Customer Experience Management (CEM) is repeating the mistakes of Customer Relationship Management (CRM)

Using the carrot or the stick?

Philosopher George Santayana once said, “Those who cannot learn from history are doomed to repeat it”. This is my concern when it comes to employee compensation and customer loyalty metrics.

The goal of customer experience management (CEM) is to improve the customer experience, increasing loyalty and driving growth. Your employees are in the best position to change the customer experience and improve your business. While I am an advocate of measuring employees on customer loyalty and value delviered, one size does not fit all. Know where you are in the adoption curve and design your compensation metrics accordingly.

One of the major failures of customer relationship management (CRM) was that the tools were deployed for the benefit of management, particularly in sales force automation (SFA) applications. SFA was deployed as a way for management to improve their sales forecasting. By having all sales people enter their forecast data into a centralized repository, sales managers could roll up the data to provide forecast by product, by region, by customer. But where was the value for the sales representative? It was another administrative task that took time away from being in front of customers.

As a result, adoption became a key issue. So what did management do to address the problem? Many decided not pay commissions unless they were “compliant” with the administrative tasks – using the stick approach. While this changed behaviors, it never really fixed the problem. The problem would have been much better served by finding ways for SFA to add value to the end user, making their job easier and offering them more value in managing their business – the carrot.

In my work with clients, I see the same mistake being made in CEM. Management wants a measure of loyalty or customer satisfaction. They understand the connection between loyalty and financial growth. They want everyone to be compensated based on loyalty so they can achieve growth. But designing a compensation program around your loyalty measure is just not that simple.

There are two major issues you need to focus on to collect an honest assessment of loyalty and improve it over time.

1. Participation & response rates
2. Action & accountability

Participation & response rates. Getting a measurement of loyalty is only as good as the data that goes into the measurement. It’s the old saying, “garbage in, garbage out”. Organizations need to ask themselves a number of key questions. Who is responding? Are they the right customers? Are they decision makers or influencers in my most strategic accounts? Are we getting a broad enough sample to know our friends AND our foe? Can we identify the detractors so we better manage our future sales pursuits? Have we identified our Promoters and defined a plan to leverage them more effectively? These are important questions to answer when trying to obtain an honest assessment of loyalty.

When it comes to participation it’s important to have both the systems and processes in place to make sure you are collecting insight from the right people. This is different in a relationship survey to your top account vs. a transactional survey in your call center. Design the participant strategy accordingly and then measure your organization on response rates. Most organizations accept 20% response rates as adequate. Fred Reichheld recently raised the bar suggesting that the goal should be 90%.

In transactional surveys, you can move response rates up significantly by better integrating the survey into your process and simplifying the survey so it’s easy for everyone to respond. In relationship surveys to your strategic accounts, a 20% response rate demonstrates a lack of relationship and active involvement from the account team. Active recruitment, leadership oversight and closed loop communication is critical to getting customers involved in your process.

Action & Accountability. Knowing the score is only helpful if you know how to change it. Where does your customer survey data go? Who uses it? How? What commitments are made as a result of the insight? Who is accountable to following through on those commitments? What immediate changes can be made in specific relationships to see immediate results? What consistent themes do you see across relationships or interactions that require investments or organizational changes?

In my next blog posting I will tackles the topic of action and accountability more thoroughly. This is a big topic and I can’t do it justice here. Isn’t taking action the whole point of the exercise? Why would you collect the data if you don’t plan to do anything about it?

I believe strongly that these two areas are much more important than the score itself. The score gives you insight that allows you to assess the health of your business, but without the right participants and without employees’ active response, the score will not help you achieve the desired results.

So, let’s learn from the CRM experience and find ways to make our CEM programs add value at every level in the organization. Let’s focus everyone on improving loyalty scores by collecting an honest assessment of current state, evaluating the ways we can improve the customer experience to increase loyalty and achieve long-term growth. Let's create an environment where management and front line employees work together to understand the drivers of loyalty and make changes to improve it. While compensating everyone on the score sounds good in theory, if you do not design the program correctly it will have absolutely the wrong effect on your employees and your customers. If there is any doubt, consider your last car dealer experience.