Present voice of the customer to all employees, and you will be more likely to reap financial benefits and manage customer experience holistically, according to the 2011 Business-to-Business Customer Experience Management Benchmarking Study.

Although only a third of companies are presenting customer feedback to all employees, those who do reported at least 20 percentage points advantage in the performance of holistic customer experience management, as shown by the gaps in blue and red bar graphs below. Examples of business results attributed to customer experience management efforts include:

• 200% growth in profit over the past 4 years. (Chemicals)
• 200% increase in market share over the past 4 years. (Semiconductors)
• 20% improvement in revenue over the past year. (Telecommunications)
• Over $100M in new and existing opportunities influenced in 2011. (Software)
• New sales year over near have nearly tripled over the past 2 years. (Software)
• Increase in revenue 10% year over year. (Medical Devices/Pharmaceuticals)
• Double digit growth over the past 4 years. (Machinery)
• 15% reduction in churn over the past year. (Transportation/Logistics)

Presenting voice of customer to all employees was identified as one of six key success factors for world-class performance in customer experience management. The other five success factors are:

• Coordination among managers of CEM methods.
• CEM as a determinant of corporate strategy.
• Calculation of customer lifetime value (CLV).
• Action on survey results by owners of customer experience key drivers.
• Funding of cross-organizational collaboration.

Comprehensive management of customer experience is prevalent among companies that present voice of the customer to all employees, as shown below:

• How We Listen to Customers: Identify and collect voice of the customer from all the influencers on the buying decision (i.e. initiators, approvers, users, buyers, influencers, gatekeepers, decision-makers). And capture front-line employees’ observations of customer sentiment, and capture customer complaints anytime anywhere.



• Customer Engagement: Engage customers in providing feedback through customer references, user groups and advisory boards, and customer communities and forums. And to analyze customer data and use customer relationship management (CRM).



• How We View Customers: Include customer metrics in balanced scorecards, integrate customer feedback sources, analyze integrated customer data, use customer metrics to evaluate organizational performance, and stream relevant feedback to all departments.



• How we Focus Employees on Customers: Reward customer experience improvement by teams, align incentive pay to customer experience metrics, create department-level action plans to improve customer experience, use customer metrics in performance reviews, and onboard all employees regarding customer experience programs.



• How we Focus our Business on Customers: Listen to customers prior to product development efforts and inform front-line employees' decision-making.



• Funding of Employee Engagement in Customer Experience Management: Incentive pay, recognition and rewards, customer journey maps and touch-points and customer life cycle, cross-organizational collaboration, internal satisfaction, change management and stakeholder management, internal communications, and internal staffing.

Recommendations: Expand your VoC audience by streaming relevant customer feedback to all employees company-wide. Scrutinize your voice of customer data collection to ensure you are capturing relevant feedback to guide the day-to-day work of all employees. Recommendations for stronger customer experience strategy, cross-organizational cooperation, and business results are provided in the study, which can be accessed at www.ClearAction.biz/benchmarking.

25% discount code = B2B25; save an additional 20% by downloading the 2010 and 2011 reports together, with discount code = 2studies.

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Connect your customer experience management efforts across the company, and enjoy exponential benefits, according to the 2011 Business-to-Business Customer Experience Management Benchmarking Study.

Companies with managers (of their top five methods to achieve CEM goals) who meet together quarterly or more often for coordination purposes, or have dotted-line reporting to a single executive or committee tend to enjoy advantages* in the following areas:

• Role of CEM: Top management’s day-to-day activities indicating that customer experience is a competitive differentiator, CEM is a formal business process, and CEM is an influencer of major business decisions.
• Voice of Customer: Identify and collect voice of the customer form all the influencers on the buying decision (i.e. initiators, approvers, users, buyers, influencers, gatekeepers, decision-makers). And involve executives in listening to customers, capture front-line employees’ observations of customer sentiment, and capture customer complaints anytime anywhere.



• How We View Customers: Integrate customer feedback sources, analyze integrated customer data, establish a single view of each customer across divisions and regions, use customer metrics to evaluate organizational performance, and include customer metrics in the company’s balanced scorecard.



• How we Focus Employees on Customers: Onboard all employees regarding customer experience programs, review business processes form the customer perspective, use customer metrics in performance reviews, reward customer experience improvement by teams, align incentive pay to customer experience metrics, and create department-level action plans to improve customer experience.



• How we Focus our Business on Customers: Use customer feedback to guide annual operating plan and listen to customer needs prior to product development efforts. And increase funding for cross-organizational collaboration.

Top 5 Methods to Achieve CEM Goals: Study participants named the following customer experience management efforts among their top 5 ways to improve customer experience:

Recommendations: Recommendations for stronger customer experience strategy, cross-organizational cooperation, and business results are provided in the study, which can be accessed at www.ClearAction.biz/benchmarking.

25% discount code = B2B25; save an additional 20% by downloading the 2010 and 2011 reports together, with discount code = 2studies.

*Companies with managers (of their top five methods to achieve CEM goals) who meet together quarterly or more often for coordination purposes, or have dotted-line reporting to a single executive or committee reported at least 20 percentage points advantage in the performance of holistic customer experience management, as well as strong business results.

Footnotes of coordination graph:
¹ or more often for coordination purposes
² to a single executive or committee

Footnotes of top 5 CEM efforts graph:
¹ including user experience
² including CRM, ERP, data mining
³ not customer-facing
⁴ dissatisfied to delighted
⁵ including forums, user groups
⁶ to increase purchase volume or duration

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The 2nd Annual ClearAction Business-to-Business Customer Experience Management (CEM) Benchmarking Study has identified six best practices for strong market performance and customer experience excellence:

• Coordination among managers of CEM methods.
• CEM as a determinant of corporate strategy.
• Presentation of survey results to all employees.
• Calculation of customer lifetime value (CLV).
• Action on survey results by owners of customer experience key drivers.
• Funding of cross-organizational collaboration.

