As Rod sat outside the conference room waiting to be called in to present Marketing’s quarterly results to the board of directors of his Fortune 50 public company he reflected on how marketing is changing. What a long strange trip it’s been from the Grateful Dead song “Truckin’” keeps popping into his head. Rightly so, Marketing has become overly complicated and just a bit weird. Not just because of the myriad of technologies that CMOs like Rod have been buying in an attempt to understand and manage holistic customer lifecycle relationships. But despite the plethora of channels, content and ways to attract-engage-convert customers, ROMI (Return on Marketing Investment) is only slightly more predictable than it was five year ago. “I have lots of analytics and detailed metrics on conversion and performance but consistently accurate predictability of marketing generated revenue? We’re not there yet,” thinks Rod. That lack of predictability is a problem on many levels, not the least of which is that Boards expect it. Rod is one Chief Marketing Officers (CMO) that participated in a qualitative study on emerging marketing trends funded by Marketo. The marketing leaders interviewed were with B2B or B2B2C companies ranging in size from the Fortune10 to early stage start-ups across financial services, manufacturing, high technology and SaaS industries. Marketers have abandoned educating the rest of their organizations on the importance of marketing specific metrics and have dropped using terms such as TOFU, MOFU, MQL, etc. in conversations with Sales, Finance or other parts of the organization. By talking about marketing programs and investments in financial terms, CMOs have seen an unprecedented level of alignment occur across the organization. With Sales the conversation is not about leads but pipeline, customer engagement, conversion and close rates. In an ideal world CMOs would like to have more strategic conversations with their CEOs and Boards about the value of activities and the impact of investments that are not directly tied to revenue. Reputation, awareness, customer experience, tracking cohort customer groups, pipeline by channel, influence of communities/digital properties, and how to drive growth are a few of the topics CMO would like to talk about. But having been burned in the past, CMOs keep the conversation strictly on revenue. Rod knows his CEO and board expects him to routinely report out revenue forecasts based on current and alternative marketing spend scenarios as part of evaluating business strategies that management is considering. He needs a data science team, help from the CIO and strategic MarTech vendors to build a predictable model that includes all the channels, programs, conversion rates, target industries and customer segments. Having spoken with a handful of progressive CMOs that have built credible market models, Rod knows it’ll enable his team to focus on where the strong and weak points are in the marketing stack, understand why and whether it’s an execution issue or a customer/market shift. The team would be able to spot market shifts – buyer, industry, competition, economic – and respond faster by changing attraction, retention and product programs. Rod’s longer term vision is to do historical benchmarking as well as against competitors. Being able to model, in detail, LTV of customer lifecycles would enable his team to un-complicate marketing and increase their precision in forecasting revenue by defining and aligning touchpoints, content and offers to customer journeys. Marketing has the real, hard data to prove its contribution to the topline – as long the language the CMO speaks is financial. The rising sophistication and transparency of marketing ROI is enabling every CMO to have a credible seat at the board table. The real power of the market model lies in its ability to link metrics and programs to what the Board and his CEO cares about – leads, pipeline, wins and market share. As the CEO comes out of the conference room to call him in to present, Rod stands up confident his conversation with the board can go to a new level and that he can demonstrate, tangibly, the importance of what marketing is and can do. First published in CustomerThink
We all know or heard of someone who did something they shouldn’t have. A long time ago I worked with someone who was responsible for setting up international sales events. She would book the venue on her credit card, get reimbursed and then cancel it, pocketing the cash. There is little disagreement that this is unethical behavior. But it took a while before the company acknowledge the behavior and addressed it despite her actions being common knowledge. What about questionable behavior that an organization seems to accept as OK? Actions like making decisions that impact your bonus without really looking at the facts, pressuring a prospect to buy more product than they really need, writing marketing copy that stretches the facts beyond truth, or positioning yourself as an objective intermediary where you have a financial interest in the outcome. If an organization’s culture implicitly condones questionable practices does that make unethical behavior ethical? Multiply the implicit acceptance of questionable behavior to a grand scale and you get situations like Turing Pharmaceuticals, Enron, Uber, the financial meltdown, and the list goes on. These are not anomalies but routine events to which we all exclaim shock at not having foreseen the impending