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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

The Six Components to Customer Engagement Strategy

Tuesday, June 03, 2014

Customer engagement needs to be a disciplined strategy with ownership, accountability, broad reach, goals, accountability, measures, and a marketing plan of its own to communicate with employees, customers, and other stakeholders. Here are six essential components to a successful customer engagement strategy:

Purpose
In order to devise an effective strategy, you must first identify what you want engaged customers to do for you. Do you want them to help resolve problems, inspire innovation, co-develop new products or services, generate market insights, improve operational efficiency, enable greater sales velocity, or something else? You need a purpose to give your strategy focus.

Engagement Opportunities
What are the most important collaboration activities that support the engagement strategy? What are the most important advocacy activities that support the engagement strategy? How do you determine each activity’s importance and priority? Once identified, what resources do you have to support these activities?

Customer selection and enticement
How do you identify the ideal customers to participate in an activity that achieves your business goals? What opportunities are best suited to the customers and the pursuit of your goals? How do you entice customers to participate? For some, it’s simply a matter of asking. But others may need incentives or a clearly articulated mutual benefit that makes participation worth their discretionary time.

Measurement and impact on business metrics
You need to find a correlation between the measure of engagement by activity and its impact on the business. How do you measure engagement and how do you demonstrate that correlation? Without it, investment in your strategy is not defensible or sustainable.

Organizational alignment to customer direction
While it’s great if you have customers collaborating and advocating, if the organization is not aligned around delivering improvements or outcomes from these activities, engagement will be short lived. Customers will realize, “Oh, they’re asking me for help but they’re not really doing anything about it, therefore, it’s not worth the investment of my time and energy.” 

Employee engagement
Similar to the process of selecting customers, how do you identify the ideal employees to participate in an activity that achieves your business goals? What opportunities are best suited to the employees and the pursuit of your goals? How do you entice employees to participate? Rewards and incentives, both intrinsic and extrinsic, may be appropriate and necessary to successfully engage employees in the business of engaging customers.

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

Three Steps to Manage Customer Crises

Wednesday, May 28, 2014

Customer crises strike without warning, and the chief customer officer must act swiftly and decisively to address root causes and begin rebuilding damaged customer relationships. Over my years of experience working with scores of chief customer officers, I've found three steps that are crucial in successfully managing any crisis:

Build Strong Customer Insight Before Crisis Strikes
As owner of the customer you know the value of thorough customer research, but having detailed data is particularly vital when crisis strikes: your unique customer insight must form the basis of a successful response strategy. Relying on that insight you will be able to specifically target touch points that will resonate with your customers, identify areas of the organization's plan that may exacerbate negative opinion, and determine the best strategies for mitigating that negativity. Have a comprehensive customer research program in place before you're faced with crisis to ensure that the information is there when you need it most.

Focus the Organization on Customer Impact
It's all too common for the wider organization to focus on damage control-acting in self-defense, laying blame, or stonewalling. But this will only worsen already injured customer relationships. Instead, it's imperative for you to lead the organization to focus on customer impact at every step along the road to recovery. This is not to say that every action must have a positive impression; we know there are times the organization must act despite negative impact. Your job is to ensure that at every step someone is asking the question: how will this affect customers? If it's positive, highlight it in a way that strengthens customer relationships, and if it's negative, use your customer insight to mitigate the damage.

Rebuild Damaged Trust
Incorporating high customer touch into routine operations allows you to rebuild trust while creating sustainable customer centric change. Seek opportunities for reassuring customers not only within the recovery, but throughout the organization. Look for functions that can be updated or repackaged to highlight positive customer impacts. Share information with customers by updating call center scripts, or devise high touch outreach programs to provide understanding about particular actions or operations of the organization. Customer trust will return only when customers feel they are receiving honest and forthcoming communication about the problems affecting them and the steps you are taking toward resolution. 

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

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

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