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The Impact of the Chief Customer Officer, Part II

Tuesday, June 24, 2014

Last week, I described recent research conducted by the CCO Council into the impact of the chief customer officer on company financials. This week, I discuss the findings in detail and provide recommendations for managing them.

1. Customer Centricity is a two-year investment

Developing and improving customer strategy is a profitable but longer-term investment. It takes at least two years for the CCO's activities to flow through the company and make a significant impact on top- and bottom-line results. Once these results materialize, however, they appear to continue to grow commensurate with the investment. B2C industries tend to see results more rapidly than B2B. Industries with intense competition show heightened impact from the CCO.  

Recommendation: CEOs and Boards must commit from the outset to support and invest in the CCO and his/her initiatives for a minimum of two years to ensure the highest ROI. In turn, CCOs must manage the expectations of the CEO and Board to allow for this two-year probationary period. 

2. The CCO must show contribution to long-term revenue and profitability improvements 

Companies have demonstrated measurable improvements in revenues and profits while employing a CCO. In some cases, overall revenue drops after the CCO's departure. This research shows that the CCO can and should be accountable for improving top-and bottom-line results, although the impact may not be measurable on a quarterly basis.

Recommendation: CEOs should expect the CCO to provide, in addition to intermediate metrics, quantifiable impact on revenue and profits, and ensure the systems are in place to properly track the CCO's contribution. The CCO should begin by providing a clear line of sight from his or her actions to revenue and profitability. In some cases, the CEO and CCO may need to begin by agreeing upon an intermediate goal of driving loyalty and accept academic research proving that loyalty drives revenue and profit. However, this can only be temporary. 

3. In absence of growth, the CCO may help prevent a slide 

In some industries that experienced negative growth, the presence of the CCO helped stem the decline suffered through competitors and maintain revenues/profits through stronger customer relationships and trust.

Recommendation: The CCO must "bank" customer trust and loyalty to protect customers against hard times. CEOs need to take a less transactional view of activities that may pay dividends at a later date. 

4. Everyone says they are customer centric... 

Every company claims to be customer centric, but fewer actually are. Many publicly-stated company policies remain company centric rather than customer centric, and in the end, those whose actions are aligned with their customer needs are more successful.

Recommendation: The CCO should, with the support of the CEO, examine the policies, actions, and restrictions to ensure that customer needs are met on balance with business needs.

This study clearly shows one thing: CCO's are adding value to the bottom line. While growing steadily from fewer than 30 in 2003, CCOs are the newest, and by far the smallest, component of the C-suite. Many companies look at the CCO position and question if they can afford to add it to their C-Suite team, but the numbers turn that question on its head and ask how they can afford NOT to do so.  

Whether you are a company looking to create a CCO position or currently a CCO looking for resources, we invite to you to explore the CCO Council (www.ccocouncil.org) to give you and your company a true competitive advantage.

*This article is the second in a two-part series excerpted from The Impact of the CCO, available for free download from the CCO Council website here.

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

2014 CCO Tenure Study Preview

Wednesday, April 16, 2014

I'm putting the finishing touches on the CCO Council 2014 Tenure Study and am excited to share a sneak preview. For the last four years, I have examined the role of the Chief Customer Officer to understand the context within which CCOs are functioning and the future of the role, specifically as these relate to the development and execution of potential CCO career strategies.

The CCO Council defines a chief customer officer as the customer-facing executive who is ultimately accountable for customers and who is driving customer strategy at the highest levels of the organization. This eliminates middle-level to senior-level executives who may be customer centric and even responsible for customer experience within their organizations, but who don't appear to possess sufficient authority to act and influence across organizational boundaries.

The average chief customer officer tenure increased again to 34.5 months, up from ~23 months four years ago. The lengthening tenure reflects in part the fact that mobility was severely restricted during the years following the recession. As well, enterprise CCOs weathered the recession far better than those in small companies.  Most importantly, this increasing tenure speaks to the growing recognition of the value of the CCO role and its increasing stability. Nevertheless, as the newest member of the C-suite, it remains the most fragile role, trailing the CMO by ten and a half months. As a side note, there is an interesting flaw in the way that Spencer Stuart computes the CMO tenure. If the CCO tenure were computed in the same fashion the average CCO tenure would be 3.2 months. Look for more detail in the upcoming tenure study results.

