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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

The Tweet Heard 'Round the World

Tuesday, April 08, 2014
Reflect back with me to April 19, 1775... 
 
With the might of the British Empire behind them, the British infantry believed it was utterly invincible. Imagine its surprise when it became surrounded by the Minute Men and later, many more of the American colonists. In the tension that followed, one nervous British infantryman fired upon the colonists, which started an exchange of fire from both sides. With this one shot that later became known as the shot heard 'round the world, the revolutionary war had begun.
 
Slightly more recently, in September of 2013, Chicago-based business owner and Twitter user Hasan Syed made history after British Airways lost his parents luggage on a flight from Chicago to Paris. Syed did something nobody has ever done before: he bought a series of promoted tweets on Twitter to express his frustration and displeasure.
 
Don't fly @BritishAirways. Their customer service is horrendous 
 
Checkout @British_Airways state-of-the-art baggage handling system [with photo of horse and buggy]
 
@British_Airways is the worst airline ever. Lost my luggage and can't even track it down Absolutely pathetic
 
A full 7 hours later, @British_Airways responded:
 
Sorry for the delay in responding, our twitter feed is open 09:00-17:00 GMT. Please DM [direct message] your baggage ref and we'll look into this.
 
By any account, Syed is no social media powerhouse. As of February 2014, he still had only 1,129 followers and 436 tweets. The sponsored tweet, however, for which he spent $1,000.00, yielded 76,000 impressions and 14,000 engagements (replies, retweets, etc.), all of which sided with him against the brand or broadcast their own, similar stories. Syed's tweet also quickly entered the news cycle, where his story appeared on BBC News, Time, Fox News, the Guardian, NBC News, Mashable, Huffington Post, and others.
 
With Hasan Syed's "tweet heard 'round the world" on September 2, 2013, the revolutionary war for customer control of your brand had begun. That same day, Andy Witt (@designingWell) tweeted:
 
What if patients were more forward and public with their frustration with hospitals like Hasan Syed was with @British_Airways?
 
Just like the British regulars, big companies have long thought they were utterly invincible-they controlled the messages, the media, and the conversations with their customers, when they bothered to have them. But to Andy Witt's point, what if one (or more) of your key customers - by size, revenue, influence, or other criterion - broadcast their frustration with your company to the public and to your other customers? What would the impact on your brand look like? Would it be inconsequential? Or could it cost millions of dollars in advertising to rectify?
 
Let's be honest. The age of cool products and feel-good service has come and gone. Social media, with all it empowers, is here to stay and still growing. It is not enough to listen to and pacify customers. Now, more than ever, reputations and relationships with customers can be tarnished, if not destroyed, with a few simple keystrokes. Customers are taking charge. They clearly want a voice.
 
We've entered the age of engagement. Today we have to engage the Hasan Syed's of the world: collaborate with them to help fix our problems and enlist them as our sales force to dramatically grow our businesses. In the days ahead, the most successful companies will grow only as they engage customers in customer acquisition, retention, operations, innovation, and even strategy.

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

Customer Engagement Models: Riot Games

Tuesday, February 04, 2014

Many companies today have developed paths to greater engagement and greater profitability through recruiting the involvement of their customers. To restate the definition of engagement: it is the extent of a customer's willingness to invest his/her discretionary time for a mutual benefit, and particularly for the benefit of a business.

Established in Southern California in 2006, Riot Games is a US-based publisher best known for its multiplayer online battle arena title, League of Legends. As a testament to the level of engagement Riot Games has achieved with its player base, today the average percentage of new players that come through word of mouth is between 85 and 90%. A significant contributor to this engagement is structural: Riot created a game that's simply more fun to play with friends. Players recruit their friends to play with them because they enjoy a better gaming experience.

One of Riot's most outstanding examples of player engagement can be found within the process by which it enables its player community to recognize and manage negative in-game behavior, called the Tribunal. The game is played in sessions that last anywhere from 20 to 50 minutes at a time. At the end of each session, if a player behaved exhibited any unsportsmanlike behavior such as berating teammates or name calling, the other players can report him. When enough reports are filed against an individual - a number based upon the ratio of reports filed to total games played - a case file comprised of chat logs (in game instant-messaging), statistics, game data, activity, etc. is generated.