crisis. If leaders are generally ethical and want to do the right thing, how can so much go so wrong? I asked Margaret Heffernan, best-selling author of Willful Blindness and her response was not what I expected. Instead of being told about the corruption of society, tyrannical bosses, and the fallacies of hyper-capitalism, Margaret responded that it’s a function of human nature to “turn a blind eye.” By only seeing the error in retrospective, we engage in willful blindness. “This is not a function of intelligence,” said Margaret during a recent interview in San Francisco. “All through history these situations happen, it’s just much more prevalent today.” Her book is full of stories about leaders ranging from ship captains to Wall Street traders who inadvertently stepped astray of ethics believing they were playing by the company’s rules. Speed and complexity play major roles in explaining why unethical corporate behavior is on the rise. “Speed is very fashionable,” explains Margaret. “We believe that in order to be competitive you need to be the fastest which accelerates business cycles and our proclivity for working 7 x 24.” Leaders, managers and employees feel they need to run faster to keep their job or move ahead. “The problem with speed is that the faster you go, the less you see and the even less you feel,” shares Margaret. Speed is particularly dangerous for CEOs. Pattern detection becomes blurred because you pick up less data and good decisions are rooted in knowing and having the right data. Complexity is our other love affair. In the quest for agility we have achieved the opposite. Complex markets, distribution channels, product families, and staffing models has resulted in organizations that are too complex to manage. CEOs and management teams long ago lost the line of sight from problem to solution. Sales and Marketing struggle to connect and have a meaningful relationship with their customers. We’re unable to manage these complex global organizations as we’ve seen in the retrospective analysis of troubled financial institutions, automotive manufacturers, technology companies and economies. The inability of the governments to stimulate their economies and other countries to resolve the spreading immigration crisis are proof points. So what is a CEO to do? Margaret’s advice is to change how they manage. She points to three truths discovered while researching her book. 1. Employees almost universally believe their bosses don’t want to hear any bad news or information that challenges commonly held beliefs. 2. Business leaders understand that they don’t know what they need to know and rely on their employees to tell them what is happening in the business. 3. Every organization has fundamental orthodoxies about things that cannot be talked about. Her advice to CEOs is to consciously slow down. Companies like Eileen Fisher, an apparel and design company which also happens to be a winner of the Great Places to Work award, slowed down their production and design cycles along with their decision making. The result was a dramatic increase in their profitability and competitive stance. In the fast paced world of fashion, this seems counter intuitive and is a good example of why we need to un-complicate our lives. Next, CEOs need to change how they communicate. By slowing down, CEOs and their teams can have more meaningful conversations about the business, data patterns, and thoughtfully evaluate different courses of action. Conversations should:
- Take longer,
- Draw in a wider range of stakeholders and audiences,
- Allow for more organizational dissent, and
- Gain wider buy-in and consensus on key decisions.
Why is customer centricity such a challenge? Theories abound ranging from customer ownership delegated to someone other than the CEO; a culture that does not appreciate the link between employee engagement and customer success; lack of in-depth customer understanding; processes that don’t consistently deliver a valued lifetime experience; or a perspective that customer engagement belongs to marketing, to name a few. From my experience working with Fortune 100 to 5000 companies across a wide range of industries, these ‘theories’ are at play but they are not the root cause of the challenge. That lies in their business strategy. Setting business strategy is as critical to an organization’s success as having delighted customers. The first sets direction and focus. Done correctly it enables employees and partners to align their efforts, resources and plans to achieve the measurable and time-bound objectives of the organization. The second, delighted customers, is the path to market share growth. Yet many business plans lack specific goals or objectives for customer success. The two are one; not separate. The role of the annual business plan is to get everyone in the organization to have a shared vision of the future and agree on what needs to be done, when, by whom and with what resources to achieve target end state. Only through planning can we confirm that everyone sees the same thing and has worked through the issues to reach that point of acceptance. Not only does everyone in an organization need to sing the same verse from the same hymn from the same book, they need to also sing it with the same level of gusto. It sounds trite but it can be hard to achieve. Most organizations have no problem setting goals. Goals are broad statements of the company’s aspirations for the future, stated in external business environment terms, are