One of the more exciting findings is the lengthened tenure of members of the CCO Council. Where average enterprise tenure is 34.5 months, tenure of Council members is a whopping 54.2 months. CCO Council members are demonstrating significantly greater ROI as they elicit greater executive commitment and involvement, demonstrate a clear impact on executive objectives, and incorporate customer strategy into the overall corporate strategy. As well, they enjoy significantly greater influence over the rest of the organization as they balance business and customer needs.

Another significant finding of the study is that for the first time, CCOs are enjoying an unprecedented mobility. When I first began the study, the CCO role was terminal-they retired in the role and there wasn't a career path available. Now, however, the CCO is being promoted to COO, CEO, or president of a business unit. This is indicative of the increased importance companies are placing on their customer strategies in requiring that executives have substantial customer roles. Executives and boards are beginning to recognize the value of the chief customer officer as a stepping-stone into roles of greater responsibility and authority. This will be covered in greater depth in the forthcoming study.

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Categories: CCO Council | Chief Customer Officer

Seven Strategies to Streamline Customer Centric Culture Change [Part one of a two-part series*]

Tuesday, December 10, 2013

A single, disgruntled employee can sabotage the work of hundreds, even thousands, in a single destructive customer interaction. An uninformed policy change can destroy loyalty in a heartbeat. Successful chief customer officers recognize that efforts to improve customer experience are meaningless without a considered effort to change company culture. One company identified that only 6% of a measure of customer centricity was attributable to customer service; the other 94% came from other activities such ease of deciphering bills, cleanliness and maintenance of company vehicles, and understandability of contracts. Customer centricity is much more than customer service or customer experience. It requires a significant change in attitude and culture across virtually 100% of the company.

There are seven strategies for making successful culture change far less painful. In this week’s blog, I touch upon three. I’ll cover the other four in next week’s post.

Obtain executive leadership and support

Executive support for the CCO and cultural change must be constant and visible. Only the CEO has the sphere of influence to mandate change across all facets of the company, and the effective CCO will leverage this Borrowed Authority to open doors and encourage people to listen. With the executive team, CCOs should create a clear definition of what customer centricity means, how the company plans to implement the concept, and how it will be measured.

Identify desired behaviors and measure their adoption

CCOs must clearly define, articulate, and gain consensus around ideal behaviors of a customer centric organization. Behaviors should be demonstrated from the top down, and those who consistently exhibit desired behaviors should be recognized and rewarded. Clear and shared expectations and feedback will help employees understand the process and adoption of culture change.

Create direct and indirect incentives

Time and time again studies across multiple industries have shown that incentives drive behavior change. Employees can be rewarded directly and indirectly. Direct impact comes through a financial bonus and through inclusion of metrics as part of his or her MBO. Indirect incentives include personal recognition through programs like Employee of the Month or assignment of a special parking space. Incentives can effectively be used to reward employees for embracing customer centricity. It is human nature for individuals to respond positively to both financial and personal acknowledgement.

*This two-part series on customer centric cultural change has been excerpted from The Bingham Advisory: Eight Imperatives for the Chief Customer Officer, available for free download from the CCO Council website here.

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Categories: Chief Customer Officer | Customer Centricity

Loyalty is Dead. Long Live Engagement

Tuesday, July 23, 2013

Customer loyalty is dead. Long live customer engagement. Loyalty is an emotion notoriously difficult to measure, typically only by proxy, such as via surveys that capture the stated intention to recommend or repurchase. But it is tricky at best to overlay stated intent on actual behavior, which can be very different. Consequently, loyalty as a business metric is often misleading and worse: difficult to correlate with other business management metrics used by executives to assess strategic decisions. This, in turn, makes loyalty problematic for justifying increased resources and credibility among customer executives. 

