Posts Tagged ‘Value’

Show me the Money: Jerry Maguire on how to build Customer Experience Business Cases

September 24, 2012

Getting Financial Benefits from your customer experience efforts is essential in today’s economy for both personal and corporate survival. CEO’s and CFO’s want you to “Show me the Money”. Just like the film Jerry Macguire.

One client discovered 7 relatively easy steps to increase profitability by 50%

Click here to see Jerry Maguire in action

Earlier in the year, I was fortunate enough to facilitate the Financial Benefits Workstream of the annual ECEW conference, one of the best Customer Experience Conferences you can attend. This article summarises the main discussions.

Create Value WITH customers

Its easy to take Value FROM customers and hope they don’t notice. Increase prices, reduce pack size, dilute the product, reduce the service. But with consumers increasing getting smarter than organisations (see recent blog) that’s a risk. Head the lessons from Verizon and Bank of America’s fee increases of last year and the associated consumer backlash. At ECEW Dave Carroll’s “United Break Guitars” was a powerful reminder of individual consumer power and brand damage that can result. So, create value WITH Customers, remove the things they don’t value, give them more of the things they do. Eliminate cost to serve by getting it right first time, was one of the recommendations from Richard Watmough of BSI.

Often the WITH or FROM tension isn’t explicit but it is deeply entrenched, especially when the P&L’s under pressure.

Don’t change beliefs, appeal to desires

It’s an old advertising mantra that Google knows well. Google could have tried to convince everyone in the advertising industry that TV advertising doesn’t work and that online advertising is more effective, but they didn’t. They simply said, we’ve got some potential customers here – would you like them? And the same approach is required for Customer Experience Benefits.

A solid business benefits case created with and signed off by finance is the Customer Experience Professionals best friend. Don’t try to convince everyone that Customer Experience is a philosophy that will revolutionise the company, just show a compelling business benefits case. That’s what all businesses desire. So how do you go about it?

There are four steps to achieve this.

  1. Understanding what Customers Value
  2. Understanding Customer Value
  3. Touchpoint Opportunities
  4. Business Case model

Understanding what customers value

This starts with classic needs research and understanding the relative importance of the various elements of the proposition. Developing impact curves for levels of service delivery through conjoint research is really important. I remember a discussion with one organisation who had made huge efforts (and invested a lot of money) to move speed of telephone answer from average of 60s to 50s but with no impact on customer.  It’s vital to understand how important individual components are and at what level the customer begins to notice. Using simple pair-wise research can also determine the role the component plays in the experience.

GGRS – Understanding Customer Value

There are four drivers of customer value: Gain, Grow, Retain, Serve. If you think about it, you’ll soon realise that these are the only four ways you can make (or lose money) with customers. Unless you understand these drivers across the customer base you won’t be able to systematically enhance customer value.

Isolating the costs and value associated with these activities across the customer base is always revealing. Allied with a review of touchpoints and sales, service and marketing approaches always leads to opportunities. In a recent client, we were able to show how a 50% increase in profitability could be achieved in a year through seven relatively straightforward steps. That got the Board’s attention!

At ECEW, Peter Sinden from leading Insurer LV= presented on how he and team had focused on the “Serve” component. One question he asked himself and the audience was what‘s the true cost of hiring and training each new staff member. (Ans: significantly more than the recruitment fee!). He showed that by focusing on employee attrition he had both saved significant amounts of money but also improved service levels significantly. Investing part of the savings made, enabled him to start to create a virtuous circle of improvement. At LV=, they have truly proved the employee-service-profit chain.

Touchpoint Opportunities

Mapping touchpoints, understanding volumetrics, costs, value and error rates and their effect on the GGRS drivers enables value opportunities to be determined. One of our client’s, Gayle Terry of British Gas, talked about how British Gas used these techniques for their connected home products, including the revolutionary Remote Heating Control (as seen in recent adverts). This, combined with customer research, helped prioritise experience investments.  Specifying consistent cost effective delivery, whilst investing in a number of ground-breaking experiences. It’s a key proof point in British Gas’ brand re-positioning.

Business Case Model

At HOWTOEXPERIENCE, what we do is model the fixed and variable costs in the P&L and apply the customer value dynamics. By that we mean the GGRS dynamics by type and value customer. We then model these dynamics  over 3-5 years to baseline the as-is situation. You can then run various improvement tactics through the same model to see relative effects. It’s simpler than it sounds and can be completed in weeks. We get the FD to sign it off and then the only debate you’ll have is about the size of the prize not whether the numbers are right. It enables a value bridge to be formed and management to be galvanised. Everyone should have one.

One step further for the more sophisticated, is to model the link between Experience Drivers and Financials, enabling a resilient return on investment to be achieved.  The first step involves modelling operational service delivery (and failures) to individual customer satisfaction/commitment research. This requires tagging of customer research to the database and combining individual customer interactions.

The second step is to tag this to the financial performance of customers (repeat purchase, retention, average order value). Obviously this works best when there are reasonably high sample sizes to work with, within a large customer base.

Its easy to convince Executives to prioritise CE investments if you appeal to their desires and offer a compelling value proposition. Just “Show them the money”.

ValueCEM Discipline 4 of 16 that smart organisations use to systematically drive value from customer experience management. See Smart Organisation CE Framework.

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