organization, and entrenched cultures resist such change unless faced by a greater threat of upset.

Can strategy be driven across the highest levels to systematize change?
An army of one does not win the war, nor does it bring about customer centricity. Executives and employees cannot abdicate their shared responsibility for customers to the CCO. The successful CCO will cultivate strategic allies across every function, driving process change across the company that enhances the profitability of the broadest customer segments.

Is there a willingness to create, capture, and act upon customer data?
Companies need hard customer data to move from the realm of "touchy feely" to solid business decisions with quantifiable results. The organization needs to be willing to initiate customer data collection activities (surveys, transactions, behavior), turn these data into actionable insights, and ensure people are held accountable for taking action.

Can metrics be created that tie customer activities to revenue?
Revenue, profitability, ROI-these are all hard metrics by which priority decisions are made within the C-suite. Without the ability to correlate customer-centric activities to tangible business results, the CCO will be hamstrung.

Does the individual culture desire to serve customers?
Implementing change is challenging for most organizations and resistance to change is human nature. CCOs find this resistance to be their greatest challenge, requiring a significant amount of time and effort. Do your front line employees truly desire to serve customers? Can they be convinced to do so?

Buzzwords like Customer Centricity and Customer Experience can be entrancing and many companies are starting to jump on the chief customer officer bandwagon. The problem is that too many just as easily fall off the bandwagon if they hire a CCO at the wrong time. To ensure success, you need to make sure your company is prepared to make the CCO a core strategic imperative rather than a figurehead. Do your homework, decide on the right time to hire your CCO, and put him or her in the optimal position for success. Your customers will quickly reward you for your due diligence instead of punishing you for a knee jerk reaction.

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Categories: Chief Customer Officer | Customer Centricity | Customer Engagement

The Six Components to Customer Engagement Strategy

Tuesday, June 03, 2014

Customer engagement needs to be a disciplined strategy with ownership, accountability, broad reach, goals, accountability, measures, and a marketing plan of its own to communicate with employees, customers, and other stakeholders. Here are six essential components to a successful customer engagement strategy:

Purpose
In order to devise an effective strategy, you must first identify what you want engaged customers to do for you. Do you want them to help resolve problems, inspire innovation, co-develop new products or services, generate market insights, improve operational efficiency, enable greater sales velocity, or something else? You need a purpose to give your strategy focus.

Engagement Opportunities
What are the most important collaboration activities that support the engagement strategy? What are the most important advocacy activities that support the engagement strategy? How do you determine each activity’s importance and priority? Once identified, what resources do you have to support these activities?

Customer selection and enticement
How do you identify the ideal customers to participate in an activity that achieves your business goals? What opportunities are best suited to the customers and the pursuit of your goals? How do you entice customers to participate? For some, it’s simply a matter of asking. But others may need incentives or a clearly articulated mutual benefit that makes participation worth their discretionary time.

Measurement and impact on business metrics
You need to find a correlation between the measure of engagement by activity and its impact on the business. How do you measure engagement and how do you demonstrate that correlation? Without it, investment in your strategy is not defensible or sustainable.

Organizational alignment to customer direction
While it’s great if you have customers collaborating and advocating, if the organization is not aligned around delivering improvements or outcomes from these activities, engagement will be short lived. Customers will realize, “Oh, they’re asking me for help but they’re not really doing anything about it, therefore, it’s not worth the investment of my time and energy.” 

Employee engagement
Similar to the process of selecting customers, how do you identify the ideal employees to participate in an activity that achieves your business goals? What opportunities are best suited to the employees and the pursuit of your goals? How do you entice employees to participate? Rewards and incentives, both intrinsic and extrinsic, may be appropriate and necessary to successfully engage employees in the business of engaging customers.

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Categories: Chief Customer Officer | Customer Engagement | Customer Insight | Customer Loyalty | Customer Retention

Three Steps to Manage Customer Crises

Wednesday, May 28, 2014

Customer crises strike without warning, and the chief customer officer must act swiftly and decisively to address root causes and begin rebuilding damaged customer relationships. Over my years of experience working with scores of chief customer officers, I've found three steps that are crucial in successfully managing any crisis:

Build Strong Customer Insight Before Crisis Strikes
As owner of the customer you know the value of thorough customer research, but having detailed data is particularly vital when crisis strikes: your unique customer insight must form the basis of a successful response strategy. Relying on that insight you will be able to specifically target touch points that will resonate with your customers, identify areas of the organization's plan that may exacerbate negative opinion, and determine the best strategies for mitigating that negativity. Have a comprehensive customer research program in place before you're faced with crisis to ensure that the information is there when you need it most.

