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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

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

Key Characteristics of the Successful CCO

Tuesday, March 25, 2014

Where does your company stand on customers? Does the voice of the customer make its way up the executive level and influence strategic direction? Have you determined that you need a C-Level position dedicated to creating a customer experience and driving customer strategy throughout the organization? If you don't know or have had concerns regarding these important questions, then it might be time to consider adding a chief customer officer (CCO) to your C-Suite.

One cannot just post a job listing and hope for the best. In this case, the lack of a standard definition of the roles and responsibilities of the CCO creates hiring challenges for CEOs and Boards of Directors. Additionally key characteristics of successful CCOs are still emerging. In order to create the right career path, it is critical for the CCO to understand what is needed to be successful. CEOs and Boards of Directors should use these characteristics as part of hiring criteria.

The CCO is the company's change agent and as such spends most of his or her efforts "selling" customer centricity. The ability to influence both internal and external stakeholders is the single most important characteristic of the CCO. The CCO spends her or his time convincing others that changes being proposed will positively affect the success of the company. Until the CCO has a track record of achievements, the ability to influence others will determine the ability to increase revenue and profitability.

Skills
Above all else, the CCO must have leadership skills, including the ability to influence others. Confronted with limited resources and some skepticism it is critical that the CCO be action oriented, have analytic skills to evaluate data, make conclusions, and turn them into programs. Negotiating agreement on initiatives requires good listening skills; solutions must be collaboratively developed in order to ensure buy-in across the organization. The CCOs' advocacy for the consumer must be unwavering. Putting the customer front and center while balancing fiscal responsibility will keep the CCO focused on his/her mission.

Experience
When asked what experience a CCO should possess, one of the most successful CCOs stated that her broad understanding of business, especially operations, is her greatest asset. It gives her credibility and the ability to identify opportunities for customer improvements. Often organizations promote the "head of customer service" into the CCO role and while that individual may know customer service it is only a small part of creating a customer centric organization.

Personality and Fit
A critical criterion for CCOs is personality and how it fits within the culture or the desired culture of the organization. At the executive level of the corporation, CCOs must be able to leave their egos at the door. Collaboration with colleagues and department heads and the ability to influence them will be critical to success. Strong-arming or using Positional or Borrowed Authority will marginalize even the best formed programs. This collaborative approach must be balanced with the ability to project a strong presence and authority. The reality is that until the CCO is able to "demonstrate value" there are skeptics who will constantly challenge the role of CCO. A CCO must be "thick skinned," able to de-personalize the skepticism, and defend a position that may not be popular or have negative short term financial implications. For example, if a product release is known to have significant flaws, the CCO must be willing to delay the release even though it may result in a negative cash flow.

C-Suite executives and board members must carefully consider the characteristics of the successful CCO. The key is not to just put a warm body in the position with a goal of driving customer strategy. Careful consideration of personality and skill sets with reasonable expectations and timelines will put a new CCO in a position for success. Without incorporating the characteristics discussed above the potential for hiring the right person diminishes.

*This article is 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

Critical Success Factors for Chief Customer Officers

Monday, March 17, 2014

CCO tenure often falls casualty to the "Results right now!" syndrome that ignores a critical fact: like great wine, strong relationships take time to develop and grow more profitable with age. Many of these relationships cannot take root without a strategic plan to transmit the voice of the customer into the c-suite, thereby positioning the company to succeed and the CCO to thrive. Based on my ten years of work with more than 150 CCOs, here are seven critical success factors that will ensure CCOs meet or exceed strategic plans for their careers and for their customers.

Authoritative title and reporting structure: Title and reporting structure of the CCO are powerful signals of the company's commitment to customer centricity. The successful customer executive will have the title of CCO and report to the CEO or to an individual no more than one level below the CEO (e.g., chief marketing officer, chief operating officer, etc.).

Unwavering executive support: Continuous, vocal, and visible support from the CEO, the board, and the c-suite is critical to growth and stability for the CCO. The leadership team cannot abdicate involvement in customer centricity just because the company hired a CCO.

Earned Authority: Above and beyond positional authority derived from the job title and borrowed authority derived from the explicit, visible support of the CEO, CCOs must earn authority and credibility of their own. They do so by leading peers, executives, and employees to recognize how customer insight and customer centricity can be valuable aids in achieving their business goals.

Alignment with the CEO: By aligning priorities with the CEO and the rest of the c-suite, CCOs secure visibility at the highest level of the company and maintain involvement in key strategic corporate decisions.

Metrics that tie customer centricity to revenue growth and profitability: It is critical for CCOs to correlate customer centric programs to revenue growth and profitability, as challenging as that may be. There is growing evidence that customer loyalty and degree of customer engagement are tied to revenue. CCOs must lead their companies to determine and validate the evidence for themselves.

Support from internal and external allies: Without the support of peers, community leaders, industry analysts, and the customer, CCO initiatives will have limited results and impact. Critical to the future of the CCO is developing these alliances and being explicit about defining and communicating successes.

Compensation commensurate with customer centricity: All executives and senior leaders should have customer measures (e.g. satisfaction, loyalty) as part of their Management by Objectives (MBO). As part of this process, CCOs need to lead managers to recognize the impact their department has on customers and customer centricity.

These critical success factors are guideposts on your path to realizing your career goals as a CCO. Create a plan around those goals and use these success factors as self-evaluation criteria to maintain focus and improve your chances for success.

*This article is excerpted from The Bingham Advisory: Eight Imperatives for Chief Customer Officers, available for free download from the CCO Council website here.

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Categories: Chief Customer Officer