These findings may be instrumental to the future of customer experience as the majority of companies have not yet implemented the above practices. Among the firms that are implementing most or all of these best practices, CEM-related business performance is much stronger and other CEM best practices are also more abundant.

Examples of business results attributed to customer experience management efforts include:

• 200% growth in profit over the past 4 years. (Chemicals)
• 200% increase in market share over the past 4 years. (Semiconductors)
• 20% improvement in revenue over the past year. (Telecommunications)
• Over $100M in new and existing opportunities influenced in 2011. (Software)
• New sales year over near have nearly tripled over the past 2 years. (Software)
• Increase in revenue 10% year over year. (Medical Devices/Pharmaceuticals)
• Double digit growth over the past 4 years. (Machinery)
• 15% reduction in churn over the past year. (Transportation/Logistics)

The most common methods in use to reach customer experience management goals are, respectively, customer touch-point improvements, customer surveys, first contact resolution of customer concerns, customer intelligence, and improvements to existing products.

Two-thirds of business-to-business (B2B) companies have realized a strong or moderate impact on the success of CEM efforts through employee engagement and employee empowerment to act in the best interest of customers. Employee engagement funding has increased over the past year for CEM efforts among at least a quarter of B2B firms in the areas of internal staffing, cross-organizational collaboration, training and conferences, process improvement, customer touch-points (including customer journey maps and customer life cycle management), and internal communications.

Similarly, a strong or moderate impact on the success of CEM is reported by two-thirds of study participants through the use of quality tools (such as six sigma, Pareto, etc.), executive sponsorship, and systems thinking (such as explicit recognition of connections and consequences across actions, processes, organizations, etc.). Customer engagement funding has increased over the past year for CEM efforts among at least a third of B2B firms in the areas of branding and campaigns, customer relationship management (CRM), customer data analysis, and customer surveys.

This annual study is the only global analysis of customer experience among business-to-business companies across all industries. It monitors the journey to world-class performance in how business-to-business firms (1) listen to customers, (2) view customers, (3) center employees on customers, and (4) center business on customers. It explores the motivations behind CEM and its linkages to corporate goals, strategy, culture, processes, and business success.

Recommendations for stronger customer experience strategy, cross-organizational cooperation, and business results are provided in the study, which can be accessed at www.ClearAction.biz/benchmarking.

Early bird pricing: save $100 before January 31st; save an additional 20% by downloading the 2010 and 2011 reports together, with discount code = 2studies.

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Customer Value Management (CVM) is widely undervalued in the way we practice customer experience management (CEM). Excellent resources on the CVM topic abound, yet few executives — and even few CEM professionals — are aware of them. Sometimes CVM seems too quantitative or difficult to grasp or implement, but the companies that have distilled customer value management principles are certainly reaping higher value for their stakeholders, especially customers! In addition to step-by-step calculations for customer lifetime value, return on customer, customer equity, customer value-added, and other essential metrics, CVM literature provides practical advice that is absolutely necessary for managing customer experience right.

Firms of Endearment (by Sisodia, Sheth & Wolfe) explains how "endearing companies tend to be enduring companies". By asking a broad sample of people which companies they love, and then working backward to identify those companies’ collective, distinctive set of core values, policies, and operating attributes — and then their return on equity — amazing findings resulted. The firms of endearment (FoE) list includes the usual suspects, and then some: Amazon, BMW, Caterpillar, Google, Harley Davidson, IDEO, IKEA, JetBlue, Johnson & Johnson, LL Bean, REI, Trader Joe’s, UPS — to name a few. "They actively align the interests of all stakeholder groups, not just balance them … and can do seemingly contradictory things such as pay high wages, charge low prices, and get higher profitability." Indeed, the financials seal the deal: " the public FoEs returned 1,026 percent for investors over the 10 years ending June 30, 2006, compared to 122 percent for the S&P 500; that’s more than a 8-to-1 ratio! Over a 10-year horizon, FoEs outperformed the Good to Great companies by a 3.1-to-1 ratio."

Customer Value Investment (by Mahajan) explains CVM in a story format, making the topic very easy to grasp, with numerous profound statements. "The customer is indispensable to our business. Without him, we have no business. The customer is an asset that can either appreciate or depreciate, depending on how we touch him. When a customer leaves, the asset is diminished or is depreciated. This asset can be shown on a balance sheet and helps in the valuation of a company. This, of course, benefits the shareholder in the long run. The asset is important for the investors and shareholders to view."

"Satisfaction can be measured only after an event or after you have bought. Value tells you why you buy. Perceived value is the cause. Satisfaction is the result. Don’t you think it is better to understand the cause, rather than only the result? … In reality, what can be more important than customers to an organization? … If you get the customer’s heart share, market share will follow!" Mahajan will be presenting a week-long CVM seminar series in San Francisco during September 19-23, 2011.

Return on Customer (by Peppers & Rogers) emphasizes trust as the key to building customer value. "Repeat after us: The only value your company will ever create is the value that comes from customers – the ones you have now, and the ones you will have in the future. To create value, you must put yourself in the customer’s shoes, understand the customer’s needs, and then act accordingly. Ultimately, this requires you to earn your customer’s trust. What value does the customer get? The customer, too, must weigh long-term as well as short-term factors, assessing the value he gets from his relationship with you. And for the customer, such a relationship will be of the most value if he feels he can trust you to respect his interests as if they were your own. The fact is that maximizing your return on a customer and maximizing the customer’s trust are quite similar tasks. … Understanding what customers need from you — figuring out what motivates your customers — is a boardroom issue, because it is vital to your firm’s long-term success."

Return on marketing investment (ROMI) is growing in popularity as a means to wise management of marketing resources. Return on customer (ROC) is not as well understood. "ROMI by contrast, might consider the value of customers in evaluating marketing spending, to choose between campaign or other specific marketing investments. ROMI can’t guide a company in making the most of its scarcest resource: customers. ROC enables a firm to make decisions based not just on the capital needed to create more value, but on the amount of customer equity required for it. Because customers are scarcer than capital, ROC is a more efficient metric for maximizing overall value creation, and ultimately, ROC will improve decisions about everything from marketing investments to product development, factory improvements, store manager compensation, financial reporting and even business combinations."