Focus the Organization on Customer Impact
It's all too common for the wider organization to focus on damage control-acting in self-defense, laying blame, or stonewalling. But this will only worsen already injured customer relationships. Instead, it's imperative for you to lead the organization to focus on customer impact at every step along the road to recovery. This is not to say that every action must have a positive impression; we know there are times the organization must act despite negative impact. Your job is to ensure that at every step someone is asking the question: how will this affect customers? If it's positive, highlight it in a way that strengthens customer relationships, and if it's negative, use your customer insight to mitigate the damage.

Rebuild Damaged Trust
Incorporating high customer touch into routine operations allows you to rebuild trust while creating sustainable customer centric change. Seek opportunities for reassuring customers not only within the recovery, but throughout the organization. Look for functions that can be updated or repackaged to highlight positive customer impacts. Share information with customers by updating call center scripts, or devise high touch outreach programs to provide understanding about particular actions or operations of the organization. Customer trust will return only when customers feel they are receiving honest and forthcoming communication about the problems affecting them and the steps you are taking toward resolution. 

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Categories: Chief Customer Officer | Customer Insight | Customer Loyalty | Customer Retention

Who Cares Whether the CCO Tweets?

Tuesday, May 20, 2014

Now that “tweet” has become a verb, it seems that everyone has a Twitter, Facebook, Google+, and any other alphabet soup social media account. And rabid social media “experts” are calling for every C-level executive to embrace social media as part of their “new commitment to transparency.” 

Who cares whether or not the CCO tweets? Is the CMO going to magically create brand evangelists in 140 characters? If the CFO posts a family vacation snapshot on the company blog is Wall Street going to raise earnings expectations?

I think not. While there are benefits, whether you choose to blog or personally participate in social media is irrelevant. However, there are four things CCOs need to be thinking about now with regards to this powerful phenomenon.

Customer monitoring
More and more of our customers are on social media and, with the proliferation of social media monitoring tools, we have at our fingertips a very rich and real-time view of customer (or end-user, as it may be for your business) needs, desires, and issues. Do we need yet another source of information about our customers? We might think not, but in truth, this source is far more immediate than sales reports, quarterly rolling surveys, or even post-interaction surveys. And because they are unsolicited, they are probably more accurate although sometimes far more inflammatory due to the inherent anonymity of the medium. Leverage the opportunity presenting itself and use it to mine information about customers, users, and even competitors and detractors. What might words said in pseudo-public tell you about private business strategy and direction that salespeople can leverage?

Triage and escalation avoidance
As we've seen over and over again, mistakes and mishaps can go viral in a heartbeat. FedEx did a wonderful job of responding within 48 hours to a security camera video of one of its drivers caught throwing a monitor over a customer's gate. In two days the video received more than 4 million views and 17,000 comments. The SVP of U.S. Operations issued a video and print response that was fantastic: apologizing, reiterating the true values of the company, detailing actions being taken, and reaching out to the offended customer. Every news article includes reference to his response, nearly nullifying the impact of the original misdeed. We have all spent significant time and energy creating in our companies elaborate, closed-loop triage and issue resolution processes for our customers in the call centers, sales channels, and at the executive level. We need to extend those processes to social media to discover problems and nip escalations before they become full-blown PR nightmares that damage our brand, loyalty, and profits.

Opportunity discovery
During the Super Bowl a couple of years ago, a number of customers were highly offended by Go Daddy's continuing borderline risqué advertisements and expressed their frustration with the obvious disconnect from their personal values along with their interest in changing domain hosts. An individual in Comcast's then-nascent social media monitoring group happened to be watching and offered them a special incentive to switch. There was a fair amount of business generated by this lucky catch. What opportunities can we find and shuttle to our sales teams?

Employee engagement
In addition to all the benefits, social media can be a legal nightmare, a PR disaster, or simply a venue in which customer trust can be damaged or destroyed. Make sure you provide customer-facing employees authorized to use social media channels on the company’s behalf with clear guidelines for appropriate, business-relevant social media behavior. Take advantage of the many new businesses that are emerging to help companies monitor and control how employees interact with customers using social media. Your objective should be to empower and leverage the enthusiasm of your employees to build trust, promote products and services, champion the brand, and foster productive customer relationships, while providing guidance and oversight to the creation of a consistent customer experience across all channels.

What are your thoughts? Who cares whether or not the CCO tweets?

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Categories: Chief Customer Officer | Customer Centricity | Customer Engagement | Customer Insight

Measuring ROI of Customer Centricity-Changes in Customer Value

Tuesday, May 13, 2014

Customer executives are regularly challenged to prove the value of their initiatives. To demonstrate value, executives must speak the language of business so as to allow business leaders to make comparisons and tradeoffs. Executives are primarily interested in increasing revenue, decreasing costs, and mitigating risk. To effectively demonstrate value, customer executives need to show how their customer initiatives impact one or more of these key factors. In my previous post I described the historical retrospective approach whereby incremental per-customer or per–segment revenue gains are correlated with increasing loyalty and engagement. Expected change in customer value is another valuable means of demonstrating ROI.