This case is displayed at random to members of the tribunal; other players in the community who have voluntarily chosen to participate in regulating and weighing in on community behavior. Through the constructive feedback of peers, Riot attempts to optimize teamwork, cooperation and positive player experiences. The best outcome is for a player to never show up at the tribunal again. Therefore, all systems are designed to adjust, not punish, behavior by allowing players equal ability to reward their peers for positive behavior by 'honoring' them after a game. When players do actually get punished, they are sent all the details in their case files: what they did, how others felt about it, why it had a negative impact on player experience, and why it was bad.

In Riot's example, it is peers - fellow players - who are applying and enforcing standards of appropriate gaming behavior; they are devoting their discretionary time to preserve the quality of experience for everyone. This strengthens the community, gives it greater credibility and authority, and at the same time frees company resources to be spent on more valuable opportunities. It also fosters greater engagement by players and a stronger commitment to the game's ecosystem.

*This post is excerpted from The Bingham Advisory: The Customer Engagement Trajectory, available for free download from the CCO Council website here.

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

Customer Engagement Models: Oracle

Tuesday, January 28, 2014

Oracle has hundreds of thousands of customers and dozens of customer programs. It measures customer engagement of its biggest accounts on an account-by-account basis. The company focuses on those top accounts that, combined, contribute the clear majority of Oracle’s annual revenue. The company has identified the eight customer programs that have the highest correlation to satisfaction, loyalty, referenceability, and revenue. The measure of engagement then is the number of these programs in which a top customer participates.

Overall engagement is measured along a continuum that begins with the transactional buyer (least engaged), increases through the buyer who is engaged in customer programs, further increases through the buyer who is partnering with the company on product roadmaps and strategies, and culminates in the buyer who is an advocate for the company (most engaged). Participation in only a couple of key programs places a customer at the transactional end of the continuum; participation in most of them places a customer at the advocate end. The company continuously measures revenue across key customers because it believes that it is easier to gain incremental revenue from existing customers than to acquire new customers and it has determined that there is a cause and effect relationship between engagement and incremental revenue. In fact, Oracle’s most-engaged are generating approximately three times the revenue of transactional buyers.

Oracle is actively partnering with their customers to improve the business. More than 7,000 of Oracle’s customers are involved in some sort of an advisory board. Some of them are executive level advisory boards, and some are product-oriented, defining product features and functionalities. Participants are expected to meet minimum meeting participation requirements. Should people be unable to participate, Oracle will allow the customer to retire from that board to make room for a more active participant.

At the advocacy end of Oracle’s engagement continuum, more than 600 Oracle customers were involved in a significant speaking engagement on the company’s behalf during fiscal year 2013. Those 600 are of the over 15,000 customers who are actively involved in referencing for Oracle under an agreed-on, individualized customer reference plan. Engagements range from Oracle’s own OpenWorld conference to participating in an advertising or product launch campaign or leading a best practices discussion with other customers and prospects. A significant segment of those speakers are senior level executives--influential people from influential brands.

Oracle also examines what content is created when determining how engaged its advocacy-level customers are. Content can come in many forms, including written and video content. During fiscal year 2013, in total Oracle produced almost 5,000 pieces of content with its engaged customers, including testimonials, case studies, fact sheets, videos, and advertisements. Furthermore, Oracle measures two facets of advocacy in its engaged customers. The first applies to customers that are even willing to engage in advocacy activities, whether or not they actually do so. The second applies to customers that are not only willing, but also actively involved in advocacy efforts such as developing content or speaking.

In summary, Oracle’s efforts are focused on engaging as much as possible those customers who are among the top contributors to annual revenue and who are already demonstrating a willingness to engage in customer programs. The company further targets customers on the basis of how much of what they spend is potentially attainable by Oracle. Finally, Oracle also looks at systematically increasing engagement with customers who represent the strongest brands in the world. Underpinning all of Oracle’s customer engagement efforts is the conviction that increasing the percentage of the customer’s spend with Oracle is more profitable than acquiring new customers.

*This post is excerpted from The Bingham Advisory: The Customer Engagement Trajectory, available for free download from the CCO Council website here.