Mastering Customer Value Management (by Kordupleski & Simpson) explains that "businesses have a greater chance of thriving over the long term if they think of shareholder value as the reward, not the purpose. … When you look at what many companies measure, how they use this data to manage the business, and what their people get rewarded for, customers often get lost in the shuffle. By losing sight of the long-term purpose of the business — to create value for customers — these business leaders have betrayed employees, customers, and shareholders. … The concepts and tools of customer value management (CVM) offer a way to target investments for improvement — investments that companies are already making — to areas that have the highest payoff for the company and the customer. Companies can actually raise their profits by raising the value of their offering."

In-depth analyses of business performance revealed a "strong link between EVA (economic value-added: return on invested capital multiplied by the amount of capital invested) and share price and CVA (customer value-added: perceived worth of your offer divided by perceived worth of competitive offer). The top 20% of businesses on the relative value scale had a ROI of almost twice that of the bottom 20%. It didn’t matter whether a company’s strategy was to compete on price or to compete on quality. What mattered was that customers felt they received better value for the money paid than they could get form the competition. Customer value management is not an end in itself. It’s about creating competitive advantage and driving business success."

Converting Customer Value (by Murphy, Burton, Gleaves, Kitshoff) explains the pitfalls of common practices: "Using average returns does not allow changes to be made to improve overall profitability, nor does it assist with the selection of future new business units or shares. By failing to recognize the issue of customer profitability, companies fail to recognize that, despite a healthy bottom line, there can be a considerable number of unprofitable customers within their customer portfolio." And like all the books referenced in this article, this one goes beyond step-by-step calculations to recommend strategies for creating value, acquiring profitable customers rather than unprofitable ones, and converting unprofitable to profitable customers. For example: "What if customers charged the organization for their time? Reducing customer non-value added (NVA) time is a new source of competitive advantage. Map the time customers spend engaged with the company or product. Focus on finding the points of impatience, when a little bit of a customer’s time wasted causes disproportionate irritation. Customers’ complaints should be explored carefully, so that similar complaints do not become ingrained.&quot’

Driving Customer Equity (by Rust & Zeithaml) explains why we need to replace product focus with customer focus: "Customers do not choose products in isolation. Rather they choose assortments of products that fit together in a complimentary manner. … The profits of individual products are not separate and distinct, but rather synergize to produce a successful and profitable customer relationship. Product-specific financial accounting need not be abolished, but it should assume a lesser role. More important, detailed, customer-specific accounting is necessary to get an accurate picture of profitability and, hence, the long-term value of the firm." The ClearAction B2B CEM Benchmarking Study revealed that executives still think about customer experience as a measure of past or current performance, whereas "a firm is only as good as its customers think it will be the next time they do business with that firm." The authors discuss "three actionable drivers: Value Equity, the customer’s objective evaluation of the firm’s offerings; Brand Equity, the customer’s subjective view of the firm and its offerings; and Retention Equity, the customer’s view of the strength of the relationship between the customer and the firm."

Mastering Customer Value Management
Gautam Mahajan and Lynn Hunsaker, presidents of Customer Value Foundation and ClearAction, respectively, are showing companies pragmatic principles and techniques during a week-long Customer Value Management seminar series in San Francisco and San Jose, California. The series includes these topics:

• Total Customer Value Management, September 19
• Customer Value Creation, September 20
• Customer Value Measurement, September 22
• Pricing & Customer Value, September 23
• CXO Customer Value Breakfast, September 23

For example, in the CXO breakfast seminar, the following questions will be discussed: Should Customer-Value-Added (CVA) be included in your financial statements? What are the customer-focus and value creation roles of your CFO, Head of HR, and other top execs? How can you recognize gaps in customer-centricity that invite competitive footholds? Mahajan and Hunsaker have implemented Customer Value Management as practitioners, and they have authored five books among them. Their collective experience will be on tap in this unique seminar series that does more than alter perspective by simplifying advanced topics; each seminar engages executives in methods for applying ready-to-use tools for improving customers’ perceived value and increasing profit. For more information about the Customer Value Management seminar series, see www.ClearAction.biz/value.

To transform your company’s profitability, and to optimize customer experience, learn all the CVM principles you can, and integrate these proven best practices into your company culture.

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Value creation is perhaps the single most important aspect of any executive’s job. As such, crystal clarity on what it is and how it’s done should certainly be top of mind. Shareholder value is fueled by customer value; shareholders leave when customers leave, not the other way around. Customer value is an ambiguous term, as it can be used either from the company’s or the customer’s perspective. Few companies know the lifetime value of their customers, or collective customer equity, and more importantly, fewer still know how much customers value their brand, and why.

Why care about how much customers value your brand? Because the customer view of the company’s value is a predictor of market share and shareholder value. Vodafone’s Graham Maher, Managing Director, says “The Customer Value Management (CVM) score is a leading indicator of Vodafone’s market share. We were able to predict market share a quarter out using CVM data, to within 1% accuracy! In fact, the Finance Director said the CVM score is more robust than any of our financial scores.” Customer Value Management (CVM) is a best practice for predicting customer behavior and business results, proven by 3M, AT&T, BP, BT, Chase, Disney, GE, HP, J&J, Kraft, Lucent, Nokia, Philips, Roche, Sonoco, S&P, Tata, TI, Vodafone, Whirlpool, Wisconsin Energies, and many other companies. “If you can create value, you can increase your prices. In point of fact, no one talks much about value anymore”, explains Gautam Mahajan, president of Customer Value Foundation. “They worry about competitors dropping price and whether they should match it, or advertising special discounts. You don’t have to lose money to create customer value; you simply need to know how much customers value the array of customer experience components, and act accordingly. The moment you start to think about pricing driving your product, then you’ve got a commodity product, and it’s a toss of the dice for customers to choose your brand. The only way to stay out of commodity hell is to properly manage customer value.”

