Successful organizations need to deliver experience, execution, and equity to continue evolving strategies and capabilities.
Posted Jan 1, 2006
As products become indistinguishable and markets and geographies converge, it will be the experience that differentiates and drives retention and loyalty among customers.
Consider this example: an entrepreneurial manufacturer who is bringing garage-shop motorcycle design to the mainstream market. In his technology-driven business model, he will provide customers the opportunity to design form-fitting bikes complete with the most intricate artwork and details from custom handlebars to custom gas caps. Before the customer commits to a purchase, one of his approved dealers will provide a digitally created, online, 3D concept model of the bike. The dealer will also provide a simulated ride that mirrors the unique bike design. All the digital information about each design is saved. In addition, he will capture the entire design, build, and delivery experience in a personalized coffee table book that the customer can share with friends and other motorcycle enthusiasts.
This business model delivers on the three core capabilities of experience management. From the personalized design to the visualization of the bike's design and ride characteristics, the manufacturer has created a unique buying experience. The real hidden asset is the book. Through the book, the manufacturer can define a localized market of potential customers with a built-in advocate, building a customer colony. Colonization is distinguished by a high-touch interaction--a dialogue--that shapes the market and creates new opportunities to collaborate with distinct customer segments.
A growing manufacturer of exhibit booths provides a good example of aligning customer experience with effective execution. This company embarked on an initiative to improve its ability to execute--and to integrate the design and manufacturing processes within its business.
Many booth designers have adopted 3D rendering technology that can simulate the complete trade show experience for their clients. Creating a virtual experience that captures the prospective client's vision of the booth plays to one of the emotional connections so important to the sale. Using 3D technology also creates another opportunity. These high-end rendering tools truly create digital art, but they also facilitate design-for-manufacturability. Our booth manufacturer recognized the value of this technology to enhance the selling process, deliver on the promised vision, and manage the client experience from sales pitch to booth delivery.
The design change process can become the hidden cost of manufacturing an exhibit booth. Frequently designers are contacted directly by clients looking to alter the design. But with no tracking of the change, the change costs were not being passed on to the customer. Without a view of the client-designer interaction, the manufacturer was absorbing all the change cost. To eliminate this leakage, workflow and data management software tools along with the new 3D design tools are being evaluated. The manufacturer's vision is to link these tools to the procurement system and create a means for designers to re-cost changes online, notify the sales rep via email, and request milling and manufacturing estimates to make the change. Sales reps will then have time to contact clients to negotiate the additional charges, review potential timing impact with the client, and release change approval.
Customer equity is defined as the total discounted value of all of a firm's customers. By that definition, it incorporates quantity of purchases, operating margins, marketing, sales, and service costs (or development, acquisition, and retention costs), and a projection of future purchases.
A leading consumer electronics retailer provides a perspective on the value of a Customer Equity Scorecard. This retailer began implementing a new store model based on a definition of customer centricity. The first step in this process was segmenting the customer base into a series of group profiles defined by buying behaviors, including types of purchases (for example, high-end electronic versus practical appliances), frequency, spend per visit, and return frequency. The development of these customer groups allowed the retailer to then assess the equity being driven by each group, and in turn the perceived value of the group over the long term.
Distinct growth and investment (or divestment in some cases) strategies were devised for each group. The store operating model was then redesigned to cater to a segmented customer base in which offerings were made based on the customer group profile. The results within the 10 percent of the stores operating under the new model were significant--a 300 percent difference in average sales growth year over year versus the existing store operating model.
The Three Es create a unifying framework to assess, define, and transform your organization to be experience-centric. Developing a set of strategies to evolve your CRM capabilities can be an effective first step.
About the Author
Christopher Conti is a vice president with TSC and leads its CRM strategy practice. He has worked with executives at John Hancock, Liberty Mutual, Fleet Financial, and others to yield bottom line results from their investments in CRM technologies. He has been an advisor to several start-up software firms in the Boston area and a speaker at various business and software conferences. He can be reached via phone at (617) 964-1565 or by email at firstname.lastname@example.org
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