Many companies use lifetime customer value to justify marketing and customer acquisition efforts. Similarly, positive changes in lifetime value are a result of increased preference, decreased price sensitivity, increased consumption, and greater advocacy. Conversely, lifetime value plummets in response to negative experiences as consumption drops and referrals cease.

A number of years ago, JetBlue analyzed NPS results correlated with passenger behavior and found that each detractor converted to promoter is worth $40 additional profit and each 1-point overall NPS gain yields a $5-8M increase in annual revenue. Highly satisfied customers increase their use of ancillary services such as seat upgrades, box food purchases, etc. Converting a detractor to a promoter yields an additional $100-140 per customer annually, or the equivalent of another flight traveled each year plus ancillary service purchases. Conversely, negative word of mouth costs the company $104 per detractor per year in missed revenue: $72 in lost referrals and $32 in unpurchased ancillary services. 

Put another way, every 25 customers actively promoting JetBlue to friends, family, associates, and on social media equates to one new customer flying JetBlue, whereas only 16 detractors would dissuade an existing customer from flying.  By the same math, it might take 36,000 promoters to increase revenue by $1M, but only 14,000 detractors to realize a revenue loss of $1M.  Every customer value quantification effort must begin with a tangible understanding for each key segment of the length of average customer relationships, costs of new customer acquisition, average customer value, and retention rates. 

Enrich these data by examining how your most loyal and engaged customers within critical segments behave differently than your least engaged. Examine factors such as overall profitability, repeat purchase frequency and volume, longevity, share of wallet, breadth of product portfolio purchased (i.e. the ancillary services mentioned above), the number and value of new customers acquired through references and referrals provided each year. For many companies the annual value of these computations are significant and become even more so when extrapolated over the average lifetime of a customer. 

Similarly, the cost of dissatisfied customers can be computed to measure the cost of status quo.  What is the cost of each call into the call center? How many callbacks are required to address the same issue as a result of an inappropriate focus on average call handle time? What are the most common customer dissatisfiers and what does it cost to address them?  How many credits are being offered to correct billing mistakes?

Armed with tangible proof of the ROI of investments in customer centricity, customer executives can have meaningful conversations with top leadership, enabling them to compare such investments against other priorities and make the best decisions for the company. Without these measures, “doing the right thing” will only happen in the best of times and most certainly not in the worst of times when it is most needed.

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Categories: Chief Customer Officer | Consumer Spending | Customer Centricity | Customer Engagement | Customer Loyalty | Customer Retention

Measuring ROI of Customer Centricity-Historical Correlations

Tuesday, May 06, 2014

A common challenge of chief customer officers and other customer executives is the need to prove the ROI of customer centricity. For better or for worse, business executives are primarily interested in increasing revenue, decreasing costs, and mitigating risk. To effectively demonstrate value, customer executives need to show how their customer initiatives impact one or more of these key factors.

One of the easiest and most powerful ways for customer executives to demonstrate value is to examine historical trends of loyalty and revenue/profits, especially for key customers. Assuming that you have a history of loyalty survey data (or even satisfaction survey data), correlate the incremental revenue (or better yet, if you have it, the incremental profit) of a customer with improving loyalty measures over time. Some local improvements may be due to a change in customer leadership or an improved sales relationship, making it necessary to examine multiple customers in aggregate and by segment. Start with the key accounts, as these accounts are supposedly enjoying the greatest attention and perhaps unwittingly becoming the most loyal.

It may also be helpful to examine the opposite; what is the incremental loss as loyalty erodes? If you plot for each of your customers their revenue (or profits) and their loyalty score over time and notice a downward trend, the negative proves the loyalty-profit correlation in reverse, and elevates the opportunity for increasing investment to stop the bleeding.

There may not be perfect correlations. Satisfaction and loyalty are subjective measures of an emotional state and although loyalty correlates well with increased revenue it isn’t as strong as customer engagement, which measures actual customer behavior. As well, without concerted efforts across the board, some of your employees or processes may be destroying the loyalty you are working so hard to create and measure. 

Are there holes in the customer or loyalty data? Do you have loyalty information from end users but not decision-makers? Or poor loyalty survey participation? How about poor participation by certain key accounts? Or worse, an inability to measure revenue/profit of an individual customer or segment? Spend some time filling these holes in your data and analytics capability so you can conduct this analysis again in the following quarter. 

In examining historical correlations in this fashion, JetBlue found that a one-point improvement in their overall NPS score equates to between five and seven million dollars in additional revenue. The goal isn’t necessarily to prove that a specific customer initiative will raise revenue by 30 basis points. Instead, the goal is to show an upward trend correlating increasing loyalty with increasing revenue/profits. Demonstrating this trend and correlation is a significant step for CCOs in proving the ROI of customer centricity, which validates the need for additional investment in activities to drive loyalty and customer engagement.

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Categories: Chief Customer Officer | Customer Centricity | Customer Loyalty