Clarity on Customer Value
Untapped value for all parties is common due to the absence of clarity on customer perceptions of value, which is a composite of his or her functional and emotional judgments of your product, service, brand, culture, processes, policies, and business model — all relative to what the customer is striving to do. A keen understanding of customers’ subconscious value equations and perceptions is essential to zeroing-in on management efforts yielding highest return on investment (ROI). Yet most customer research focuses on brand recommendation and sentiment or new product development. Customer value is typically implied, or awkwardly derived from questions about price expectations, or simply assumed. However, Customer Value Management supplies tried-and-true methodologies for discovering how customers think about specific value relative to your competitors and to their expectations.

Customer Value Chain
Another reason for untapped value is weak management of the interdependencies among entities in the value creation and delivery chain. Traditional thinking charges R&D with value creation, but in reality, the customer experience is impacted even by your support functions’ internal and external policies. In fact, everyone in the company, including suppliers and alliance and channel partners, plays a role in the snowball effect of decisions and hand-offs that eventually shape the entire customer experience. The CEO is the chief value creator, balancing the common interests of all stakeholders.

Customer Value Techniques
Gautam Mahajan and Lynn Hunsaker, president of ClearAction customer experience optimization consulting, are showing companies pragmatic principles and techniques during a week-long Customer Value Management seminar series in San Francisco and San Jose, California. The series includes these topics:

• Total Customer Value Management, September 19
• Customer Value Creation, September 20
• Customer Value Measurement, September 22
• Pricing & Customer Value, September 23
• Customer Value CXO Breakfast, September 23

For example, in the CXO breakfast seminar, the following questions will be discussed: Should Customer-Value-Added (CVA) be included in your financial statements? What are the customer-focus and value creation roles of your CFO, Head of HR, and other top execs? How can you recognize gaps in customer-centricity that invite competitive footholds? Mahajan and Hunsaker have implemented Customer Value Management as practitioners, and they have authored five books among them. Their collective experience will be on tap in this unique seminar series that does more than alter perspective by simplifying advanced topics; each seminar engages executives in methods for applying ready-to-use tools for improving customers’ perceived value and increasing profit. For more information about the Customer Value Management seminar series, see www.ClearAction.biz/value.

By seeing value the way customers see it leaders gain the context for collaborative value generation that offers sustainable differentiation and is rewarded by the market place.

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Guest Blog by Peggy Carlaw
A sizeable percentage of customers who are displeased with service, or irritated, never provide feedback about their experiences, according to the BusinessWeek article titled Blind Spots in Customer Service, citing recent research drawn from the customer service data of financial institutions. Say you have a customer who is frustrated but not fuming—in other words, not upset enough to take the time and energy to contact you about the level of service received (and keep in mind—some people who are upset will never contact you). It takes energy and time—a precious resource for most of us—to let a company know we’re dissatisfied. Many people choose to say nothing at all and may instead quietly take their business elsewhere.

Do you consider a month with reduced customer complaints a success? Like many businesses that rely on customer service satisfaction (CSAT) rate and attempt to make changes to reduce the amount of complaints received, it’s easy to focus on the feedback you’re receiving. The challenge is to uncover what you’re not hearing. Oftentimes, it’s the lack of feedback that will ultimately erode your CSAT rates—not your low complaint numbers.

How Many Unhappy Customers Are Out There?
The BusinessWeek article cited a study that tracked 5,000 financial services customers in seven countries. One-third of those surveyed—31% to be precise—reported that their expectations weren’t met by their financial institution. Thirty-five percent stated that they were dissatisfied, but they never registered a formal complaint or communicated to the institution that they weren’t happy.

If one-third of your customers are dissatisfied with the service you’re providing, how does that work out financially for your business? Let’s say that half of the dissatisfied amount defect and take their business elsewhere—so 15% of your customers could leave and you’ll never have an understanding of why they were upset or what aspect of your customer service program failed to meet their needs. In the study cited, the authors estimated that the “hidden dissatisfied” customers worked out to a $243 million dollar revenue risk for a mid-sized bank. For any company, a 15-35% potential loss due to irritated customers is simply too big to ignore.

You Can’t Fix What You Don’t Know is Broken
When customers don’t communicate with you about their frustrations, you proceed to operate blindly, oblivious that you’re not meeting the expectations of those you’re attempting to serve. The financial services data found that a whopping 65% of those who claimed to be dissatisfied with the service never had their problem resolved. And that, really, is the crux of the issue—if your customers don’t take the effort to voice their frustration, the underlying problems remain intact.

Give a Voice to the Dissatisfied
In order to hear from your dissatisfied—or even mildly irritated customers—you need to make it easy for them to register their complaints. When you’re evaluating the design of your customer experience management system, be sure you make it easy for customers to voice their dissatisfaction. Additionally, consider the following points:

• According to the study, one of the most important factors in determining whether a customer will voice his or her irritation is contingent on institutional attributes, such as easy access to channels that allow feedback, and the willingness of the staff to solicit feedback and provide assistance.
• If customers aren’t registering their complaints, you still need to identify them, which means that you need to look beyond complaint data. Uncover the areas where you can look further—financial institutions can analyze missed SLAs (service level agreements) or you can look at customer behavior patterns and start to identify trends of happy customers versus non-responsive customers.

Prevention is the Key!
Prevention is still the best way to decrease customer complaints. For truly superior customer service, you don’t want to operate a business that is putting the cart before the horse, so to speak. It’s great to design a system that adequately captures customer complaints—and we highly recommend you do so—but ultimately, to generate loyalty, you need to create a business model that fosters happy, pleased customers. Preventing dissatisfied customers is the key and to that end, your customer service training efforts will be one of your best investments.

