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Smart Marketing: How Mature is Customer Experience Management?

A customer's total experience with your company is worth way more than any single communication. Customers are human beings—they feel first, think second. And the interactions they have with you strongly influence their hearts, producing a longer-lasting impact than communications directed toward their heads. But how well does your company deliver customer experiences?

The Customer Experience Maturity Monitor, a qualitative and quantitative research study conducted by Peppers & Rogers Group, SAS Institute, and Jubelirer Research, addresses this issue in its first report, "The State of Customer Experience Capabilities and Competencies."

While customer experience has always been important, today it is more critical to business success than ever before due to six factors:

• The shift of brand control to consumers.

• Heightened customer expectations.

• Product commoditization.

• The multi-channel environment.

• The challenge of treating different customers differently.

• Short-termism's insidious effects on business decisions.

These factors are not due to the state of the economy, nor are they the latest consumer fad. Rather, they represent the consequences of the steady march of technology and the increasing "connectedness" of all human beings. Appreciating these important implications is the first step toward creating experiences that differentiate your brand.

The research was tracked along the framework of SAS' Customer-Centric Business Model. The idea is, in order to achieve the competitive advantage arising from customer experience excellence, a company must focus on those organizational capabilities and competencies most influential in deepening customer insight, choreographing customer interactions, and continuously improving marketing performance. It isn't about generally improving customer service quality or uniformly enhancing customer satisfaction—it is about designing an experience for each customer based upon knowledge of that individual, delivering it across products and channels, and measuring outcomes to guide ongoing refinements.

Creating a great customer experience starts with acquiring enterprise-level customer insight through data. Timely, accurate, and cross-channel data is critical to shaping a customer's individual experience. Good data allow you to test your marketing messages and streamline the customer's experience across multiple channels. Unfortunately, many companies either don't have access to this kind of data, or don't have the capability to produce useful insight with it. Only 39 percent of companies rate their performance as good or excellent in anticipating customers' purchase behaviors.

Only by anticipating customer needs and behaviors can a company proactively engage its customers with customized interactions that are both relevant and timely. Lacking the ability to predict will cripple your efforts to deliver a good customer experience. And customers don’t want companies simply to collect scads of personal data, either…unless the data collected is used to add value to the relationship, for the customer, perhaps in the form of a faster or more tailored product, better service, or more convenient ordering.

Once a company achieves deep descriptive and predictive insight, it has the opportunity to use that knowledge to alter the customer experience by intelligently choreographing individual customer interactions. Doing so requires managing and optimizing segment strategies, in order to engage valuable and high-potential customers in meaningful relationships.

Our research for the Customer Experience Maturity Monitor reveals just 25 percent of companies consider themselves good or excellent at using mathematical programs to maximize the profitability or ROI of their marketing campaigns. Consistent with the lack of use of optimization, the research also documents few companies (18 percent) rate their performance as good or excellent at creating and managing individual "treatment tracks" across products and channels, in order to manage and improve the overall customer experience. Customized interactions are not commonplace, but clearly the future has already happened—it's just a question of whether a company or its major competitor will get there first.

Whether the quality of customers' experiences is poor or excellent, all companies have room for improvement. To continuously advance your marketing performance, you have to measure and report the benefits your campaigns deliver, optimizing your marketing investments so as to maximize those benefits. As a marketer, what you want to do is continue to learn, in order to improve your campaigns' performance over time.

But in terms of customer experience, the same exact "continuous improvement" rationale can be applied at the individual-customer level. By harvesting the learning gained from each customer interaction, you should be able to deepen your insight with respect to each individual customer, improving that customer's experience with your brand over time. Managing and tracking customer experiences, in other words, allows you to create powerful, loyalty-boosting Learning Relationships with individual customers—relationships that get "smarter and smarter" with respect to each customer's individual preferences over time, ensuring that the customer finds it easier and easier simply to continue dealing with you, rather than try to re-invent their relationship with some other firm.

Unfortunately, our Customer Experience Maturity Monitor research once again shows marketers falling short. Only 31 percent of companies rate their performance as good or excellent in capturing the expressed needs of customers during live interactions. Additionally, only 28 percent of companies think they are good or excellent at updating customer profiles to reflect past customer activity (e.g., interactions and purchases) as well as outbound and inbound contacts (campaigns and call-center or Web interactions). Not surprisingly, therefore, even fewer (21 percent) consider themselves to be good or excellent when it comes to altering individual customer interactions or treatments based on changes in a customer's history or profile.

Generally speaking, our research shows most companies consider themselves moderately capable—but not very expert—at managing individual customer experiences. There is, in short, a lot of room for improvement, and a giant prize yet to be claimed by most firms: customer loyalty.

Editor's Note: Download the full research report at www.peppersandrogersgroup.com/links/cemm.html.

Don Peppers and Martha Rogers, Ph.D., are founding partners of Peppers & Rogers Group, a division of Carlson Marketing, in Norwalk, Conn.