By Curtis Bingham

Customers with the best experience generate 140% more revenue. Digital transformation enables greater customer engagement, and therefore greater revenue.

What is the business value of an improved customer experience? CEOs have never responded well when chief customer officers (CCOs) say “Trust me, this is the right thing to do.” In fact, the average tenure of a CCO is only 27 months (recent CCO Council research). Why is this so low? One reason is that some customer executives struggle to demonstrate quantifiable ROI for customer initiatives. When the CEO and CFO are making priority decisions they simply can’t compare the returns for investing in CX improvements with hiring another salesperson.  Or worse, when the company hits a revenue road bump, the CCO’s initiatives and sometimes even the CCO herself are the first to be cut because their value cannot be quantified.

According to research published in HBR by Medallia, customers with the highest CX scores generate 140% more revenue than those with the lowest.

Medallia examined in depth two companies, one transactional and one subscription based. Transactional companies typically measure return frequency and average spend per visit. Subscription-based companies typically measure duration of repeat business, typically through retention, cross-sell, and upsell. They examined customer feedback and experience scores at a point in time, and then actual behavior for the subsequent year. This is important, as one of the downfalls of NPS measurement is that it measures nebulous intent and not actual behavior.

After controlling for other factors that drive repeat purchases such as affinity or natural consumption cycles, Medallia found a strong correlation between CX and revenue. Revenue generated by each customer increased significantly with higher CX scores. The customers with the best past experiences generated 140% greater revenue than customers with the worst past experiences.

For the subscription business, customers having the poorest experience stood only a 43% chance of being a member a year later, and were only likely to remain a member for a little over a year. Conversely, those with the best experiences were 74% likely to remain a member a year later, and were likely to remain a member for six years.

Done right, digital transformation promises improved customer engagement, a better experience doing so, and decreased costs to serve. And that’s a compelling argument.

How are you demonstrating the ROI of your customer initiatives and CX programs to your CEO?

P.S. Next question: Would it be valuable to have a discussion about where you need to go next in your digital transformation?

I've created a comprehensive digital assessment that benchmarks against the world's leading companies in six critical dimensions and gives you a prioritized roadmap going forward. I've partnered with Bob Taylor, former CCO of Samsung SDS and present CDO of from.digital, a digital transformation agency to bring this to you.

If you'd like to discuss, please call me at 978-226-8675 or email curtis@ccocouncil.org.

By Curtis Bingham

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.

By Curtis Bingham

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.

By Curtis Bingham

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?

By Curtis Bingham

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.