Long live customer engagement. Customer engagement is an effective leading indicator of loyalty and profitability. It is easier to measure, easier to influence, and more strongly correlated with revenue and profits than loyalty measures such as Net Promoter (NPS), Customer Loyalty Index (CLI), or others that are poor proxies for revenue. Effective engagement activities create emotional attachments that draw customers closer to protect them from competitors, encourage repurchase while lowering price sensitivity, gather insight to refine strategy, and ultimately promote evangelism. 

Customer engagement is the sum of activities that build positive connections between a company and its customers and result in greater involvement that positively impacts revenue.

Jeb Dasteel, CCO of Oracle, found that Oracle’s most engaged customers are 7% more satisfied, and 33% more profitable than similarly-sized, non-engaged customers in the same industry. A 2008 study by PeopleMetrics on the impact of customer engagement on financial performance showed that companies with high customer engagement enjoyed 13% higher revenue growth, as compared to 36% revenue losses as customers disengaged.

It is easy to identify engaged customers because they participate in discrete customer programs. Their transactional behaviors are easily observed and their relative profitability is easily calculated. Validated by such clear correlations with profit, customer engagement activities then clearly warrant greater priority, with a commensurate increase in funding. 

Customer engagement activities might include mail or email notifications, post-purchase follow-up calls, participation in online communities, executive or industry advisory board participation, etc. 

The CCO Council recently undertook an effort to characterize customer engagement and create a framework for its members to follow in adopting this new metric. Some of the key recommendations from this effort include:

1. Investments in customer engagement activities should be made according to their impact. The ROI of customer engagement activities can be plotted along an increasing trajectory with the least valuable (but likely necessary) activities being tactical and impersonal and the most valuable activities being those that are both strategic and personal. Personal activities increase engagement, and strategic activities drive longer-term business value. 

2. Engage customers selectively. The most impactful customer engagement activities are typically the most resource-intense. Programs should therefore be carefully matched with those customers most likely to engage further.

3. Simple measurement approaches are sufficient to realize the strategic intent. Participation in select high-value activities and the crossing of thresholds to levels of involvement are two simple measures that can demonstrate engagement. 

Engagement coupled with strategic business opportunity can provide a powerful guide to customers with greater business/revenue potential. Coupled with transactional satisfaction measures, engagement can further highlight those in need of rescue.

Customer engagement is a more easily measured and more accurate metric than the outmoded customer loyalty. It is also a powerful leading indicator that enables executive decision-making to drive increased revenue and profitability. Long live customer engagement. 

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

How CCOs Survive to Thrive

Friday, May 03, 2013

The CCO role – today still relatively new and underrepresented – is a lonely place. Yet the impact CCOs have on a company’s bottom line can be profound. They address customer centricity in its primary forms – customer satisfaction, customer retention, and customer loyalty – and they help develop profitable customer strategies that work for your company because they work for your customers.

CCOs have mastered the following three key elements of corporate survival:

Driving profitable customer behavior

Boosting customer satisfaction, retention and loyalty are terrific as goals of your customer-centric culture. But just achieving these goals won’t ensure success. You need to encourage customers to behave in a way that maximizes profits. That requires repeat purchases as well as upselling and cross selling within your product/service portfolio. CCOs have proven adept at establishing loyalty programs that reward purchases of the most profitable products/services based on incentives such as “membership points” that can be redeemed for merchandise, gift cards, etc. This approach builds add-on sales and provides a sense of identity as a “member,” which strengthens a feeling of customer loyalty due to entitlement.

Create a customer-centric culture

The commitment to customer satisfaction, retention and loyalty should be part of the identity – the DNA – of an organization. But adding customer centricity to a company’s mission statement is the easy part. Implementing it throughout the organization entails some heavy lifting. CCOs are developing performance metrics to verify that customer-centric processes are in fact being followed. They are creating incentives for employees at all levels to comply with best practices for their positions that promote customer satisfaction, retention and loyalty. Some even review hiring practices to ensure that qualities associated with customer service orientation are part of the screening process for new hires.