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Are customers or employees the number one priority of management’s decision-making hierarchy? … Or perhaps investors trump all? These questions may be in the consciousness of most customer experience practitioners. The title of this recently published book Employees First, Customers Second emphasized this stakeholder hierarchy notion. The book chronicles the CEO’s efforts at HCL Technologies to re-align his company with customers’ changing priorities: “The increased complexity of the customer’s business, combined with the increasing complexity of solutions (usually sourced from multiple vendors), made it necessary for customers to focus on execution and implementation.” From various customer interactions he came to realize that “our biggest problem with the organization structure was that it did not support the people in what we call the value zone: the place where value is truly created for customers. In a services company in a knowledge economy, this zone lays in the interface between the customer and the employee. … So, to shift our focus to the value zone, we turned the organization upside down and made management and managers, including those in enabling functions (such as human resources, finance, training, and others), accountable to those who create value, not just the other way around.”

Despite the title of this book, I noticed that the author consistently referenced distinct customer needs that spawned new thinking about employee empowerment and the needed shifts in internal processes and policies to enable employees across the company (not just customer service employees) to really serve customers properly, whatever their role. Another clarification: “The value zone of industrial companies is deep inside the organization, in the R&D centers and the manufacturing plants. … The rise of the knowledge economy, however, has changed all that. … The value zone no longer lays in the technology itself and certainly not in any particular hardware or software technology. Customers could choose among many options, all of which would likely enable them to achieve their goals if implemented well. Something had to be different, then, about the way the technologies were brought together and implemented for each customer. Something more had to be changed about how we delivered our services.” (I recommend reading this book as a great primer for modern thinking and pragmatic methods of customer-centric employee empowerment and engagement.)

Employees First
This provocative question “Customers 1st or Employees 1st?” was posted on several LinkedIn Groups and Focus.com to gauge prevailing opinions. It was also discussed in a recent TweetChat. Those working in service industries or customer service functions leaned toward employees first:

• Your customers will only be happy if the people servicing your customers are happy.¹
• Employees are the key touch-points to know the customer better so an organization can develop and deliver products and services that are relevant to customers’ needs and expectations.²
• Great employee engagement will not guarantee customer engagement, however, poor employee engagement guarantees poor customer engagement.³

Customers First
Acknowledgement of customers’ life-giving value to an organization expanded to a discussion of customer definition:

• It is a buyers’ market and each customer is critical to the success of the business. Without customers there is no need for employees. (I see no indication that the public sector seems to view the customer as critical.)⁴
• A customer-centric focus is a part of the culture driven by leadership; it defines how employees behave, imparts certain values, and influences their decisions.⁵
• Any employee within an organization is a customer to another employee, one way or another, but that does not generate the revenue. If the end-customer objectives are clear to the organization, and the roles of each employee relative to these objectives are clear – ‘we exist because of the end-customer’ — we can get our act together to satisfy the end-customer.⁶
• Everyone is a customer to someone. The employees are the customer themselves for benefits, safety, ergonomics, etc. The direct opposite is true when considering quality, productivity, etc, where the organization is the customer of the employee. Bottom line, when everyone views the recipient of their actions as the ‘customer’, the whole employee / customer question becomes moot.⁴

Two Sides of the Same Coin

• Different sides of the same coin. Both have to be in balance to each other. All employees in the organization should be committed to contributing to customer satisfaction and own their piece of the customer experience. It will reflect in the perfectness of the product. Both need to be heard and respected to make it a win-win.⁷
• Consider the employee as an internal customer and the answer is clear — they both matter equally. They are part of an inseparable circuit.⁸
• I find this question rather tricky, like asking ‘heart first or lungs first?’ You can’t live if any of these stop working.⁹
• If approached as mutually exclusive efforts, you are doomed to lose both.¹⁰
• If the culture of the organization puts the customer at the heart of the business, that will drive employee behavior.¹¹
• You need leadership focus and strategy as well as the right organizational alignment, along with employee engagement, to give yourself the best opportunity for a great customer experience.¹²

What’s the Reality?
Impressive discussion, but what really happens in day-to-day management? When I expanded the question to ask how investors figure into the equation, people responded that theoretically all stakeholders’ needs should be balanced, but they acknowledged that’s rare in actual practice.

• What does it mean to ‘come first’? Shareholders get number one favor and priority.¹³
• Traditionally, the dominant mindset for public companies has been one of fine-tuning corporate operations to meet Wall Street financial targets, e.g. growth in stock price (however achieved), earnings per share, etc.¹⁴
• There is no equal importance of all in reality, and therefore, a client needs consultants to fix the problems :). Silos occur when a function does not care about their end-user but only their own performance metrics.¹⁵
• There’s also the Board as well as shareholders to consider. Not too long ago we did a piece of work for a major UK retailer whose Chief Exec was rewarded by driving up profit and share value. He did so using the ‘pile them high, sell them cheap’ mentality whilst sacrificing all the good things they’d done around creating a great customer experience. So when he left with his big payout there was little in the way of customer loyalty left – inevitably they were bought by another company! ¹⁶

Aligning Interests of All Stakeholder Groups
Thank goodness some companies have figured out how to “actively align the interests of all stakeholder groups (society, partners, investors, customers, employees), not just balance them,” explains the authors of book Firms of Endearment. “Instead of trading off the interests of one group versus those of another, they have carefully devised business models in which the objectives of each stakeholder can be met simultaneously and are in fact strengthened by other stakeholders. That’s why these companies can do seemingly contractor things such as pay high wages, charge low prices, and get higher profitability.” Companies classified as ‘firms of endearment’ include Amazon, BMW, CarMax, Caterpillar, Commerce Bank, and 22 others (see pages 9-16). “The public ‘firms of endearment’ returned 1,020 percent for investors over the 10 years ending June 30, 2006, compared to 122 percent for the S&P 500. … Over a 10-year horizon ‘firms of endearment’ outperformed ‘Good to Great’ companies by 1,026 percent to 331 percent (a 3-to-1 ratio).