generally enduring and often not measurable. Rarely do companies struggle with setting goals around revenue/profitability, mindshare, reputation, market share, product mix, thought leadership, organizational agility, culture or customer success. A typical customer success goal is worded along the lines of: “To maintain solid, sustainable customer relationships with the highest level of loyalty and sustained satisfaction.” The challenge comes in defining objectives. Objectives are internally focused and defined in financial, statistical or numerical terms. Performance against measurable objectives is the prime indicator of whether the related goal is being achieved. While goals are stated in multi-year terms, objectives are time bound and stated in quarterly, monthly and/or annual terms. Planning teams inevitably get stuck on setting objectives for the ‘customer success’ goal. They get stuck because the company often views customer delight / loyalty / satisfaction (pick your favorite label) as a separate set activities loosely related to other goals. Nothing could be further from the truth. Customer success is interdependent as well as part of all other goals. Miss any goal’s objective and it will have a direct impact on achieving customer success. Two things typically happen at this point. An epiphany occurs on the depth of the interdependency between the rest of the business plan and customer success. Or management focuses on putting customer success in a box. Most companies opt for the latter because addressing the interdependency is seen as “opening Pandora’s box”. Their focus, incorrectly, is on finishing the plan instead of planning a path to assured success. The missed opportunity is on the road less traveled. Companies that invest the time to understand their current and future target customer groups’ lifetime ‘value’ expectations and match them to the organization’s strengths, weaknesses, market opportunities, threats and resources consistently develop more achievable strategic plans in good times as well as bad. Best-in-class companies do this matching across a number of internal and external scenarios to identify where the ‘rubber meets the road’ in achieving true customer and company success. Not only are their plans more consistently achieved, their companies also have significantly greater internal alignment, are more agile and innovative. The most common push-back to this approach that I hear is “it takes too long”, “we know our customers”, “our business strategy is not dictated by customers”, and/or “we don’t have time to overhaul our strategy”. None of these are really true; they are just excuses for not getting outside of one’s comfort zone and seeing the many shades of future reality. Leaders looking to ground their business strategy in customer success can start by: 1. Journey map the lifecycle of their highest value current and target customer groups. 2. Map interactions, their associated emotional and value states. 3. Conduct a detailed SWOT, emerging trends and competitive chessboard analysis. 4. Co-create with highest value customer groups a higher value-producing, distinctive customer lifecycle experience. 5. Evaluate current 12 to 36-month macro-strategy against #3 and #4, identifying areas of change. 6. Define the target end-state and timeframe for change area. These six steps will give you a solid start down the path of customer-centric business strategy. The key is to not boil the ocean, be too attached to sacred cows, and limit future opportunities by screening them based on today’s resources and market states. The holistic focus enables employees to understand the key interaction/process activities, emotion/culture intersections, and internal/external variables that drive preference, engagement and market share growth. Embracing the interdependency of customer success turns the platitude of customer delight into a tangible, achievable reality.
Customer experience has undergone a dramatic transformation over the past four years. Beginning as a new software category promising to help companies delight, convert and retain customers to where it is today, a business discipline, focused on aligning culture, strategy and processes to audiences’ lifecycle expectations. The road has been a bumpy one. The software category matured, fragmented and is consolidating as vendors and users, alike, tried to achieve the promised ROI – revenue growth from customer loyalty. Companies ran into multiple roadblocks mostly from employee fear, resistance to change, lack of internal competences and mistaken belief that software could bypass change management. Vendors, on the other hand, introduced a steady stream of features at a cadence that outpaced the capabilities and understanding of the most sophisticated users. An impasse has been reached. Frustrated users are taking a step back to evaluate why delivering the experience customers valued was so hard. Robert Tas, chief marketing officer of Pegasystems, a strategic applications vendor for marketing, sales, service, and operations, summed up five key barriers as:
- Companies structured around products instead of customers,
- Treating digital experience as a ‘check the box’ and not understanding what it means,
- Line of business-centric funding model that doesn’t benefit anyone else,
- Disconnect between employee expectations with them being treated as consumers and how they ultimately treat customers , and
- Not closing customer feedback loops and being transparent.
