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Innovation Must Begin with Customers

Monday, February 10, 2014

The new reality is that innovation must start with customers. To effectively leverage innovation to fuel customer-centric growth, companies need to do three things:

Develop and regularly refresh an extraordinarily deep understanding of customers’ needs, wants, desires, and attitudes regarding their products, services, and the company itself

It isn’t too hard to find out what customers need, want, and are willing to pay for these days: customers are demanding to be heard, across an unprecedented proliferation of channels and platforms. Unfortunately, not nearly enough companies make sufficient effort to systematically capture and utilize available customer insight, choosing instead to operate “from the gut”, or rely upon outdated third-party research.

To effectively listen, you must speak with and learn from customers, vendors, partners, and others, wherever they can be found. You need to scour the social web, public forums, and user communities to woo influential users, bloggers, exemplars and advocates who can meaningfully contribute to your growing body of knowledge. Of course you need to solicit information about product issues, too, but there is far more than that to be gained. You must delve deeper into customer attributes, perceptions, dissatisfiers, and how they reflect upon your business processes. That data will enable you to quantify, justify, and defend the value you provide. It will also help you fortify customer purchase and retention drivers, as well as to discover new, profitable opportunities.

Assign executive champions for innovation initiatives

Great leaders are those who can recognize significant innovation and successfully evaluate it, vet it with customers, and commercialize it. Executive leadership alone has the ability to understand potential, forswear risk, fund great ideas, and remove obstacles. Companies must create executive-level support for well-qualified initiatives so they see the light of day and have a chance to contribute to the company’s bottom line. As well, these contributions must be formally measured and rewarded to ensure that the desired results are achieved. 

The CCO Roadmap identifies innovation as one of the key responsibilities of the chief customer officer (CCO). The CCO is in a unique position from which to identify, evaluate, and refine customer-centric innovations to ensure the greatest success. World-class CCOs have at their fingertips data identifying the most valuable and profitable customers whose needs are most important to consider. In addition, these CCOs have the strongest B2B customer connections and the greatest B2C credibility to garner participation in customer listening activities that discover, test, and refine innovative ideas. Leveraging their in-depth customer understanding, CCOs can effectively ground the most promising innovation efforts in reality.

Create a unified process for identifying and qualifying new opportunities for products, services, markets, or segments

With the seemingly unending supply of new business opportunities, how do you go about evaluating them all to determine which ones are viable? For Proctor & Gamble, the process was relatively straightforward: it identified the five biggest customer issues for each its divisions and then spent time with key customers to identify the desired experience around each issue. It then began to source solutions from innovation marketplaces, evaluating each according to potential profit contribution, strategic fit, and overall improvement to the desired customer experience. While your process may be different, the most important thing is to ensure that there is a unified process that everyone in your organization understands and can follow.

It is clear that sustained, profitable innovation must come from customers. Those companies that strive to intimately understand their customers’ needs, wants, and desires and profitably satisfy them better than their competitors are those who will win in the customers’ eyes and in the marketplace. Let your customers guide your next strategic move so you can grow profits as you attract more of the best customers and keep them longer. 

This blog post is excerpted from Curtis's full-length article, Innovation Starts With Customers. Visit our Exclusive Resources page for other articles by Curtis.

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

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

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

The CCO Dashboard [Part two of a two-part series*]

Tuesday, December 03, 2013

In this second of two blog posts, I discuss the final three out of seven measurements that should be on every CCO’s dashboard, in addition to the potential metrics for each of these areas.

Depth and breadth of customer centricity as part of the culture

How customer-centric is your company, and how do you know? The core value proposition for the CCO is that of creating competitive advantage from increased customer engagement. The impact upon customers should be considered at every strategic decision and incorporated into the stage gate processes.

Metrics: Consider the number of employees with customer-related metrics in their MBOs, or those with a portion of their bonus tied to customer centricity measures. The number of employees involved in various customer engagement programs is also an especially good metric.

Influence on overall revenue

The CCO has indirect and direct impact on revenue. Directly the CCO can influence new sales and retention rates if they have authority over those areas. CCOs can also improve customer-facing processes that have led to more efficient operations, which leads to overhead reductions. Depending on the span of responsibility the CCO may have other less direct opportunities to influence profitability and revenue.

Metrics: Measures will vary by corporation, but some measures might include tracking changes in spending by account based on loyalty scores and customer engagement as these metrics have been shown to impact revenue. The CCO's involvement in the sales process and changes in deal closes and up-selling should be considered as well.

Influence on the key performance indicators of other members of the C-Suite

Initiatives of the CCO should positively affect the Key Performance Indicators (KPIs) of peers. Every executive should be able see improvements in their metrics if the CCO is effective.

Metrics: The influence of customer centric initiatives on KPIs of other departments is a way of evaluating CCO effectiveness. Improvement in the sales cycle, close rate, new sales due to CCO activities are examples of dashboard metrics.

Given the scope and breadth of the business areas to be monitored and measured, the role of the CCO is not to be entered into lightly. When the CCO is successful, the company is successful. CEOs and Boards of Directors must understand and commit to provide the CCO with visible and continuous support, provide appropriate resources and develop metrics to demonstrate the value of the CCO. There are many such resources available to CCOs to guide them through challenges to success and to keep them from experimenting at the expense of their customers. The CCO Council itself with additional research and peer networking guides many CCOs in their mission.

*This series 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 | Customer Insight

The CCO Dashboard [Part one of a two-part series*]

Tuesday, November 26, 2013

There are seven measurements that should be on every CCO's dashboard. I cover four in this blog post and the remaining three in next week's blog post.

First, an important word about metrics. Because these metrics represent "proxy" measures for revenue and profitability, securing buy-in from the corporate level that these metrics are indeed tied to revenue and/or profitability, albeit indirectly, is critical to their credibility and the CCO's authority. Without this consensus the dashboard cannot demonstrate value for the CCO. The metrics are presented in order of data readiness and access; the easiest measures are listed first.

Key account relationship health

On a weekly basis, account relationship managers should post the status of key accounts; those in green have no issues, those in yellow have some emerging issues not of a critical nature, and red accounts are those in greatest jeopardy. The CCO must take personal responsibility for resolving the issues for accounts with red indicators.

Metrics: The number of accounts in green or successfully migrated to green, or elapsed time between identification and improved account status are potential metrics for the dashboard.

Overall and key customer engagement

It has been shown that more engaged customers spend more money. The degree of customer engagement can be measured based on rates of participation in customer programs such as executive forums, product development, and participation in corporate strategy initiatives. One large technology company has over 70 customer engagement programs and they have been able to document the positive relationship between customer engagement and spending.

Metrics: There are several metrics to be considered: The number of customer engagement programs and their growth, the level of involvement of customers in customer engagement initiatives, and especially the spending patterns of customers at different levels of engagement.

Loyalty measures

Academic research has proven that the higher the level of customer loyalty the greater the spend level.

Metrics: A number of commercially available survey instruments can be used to measure customer loyalty. As well, combining a customer's spending over time and customer loyalty makes a good proxy measure.

Progress toward resolution of critical customer issues

Identifying and focusing resources on resolving critical customer issues is an important role for the CCO. One large technology company annually identifies its chief customer concerns that represent a combination of technical, operational, and process issues.

Metrics: The time it takes the CCO to identify the components and drivers of the issue, the timing for a resolution plan, and time to resolution are appropriate measures for the dashboard.

This covers the four of the seven areas recommended for the CCO dashboard. The remaining three measurements and their potential metrics will be discussed in next week's blog post.

*This series 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 Insight