Practical advice for stakeholder alignment is provided in the book Chief Customer Officer: Getting Past Lip Service to Passionate Action. Every company has a traditional power core – engineering, sales, IT, marketing, etc. – and author Jeanne Bliss explains how to diagnose the power core and address the realities of that core’s inherent strengths and weaknesses to achieve stronger customer experience and business results simultaneously. Overcoming silo mentality through transparent metrics and effective motivation techniques is essential for any organization’s long-term value maximization, for every stakeholder.

Customer Context Enterprise-wide
The notion of stakeholder hierarchies is certainly real. But the title of the book Employees First, Customers Second is a misnomer, as the path followed by HCL Technologies over the past several years emphasized empowerment in the context of customer priorities. It’s this context that makes the most sense:

• HR must hire, train and motivate employees to efficiently deliver whatever maximizes revenue from customers.
• Operations must efficiently make whatever maximizes revenue from customers.
• Engineers must efficiently design whatever maximizes revenue from customers .
• And so on, for every functional area of a firm.

Let’s face it, investors run away when customers run away, not the other way around. Employees are a firm’s greatest asset, and customers make paychecks, budgets, and earnings possible. As one participant in my call-for-observations said: “The customer must be the core as they pay for all the others to exist. There are often times when the customer needs to be educated in order to properly understand what they are paying for but they have to come first. Everyone else in your list is no more than 3 steps away from the front-line and so they should also be working toward the goal of a happy and profitable customer. The problem with some of these mental models is short-term focus and profiteering. When there is a medium-term to long-term view it gives a company the time to generate a situation where everyone wins – from the customer backwards.”¹⁷

The job of top management and customer experience leaders is to help everyone enterprise-wide to view their work in the context of the paying customer. By understanding the connections between all the stakeholders within the context of the customer, silo mentality gives way to customer-centric decision-making that pays dividends for all.

The author expresses thanks to the following people who commented on the question: Customers 1st or Employees 1st:
¹Doug Murray
²Jayaprakash Kavala
³Rudy Vidal
⁴Ed Heins
⁵Chip Verner
⁶Jojo Fabia
⁷Suzanne Harrison
⁸Neil Carlson
⁹Alvaro Perez
¹⁰Larry Garcia
¹¹Jayne Griffiths
¹²Dan Wiersma
¹³Dan Bernard
¹⁴Thomas Bell
¹⁵Anand Gijarre
¹⁶Stephen Peattie
¹⁷Nigel Davey

Compare your company’s practices to the findings from the Annual ClearAction Business-to-Business Customer Experience Management Benchmarking Study.

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Sunnyvale, CA — May 11, 2011 The role of customers in business-to-business companies is being explored in the Second Annual ClearAction Business-to-Business Customer Experience Benchmarking Study. As the only global analysis of best practices to create excellent business customer experiences, this research effort provides insights to executives who want to maximize value for their stakeholders and clients alike.

This comprehensive survey answers these questions: Who in the organization has overall responsibility for driving customer experience improvement? What are the primary goals, motivations, and obstacles for customer experience excellence? And to what extent does the company strive to understand customer perspectives, build customer-centricity, and create customer value?

Business-to-business (B2B) scenarios are underemphasized in other customer experience studies, which tend to highlight consumer sentiment, customer service contact centers, customer management tools and technologies, or specific geographies and industries. “B2B customer management is exciting,” explains Lynn Hunsaker, Customer Experience Strategist at the management consulting firm ClearAction. “Ongoing conversation and tweaking among a variety of functions influencing the purchase decision characterize the B2B environment, typically with customized offerings at high unit prices, such as machinery and enterprise software. In reality, poor customer experiences in the B2B world can have far-reaching personal impacts, and the social factor at trade shows, forums, and alliances is just as important to manage in B2B firms as it is for B2C companies.”

This second annual survey differs from the 2010 baseline study which explored the functional owners of various customer experience programs, and the degree of organizational deployment. The 2011 questionnaire consists of about 40 questions to gauge comprehensive aspects of customer experience management.

Customer experience management (CEM) is an emerging discipline that some companies view as the determinant of corporate strategy, while others view it as a component of customer-facing professionals’ roles to grow revenue. CEM is a composite of customer service, voice of the customer, co-innovation, experiential marketing, customer relationship management (CRM), customer references, internal branding, and similar efforts. The vast array of CEM approaches across companies will be assessed in this study to determine meaningful patterns for differentiating the customer experience.

Best practices and recommendations will be shared with survey respondents in a complimentary copy of the study report ($395 price). As another token of appreciation, participants may receive a complimentary copy of the ebook Customer Experience Improvement Momentum. To maximize integrity of the study’s findings, participation is limited to B2B companies that do not provide customer experience tools and methods to others. To participate in the 2nd Annual ClearAction Business-to-Business Customer Experience Management Benchmarking Study survey, contact benchmark(at)clearaction(dot)biz. See answers to frequently asked questions (FAQs) at www.clearaction.biz/benchmark.

About ClearAction
ClearAction LLC is a customer experience consulting firm specializing in customer-centric innovation, enterprise-wide employee engagement in customer experience optimization, and customer relationship skill-building. Lynn Hunsaker, head of ClearAction, is on the advisory board of CustomerThink, The Customer Care Network, CustomerExperienceOne, and Marketing Operations Partners. She is author of three ebooks: Innovating Superior Customer Experience, Metrics You Can Manage for Success, and Customer Experience Improvement Momentum.

About The Insight Advantage
The Insight Advantage is a full-service research firm, providing a wide range of services (web surveys, focus groups, telephone interviews) to help companies implement customer research for ongoing insight into their customers’ evolving needs and expectations. Jennifer Berkley Jackson, head of The Insight Advantage, is an extension faculty member of University of California – Santa Cruz.