- People – empower front-line employees to do what is right to meet customer expectations. Fanous takes a different approach to hiring customer success managers. He hires seasoned practitioners, storage and system administrators, that have scored high on empathy skills. These employees have the maturity and experience to make the right decisions and serve as advisors to customers that add value to every interaction.
- Engineering – is required to ‘man’ the customer support center and answer support calls. Having the employees who design the product address customer complaints, questions and concerns results in better designed products that can be produced with fewer defects. In short, they take more care in doing their job because they are directly accountable to customers.
- Automation – to remove complexity from the user interface of products. Fanous found that the ease of product use directly correlates to repeat purchases and higher NPS scores. Ease of use, however, cannot come at the expense of missing product features, value add or differentiation.
The operative phrase is to “be involved in”. Increasingly, that is taking the form of customer co-creation. Prahalad and Ramaswamy defined co-creation as “the joint creation of value by the company and the customer; allowing the customer to co-construct the service experience to suit their context.” In my work, I define co-creation as the “purposeful action of partnering with strategic customers, partners or employees to ideate, problem solve, improve performance, or create a new product, service or business.” The concept has been around since 2000 yet has taken over a decade to catch on. Co-creation is not a customer advisory board on steroids or a clever sales and marketing tactic. It’s about jointly creating value , for the vendor as well as customers. To most managers, the thought of openly and transparently engaging customers, sharing detailed data is downright scary. The rewards, however, should cause CEOs to pause and reconsider. Let’s look at how two very different companies are using co-creation to drive value. The first is DHL the global market leader in logistics, part of the world’s largest mail and logistics services company, Deutsche Post ("DP") DHL. You may know them by their yellow and red delivery trucks. Privatized 15 years ago, today the DP DHL Group employs some 490,000 employees around the world producing $57 Billion in annual revenue. You might think a company this size would struggle being agile, let alone set standards in innovation and customer service. What DHL discovered was its customers wanted help in rethinking their supply chains to improve business performance. “That is quite a challenge, as we are typically dealing with very complex global supply chains” shared Bill Meahl, Chief Commercial Officer at DHL, “one which fueled us to embark on a journey of customer co-creation.” Embarking on this path meant more than just process and service changes, it meant picking the right customers to work with and deepening employee capabilities to understand how they impact customer business, customer perception and sustainability. A critical success factor was teaching employees how to “walk a mile in customer shoes so they intimately understand the dynamics of working with customers ,” according to Meahl. That competence is critical to developing a range of viable recommendations and new solutions that not only meet customer goals but demonstrate the value of DHL as a business partner. DHL understands that innovation must be customer focused. One way they ensure this happens is by bringing customers and their DHL service partners together in specially built Germany- and Singapore-based innovation centers for workshops to share best practices and create value. The purpose is to “conduct intensive hands-on workshops that explore and understand technology, economic, socio-political and culture trends to develop new ways to manage supply chains and logistics.” Sessions sometimes start with a look at what business could look like in 2050. Employing a proven methodology of scenario planning, DHL’s approach takes customers on a time journey which showcases a four-quadrant view of what the world could look like in 2050. The quadrants are radically different from each other; one quadrant is always a doomsday scenario and its opposite is a perfect world. The power of scenario planning is that it breaks mindset. The joint team then ‘walks’ backwards from 2050 to 2020 which provides a platform for specific trend lines, core competencies, and problems that need to be solved. From there, the joint team brainstorms solutions and approaches. Some of the innovations that have been launched as a result of the over 6,000 engagements conducted in DHL’s innovation centers and other customer co-creation formats include:
- Parcelcopter, a drone delivery research project, which may in future enable companies to be more responsive, agile and cost-efficient.
- “Smart glasses” and augmented reality, co-created with DHL customer Ricoh, to improve inventory and warehouse picking efficiency by 25 percent.
- “Maintenance on demand” (MoDe), co-created with DHL’s customer Volvo Trucks and other partners, uses sensors that automatically send back vehicle and component performance to identify when and where truck maintenance will be required.
- IoT Report, an industry report, authored by DHL and Cisco, that identified and evaluated the implications and use cases of the Internet of Things in logistics.
- Robotics applications that are currently being jointly tested with customers. These range from self-driving trolleys that support pickers to do their work in a less strainful way to collaborative robots that support workers for value-added services such as co-packing.