 

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

Customer Engagement Models: MetLife

Tuesday, January 21, 2014

Many companies today have developed paths to greater engagement and greater profitability through recruiting the involvement of their customers. To restate the definition of engagement: it is the extent of a customer's willingness to invest his/her discretionary time for a mutual benefit, and particularly for the benefit of a business.

MetLife sponsors and maintains a robust customer community with which it engages in many ways over time, from asking simple questions to testing ideas and products. In a simple yet powerful engagement exercise, the company asked community members to write a letter to a relative explaining why insurance is important. The customer stories that resulted from this exercise were deeply moving and very powerful. They described experiences that enabled the marketing group to understand where and to what emotional extent insurance is a welcome relief rather than a necessary evil. These stories continue to inform MetLife's understanding of what customers value. They also enable MetLife to humanize and optimize its marketing and sales efforts. 

MetLife has also leveraged stories that customers share with each other to drive advertising campaigns. In Poland, MetLife has low name recognition and market share but word of mouth promotion is unusually strong. One popular story customers were sharing there told of a claim from an elderly woman whose signature did not match the one on her policy. Normally such claims are denied, but in this case, an agent tracked the woman down, found her in a nursing home, verified her identity, and paid her claim. MetLife created a very successful television advertisement based on this story. And because real life customer stories like these increase authenticity and effectiveness, they give MetLife a significant edge over its competitors.

The insurance industry is replete with cumbersome product names such as, "Variable annuity with a guaranteed minimum withdrawal benefit," or "Immediate lifetime annuity with return of principal." The names attempt to describe function from a company perspective and end up confusing customers. In anticipation of a new product launch, MetLife turned to its customer community to share the product's purpose and benefits. Customers provided not only the name, but also the emotions to evoke and the messages to convey within the product's marketing and advertising campaign. In May 2013, MetLife launched the customer-christened "Shield" insurance product.

MetLife has successfully engaged customers in product development and in customer acquisition and retention. As well, MetLife has demonstrated such value in engaging customers in process redesign pilot projects that the CEO has mandated leveraging customer engagement in order to eliminate $100M in costs from the business. 

*This post is excerpted from The Bingham Advisory: The Customer Engagement Trajectory, available for free download from the CCO Council website here.

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Categories: Customer Centricity | Customer Loyalty

Engagement: The Key Metric for the Future

Tuesday, January 14, 2014

Customer engagement is properly defined as: The extent of a customer's willingness to invest his/her discretionary time with a company for mutual benefit.

For a description of the measurement of customer engagement and a discussion of engagement's two key components, see The Bingham Advisory: The Customer Engagement Trajectory.

Engagement is intuitive. If customers are accepting sales calls, participating in innovation processes, speaking at conferences on behalf of the company, pinning products on Pinterest, and advocating company products on Facebook, they are clearly more likely to repurchase, increase company share of wallet, with reduced price sensitivity.

Engagement is a more accurate measure of customer perception and is a leading indicator of loyalty. Loyalty is a subjective measure of an emotional state, whereas engagement is an objective measure of actual behavior. One of loyalty's greatest challenges is measurement of true loyalty. Loyalty is typically measured once or twice annually via survey. But surveys merely capture a snapshot of the customer's emotional well being at that moment. This snapshot could be adversely affected by factors outside the company's control. Survey granularity is often insufficient to discover crises in the making. In addition, customers are experiencing survey fatigue and response rates are falling, further masking potential crises from view.

By contrast, engagement is based on observable behavior: is a customer participating in relevant activities that lead to purchase/renewal? By structuring metrics with sufficient granularity, a company can tell how often and to what degree a customer participates across a range of platforms and activities over time. Waning participation is a leading indicator that loyalty and future revenue may be at risk.

Engagement is highly correlated with revenue. Oracle's most engaged customers generate 33% greater revenue. They are 4% more loyal and grant Oracle 12% greater share of wallet than transactional customers. PeopleMetrics found that companies focusing on customer engagement realize a 13% revenue reward, compared to a 36% revenue penalty for those companies obstructing customer engagement.

This is the Age of Engagement. Customers are demanding to be heard and involved. The most successful companies will grow as they engage customers in customer acquisition, retention, operations, innovation, and even strategy.

*This article is excerpted from The Bingham Advisory: The Customer Engagement Trajectory, available for free download from the CCO Council website here.

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Categories: Customer Centricity | Customer Insight | Customer Loyalty