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This article describes the 5th of 10 unique characteristics of customer experience relative to more well-known concepts such as customer satisfaction and retention. The characteristic defined in this article is: Choice — Customer experience is built on trust and mutual respect for variety; share of budget is more important than loyalty.

So you want a relationship with your customer? If one of your greatest hopes is for your brand to be loved by your customers, think about what it takes for your personal relationships to thrive. Since customers (even B2B) are people, they tend to have similar responses to relationship strengths and weaknesses whether the relationship is personal or with a brand. As you know from your own experiences, trust and respect for your choices are at the root of relationship failure or success. Yet, customers’ trust of companies is steadily eroding! In fact, U.S. consumers’ trust dropped a whopping 8 points from 2010 to 2011 in the Edelman Trust Barometer study¹, and U.S. and U.K. firms rank 8th and 9th in trustworthiness, behind Brazil, India, Italy, China, Germany, and France.

Astoundingly, trust of banks dropped 46 points in the U.S. and 30 points in the U.K over the past 3 years. Only one in four people in these countries feel they can trust banks to do what is right. In 2008, U.S. automobiles were the lowest ranking industry, but they have managed to bounce back with a 17 point gain. Hindsight may be a great teacher here, as we’ve observed self-centeredness in these industries in recent times. In the interest of maximizing short-term financial performance, these companies seem to have forgotten that relationships are a two-way street. Once trust is eroded, any amount of advertising and sweet-talking tends to have little effect. For so many reasons, it’s essential to maintain high trust with your customers.

If you love someone, set them free. Yet, long-term (e.g. 1-year, 2-year) agreements, exclusions, caveats, change fees, extensive fine print, extra steps (hassles), and many other penalties are the norm in several industries. These are examples of bad profits, as described by Fred Reichheld in his book The Ultimate Question: “Whenever a customer feels mis-led, mistreated, ignored, or coerced, then profits from that customer are bad. Bad profits come from unfair or misleading pricing. Bad profits arise when companies save money by delivering a lousy customer experience. Bad profits are about extracting value from customers, not creating value. When sales reps push overpriced or inappropriate products onto trusting customers, the reps are generating bad profits. Bad profits provide a distorted picture of business performance. The distortion misleads investors, yielding poor resource decisions that hurt our economy. That tarnished reputation undermines consumer trust and provokes calls for stricter rules and tighter regulations.”²

The 2011 Satmetrix Net Promoter^® Industry Benchmarks Study reports 1 in 5 U.S. consumers say bad experiences lead them to switch brands. Bad experiences were described by 34% of consumers as interacting with a rude or disinterested employee, and by 20% as unexpected charges or fees; 20% also listed poor product or service quality as the main reason for switching brands.³ Specific examples are described in a 2010 study by Consumer Reports, which lists the naughty or nice policies of 20 leading consumer companies. (By the way, these concepts apply just as well in B2B, government, non-profit, etc.)⁴ Don’t let your fear of a few usurping customers lead you to punish all your customers for wanting to give you their money! Re-think the customer-centricity of your sales and service policies, and all your other policies, for that matter.

As Jeanne Bliss explains in her book I Love You More Than My Dog: 5 Decisions That Drive Extreme Customer Loyalty in Good Times & Bad, “Consider the story that the collective decisions of your organization tell customers, employees, and the marketplace. What story is emerging about who you are and what you value? Are your decisions reflecting what you intended? When you make decisions that respect and honor customers you will earn their respect — eventually their love. Are your decisions compelling customers to tell others to try your products and services? Are customers telling your story?”⁵ You don’t need fancy technology or campaigns to build highly profitable customer retention. You simply need to consistently provide the value that you promise.

When a company is distrusted, 57% of customers will believe negative information, and only 15% will believe positive information. In contrast, when a company is trusted, only 25% of customers will believe negative information, and 51% will believe positive information.¹ A study by the London School of Economics examined the revenue gains by increasing positive word-of-mouth and by reducing negative word-of-mouth. They found that reducing negative buzz pays off 300% over improving positive buzz.

If you want ongoing strong financial performance, build trust into your customer retention efforts. Remember the golden rule: Do unto others as you would have done unto you. It’s the best rule of thumb for anything in life, and an essential ingredient to reaping high returns on your customer experience investments.

¹Edelman Trust Barometer, 2011.
²The Ultimate Question: Driving Good Profits and True Growth, by Fred Reichheld.
³Satmetrix Press Release, February 17, 2011.
⁴Consumer Reports, November 22, 2010.
⁵I Love You More Than My Dog: 5 Decisions That Drive Extreme Customer Loyalty in Good Times and Bad, by Jeanne Bliss.

See the other posts in this series:
Customer Experience Management is Doing the Right Thing
Start with Your Customers for Success in Every Strategy
Fall in Love with Your Customers for Best Customer Experience
Customer Experience Management is Uncommon Sense
Customer Experience is More Than Engagement

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What do you think of this theory: As customer-centricity of an organization increases, customer experience management return on investment also increases.

Exploring the Theory
This theory originated as an observation of my own experience as a customer and results of studies that contrast top management’s ratings of their own customer-centricity against the perceptions of those executives’ customers. Typically five times as many executives think theyre customer centric relative to the number of customers who agree. Recently I explored this theory with customer centricity experts Jeanne Bliss¹, Jill Griffin², and Dick Lee³ in a roundtable discussion that was recorded live on Focus.com. Here are the highlights of our conversation:

Defining Customer Centricity
How do you define customer-centricity?

• The orientation of a company to the needs and behaviors of its customers rather than internal drivers such as short-term profit, cost-cutting, operational metrics, etc. (Griffin; Wikipedia)
• The degree of alignment between the company’s metrics (what people are rewarded and recognized for) and processes with official statements about customer focus. (Bliss)
• Creating new value for customers in a way that creates value back for the company. (Lee)

Challenges of Customer Centricity
Why is it hard to be customer-centric?

