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CEM in the Age of Customer Capitalism (Roundup)

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While bloggers this week have been discussing the Harvard Business Review blog post "Five Ways to Heal American Capitalism", by Roger Martin, more fascinating to me is Roger's article in the January/February issue, "The Age of Customer Capitalism". His thesis:

Modern capitalism can be broken down into two major eras. The first, managerial capitalism, began in 1932 and was defined by the then radical notion that firms ought to have professional management. The second, shareholder value capitalism, began in 1976. Its governing premise is that the purpose of every corporation should be to maximize shareholders' wealth. If firms pursue this goal, the thinking goes, both shareholders and society will benefit. This is a tragically flawed premise, and it is time we abandoned it and made the shift to a third era: customer-driven capitalism.

Walker Information has two blog posts discussing the ramifications of this shift for researchers. In "Customer Capitalism: Does It Pay Off?", Mark Ratekin writes:

If we assume that customers are the source of all future earnings, then logic would suggest that maximizing customer value would be the best way in which to maximize shareholder return in the long run.

Do the data bear this out? Professor Martin provides some anecdotal examples in support of customer capitalism; we can add several more from our work with clients...

 

1. We continue to see a statistical connection between what customers say they will do and what they actually do;
2. We have witnessed the correlation between a customer's loyalty and his/her revenue growth rate, profitability, willingness to buy across a firm's multiple categories, etc.
3. The Walker Index, a composite of Walker's publicly-traded customers, continues to outpace the broader market indices in total; [to which I would add, also check out the Forrester CxPi and stock performance]

In addition, the academic literature provides analysis consistent with what we see in our client work.

However, the notion of Customer Capitalism is another example of easy strategy that is extremely hard to execute.

So how can you use CEM (Customer Experience Management) to execute such a strategy?

• In "Things to Consider When Implementing a Customer Capitalism Strategy", Mark argues that the four key areas to focus on are organizational support for customer centricity, integration of customer data into work processes, incentive alignment to customer needs, and effective communication plans to both employees and customers.
• Bruce Temkin in "It's All About Your Customer's Journey" writes, "Over time, the decisions that companies make end up straying farther and farther away from addressing the actual needs of customers....That's why companies need to use tools and processes that reinforce an understanding of actual customer needs. One of the key tools in this area is something called a customer journey map (also known as a touchpoint map). Used appropriately, these maps can shift a company's perspective from inside-out to outside-in." Bruce just published an independent Forrester report, Mapping the Customer Journey, outlining best practices and five steps for building a customer journey map.
• Don Peppers argues on John Oswald's blog that you need a framework for making the hard decisions about priorities and investments. "If your marketing exec says, well if we want a good customer experience then we should just DO these kinds of things, then our question is: What if the cost is $100 million? Or $500 million? See the problem? At some point a balance has to be struck, but where? Simply saying that CXP leaders tend to have better financial results than CXP laggards won't solve the hard problem of resource allocation. To solve this problem you need a metric for the benefits of customer-experience-management that can be converted to dollars and cents. That's why we invented the financial metric, Return on Customer, a precisely quantifiable measure of the efficiency with which a company's customers are creating value."