Demonstrate your value 

All CCOs worth their salt have developed a methodology for verifying their contribution to revenue and cost savings. For the former, they can point to increasing sales year over year among existing customers, the increased rate of newly acquired accounts, and reduced churn among the overall customer base. For cost containment, all CCOs can point to fewer calls from unhappy customers, fewer poorly handled onsite customer visits, etc. The more skilled CCOs also provide data from customer surveys that show high levels of satisfaction and loyalty, which serve to increase brand equity and lifetime customer value.

Armed with these strategies and tactics, CCOs not only survive, most are thriving…and getting their fair share of compensation increases by recognizing that keeping customers happy is always a good business decision.

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Categories: Chief Customer Officer

Losing the Trail

Friday, May 21, 2010
The mountain trail I had been climbing suddenly ended. I looked hard at every tree, turning in a slow circle, hoping to see the familiar yellow blaze on a tree that would mark the way forward.  As I started to cool down, the perspiration on my shirt began to freeze, and I felt the cold start eating at my exposed fingers and ears.  I had lost the trail.  

I was hiking in the White Mountains and had been following a well-traveled trail, clearly marked with yellow blazes on trees.  As I went further into the backcountry, I noticed more trees bearing the blazes had fallen down during the severe winter ice storms.  I wasn’t concerned because I could typically make out other signs of travel, such as a worn path, crushed leaves, or cut branches marking the trail others had traveled before.
Now I was lost, and the only hope I had was to retrace my steps, looking over my shoulder every few feet in hopes of returning to familiar territory.  I was racing against time and the cold.  After a time, I recognized the familiar yellow blaze on a tree.  Relief flooded through me.  I peered off into the distance and saw far away the next yellow blaze in a much different direction than I had taken previously.  Clearly, many other people had missed this marker and had mistakenly gone down the same wrong path. 

I was lucky.  I had followed in the footsteps of others who’d been equally lost, and I’d been able to return to familiar territory and once again find the correct path forward.  

How many of you are trying to navigate the poorly marked path towards customer loyalty, and find yourselves unsure where the next trail marker is, or worse, following what appears to be a well-trod path that leads you further and further away from you desired objective?  What are the consequences to your customers, your company, and you personally when you have to backtrack and reset, having experimented at customers’ expense and finding that you’ve lost the trail?

Are you merely a fire fighter, running from one customer crisis to another?  Or do you have a clear-cut strategy in place to prevent them from arising in the first place? Do you know what needs to happen after you’ve developed a comprehensive survey program?  Or how about if you find yourself in a customer crisis?  Do you have a response plan in place?  Do you know the critical steps to creating a stellar customer experience? 

Many executives have been able to reach their positions by “figuring things out” yet, at the C-Level, there simply isn’t room for this approach, and the consequences of taking the wrong path can be severe.  

As a CCO or customer executive, you need to find a way to abstract yourself from the inevitable day-to-day crises, and develop your long-term strategy.  This strategy needs to be grounded in reality and proven best practices.  

Such a comprehensive plan prevents you from wandering, and helps ensure you are focused on the right activities.  It proves to your CEO and your board that you are competent and deserve to be entrusted with the company’s most valuable assets: the customers. 

The members of the Chief Customer Officer Council have created the Chief Customer Officer Roadmap, which, like the yellow blazes on the trees, clearly marks the path you need to follow in your path towards creating a strong customer focus and engendering intensely loyal customers. It contains nearly 100 critical activities that you as the CCO or Customer Executive don’t necessarily need to own, but that you do need to ensure are implemented and sustained within your companies.  

The Chief Customer Officer Roadmap is broken down into a number of categories, and there is a loose, top-to-bottom and left-to-right progression.  The Roadmap also provides a rough priority order of activities in each section.  

More details on the CCO Roadmap are found on the CCO Council website

The CCO Roadmap enables you to focus on the most important activities first, and over time, broaden your horizons to better serve customers and deliver stronger corporate results, while saving you time because you don’t have to experiment at customers’ expense as you follow trails that lead nowhere and cost you precious time as you backtrack to familiar territory.  

If you haven’t already, please join us on the CCO Council so you can benefit from the invaluable experience of those who have blazed a clear trail for you to follow.  

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Categories: CCO Council | Chief Customer Officer