• Companies build competencies by operating areas, also known as silos (because they stand alone without interfacing with other operating areas). So the work is to connect the silos to deliver a customer experience. (Bliss)
• It’s hard to convert to cross-functional thinking that aligns process to strategy and then technology to process unless the organization focuses completely on strategically creating new value for customers – then the old ideas can be readily shed. (Lee)
• Context is essential, reminding people why they’re measuring what they’re measuring. For example, the reason for focus on operations or employee satisfaction is the fact that customers pay paychecks, and if the customers stop buying your products and services, you won’t have the revenue to measure or operate by. (Hunsaker)
• It’s easy to get preoccupied with satisfaction results and regression analysis – it becomes more about a statistical exercise rather than recognizing that at the end of the day, it’s a living, breathing customer who chooses to do business with you, or not, based on what you have done for them. (Bliss)
• You have to believe in your gut that if you do the right thing for customers, they’re going to do the right things back for you. If you don’t believe that core proposition, you can’t go forward. (Lee)

Breaking Customer Centricity Barriers
Among the companies that have good ROI on CEM investment, how did they become customer centric?

• Most of the customer-centric companies were founded that way, such as FedEx, Nordstrom, Amazon, Zappos. Fewer companies have made the transition to customer-centricity, for example Procter & Gamble and USAA. The transition is very difficult and it takes a lot of work to get a company out of an inside-out state to cross over to outside-in. (Lee)
• CEO-led initiatives and talking about silo connections will not cause customer-centricity until the front-line employees truly believe that the company is really there for the customer; otherwise it doesn’t snap into place. I’ve seen a seven-year transition that ultimately made that happen last week. (Griffin)
• Companies that are customer-centric are typically the ones that have been successful in integrating strategy, process, and technology. Some companies believe that if they hire and train people well, they’ll be customer-centric, but employees’ work, along with technology support, must also be changed before it all pulls together. (Lee)
• The executives in the middle of the organization really need to be engaged to understand that the purpose of the business is to grow their customer assets, and attach that to the delivery of an experience. It’s best to break this effort into 90-day plans and then work the plan, engaging people throughout the organization to build this thinking. (Bliss)

Necessity of Paradigm Shift

• Organizational design and change management are critical components of getting to customer-centricity; a disruptive element is necessary to acknowledge that the company is organized to do business in an internally focused way, and to address the prevalent attitude: “Well, I know we have to change, but we can’t stop doing what got us here.” (Lee)
• As I’ve conducted training for many corporate boards of directors, it’s been interesting how little I’ve heard the word “customer” used by them. And I’ve certainly been surprised by the absence of customer metrics that would be propelled from top management into the board room. They typically have a great deal of financial measurement, but not a lot of it applies to customers. (Griffin)
• Quarterly orientation can lead to abandonment of customer-centricity efforts. This is a long path of transformation and it’s not about immediate quarterly change. Persistence is necessary to stay the course. (Bliss)
• One of the challenges is to step away from the day-to-day activities to allow big-picture thinking. (Lee)
• Pre-occupation with value in the here-and-now hinders customer-centricity; appreciation for value migration on the next horizon, and preparation for it, is essential. (Griffin)
• This can’t be done by a single operating area; people have to align themselves across the current process, improve it, and take it to the next level by re-thinking the experience and all of the different parts involved in it. For example, billing isn’t just billing – it’s also communications, process, operations, marketing, customer service, and IT; so all of those operating areas need to collectively re-think the experience and align the process to the desired experience. (Bliss)

False Understanding of Customer Experience Management!
From today’s discussion, it appears that if companies are defining customer experience management primarily by marketing, sales and service, they’re missing what will drive customer-centricity and ROI on CEM, as the focus of our conversation has been actionability, operational improvement, holistic view, structure and accountability. (Hunsaker) Do you think there’s a disconnect in industry today about exactly what customer experience management is?

• I absolutely do; I think that people still equate it with something like customer service, and it’s much bigger than that. I am meeting very few companies right now that really see customer experience in the totality that it truly is. (Griffin)
• If a customer experience program is aimed at public relations, advertising, and marketing then you’re trying to shape what the customer does; however, outside-in thinking is the reverse: it’s about letting customers shape the company. (Lee)
• Think about the evolution of it: we had customer service, TQM, customer relationship management, and at every stage people have nibbled and haven’t stayed the course, and as a result, have abandoned it and haven’t seen real change. Customer experience is a discipline. It’s a way of re-thinking the business, but you need to do the hard work of re-aligning how you work, aligning the silos, changing the metrics, connecting the processes of the operation, and making it relevant and do-able. To make it work, you have to commit. You have to stay the course and be there for the long-term transformation that’s involved in making it work. (Bliss)
• The vast majority of barriers are in the flows: work flow, information flow, communication flow, data flow, and that’s where the faults occur. If you fix that, everything comes along with it. (Lee)

A Way of Life
In summary, what we’ve described today is a way of life.

• Customer-centricity is a way of thinking and doing that puts the customer at the center of all you do; it’s the way you operate in your organization, enterprise-wide.
• Customer experience management is more than a journey, more than an initiative, but a way of life.

If you are striving for higher ROI on your customer experience management efforts, we hope your organization adopts the tried-and-true principles and techniques we have discussed here. We welcome empirical data to prove our theory, and your comments as well. (Hunsaker)

¹Jeanne Bliss is author of Chief Customer Officer: Getting Past Lip Service to Passionate Action and I Love You More Than My Dog: 5 Decisions That Drive Extreme Customer Loyalty in Good Times and Bad.
²Jill Griffin is author of Customer Loyalty: How to Earn It, How to Keep It and Customer Winback: How to Recapture Lost Customers and Keep Them Loyal.
³Dick Lee is author of The Customer Relationship Management Survival Guide and founder of the Building the Customer Centric Organization LinkedIn Group.

Lynn Hunsaker is author of 3 ehandbooks: Innovating Superior Customer Experience, Metrics You Can Manage For Success, and Customer Experience Improvement Momentum.