The "CMO Agenda 2011" .... Not Social Media, but rather Total Customer Experience being top of mind!

[Former Member]

Marketing is in the midst of a fundamental shift ... and that's no coincidence: While the concept of CRM (Customer Relationship Management) began to make waves in the sales and service areas in the 1990s, it is now increasingly making inroads into marketing as well. In these times of economic turbulence, the field of marketing must increasingly confront questions that have been discussed in other fields for some time. The economic crisis has given additional impetus to the discussion. So, dealing with the “social media empowered customer”, what will be top of the agenda for the Chief Marketing Officer (CMO) in 2011? In order to distil the CMO Agenda 2011, we have personally interviewed 40 CMOs with a combined marketing spending of more than 3.5 bn Euros.

Surprisingly, first of all CMOs personal assessment of the quality and performance of their companies' marketing reveals a sobering picture: Half of all CMOs (51%) sees a strong need for corrective action and gives a maximum grade of “Three (satisfactory)” or “Four (unsatisfactory).” The average grade given by all surveyed CMOs comes to 2.6 – essentially a high “Three” on a scale of “One (very good)” to “Five (inadequate)”. In a nutshell and pretty unexpected, the CMOs are not too enthusiastic about their own performance.

CMOs' dissatisfaction with the quality and performance in their departments is less a reflection of perceived conceptual deficits or uncertainties in the face of newer challenges such as the advent of “social media,” but rather results from the ongoing lack of sufficient transparency with regard to “traditional” issues such as how to represent marketing ROI in their companies. This assessment is consistent with the views expressed by the CEOs/managing directors of large companies in a parallel survey on the same subject : The CMOs' superiors likewise focus their criticism on marketing departments' insufficient capacity to demonstrate marketing ROI and a positive contribution to the company's success. The cause of this dissatisfaction can generally be found at the outset of the marketing process chain: There is a lack of sufficiently differentiated and structured marketing planning that is not only coordinated with the company's business and sales strategy, but which further operationalizes the strategy for every measure right down to the level of individual key performance indicators (KPIs). The CMO is charged with the difficult balancing act of closing the conceptual (and skills) gaps in the newer areas such as “social media/online marketing” with all possible vigor while at the same time continuing to develop and improve fundamental marketing work with regard to differentiated planning with quantifiable indicators (KPIs).

Perhaps surprisingly, the rather overarching topic “Total Customer Experience management/integrated marketing” (TCE) is the most frequently mentioned issue for the agenda for the next year. More than one-third of all CMOs report an intention to give special attention to this issue in 2011. The interviews reveal the seemingly counterintuitive recognition that focusing on “integrated marketing” –– rather than homing in on individual issues such as marketing planning, ROI or social media –– is the best way to initiate the requisite changes in marketing. As Dr. Rainer Hillebrand, Chairman Sales, Marketing and E-Commerce, Otto Group indicates, “A thoroughgoing networking of all customer touch points, including all relevant information on processes etc., is one of the objectives we've set. It's the only way to achieve a sustainable customer orientation within the organization.”

The CMOs are unanimous in their view that while individual issues need to be operationalized and dealt with in dedicated projects, those projects must in turn be directed towards achieving an overarching objective. The idea, as applicable for a shipping company as for a high-tech company, can be summed up thus: “ ... what good is excellence in marketing communication if the impression and service provided by service employees is qualitatively and quantitatively diametrically opposed to the content and values of the marketing department ...?”

The motivation for the increasing focus on the customer in the context of “total customer experience management” derives from the recognition that dissatisfied customers are generally lost forever (only roughly 4% complain; between 75-90% are gone for good) and can have considerable negative aftereffects on the respective market. Each dissatisfied customer tells up to 9 additional customers about the negative experiences with products and services. Retaining satisfied customers, on the other hand, requires far less expenditure than customer acquisition (roughly 1/6 of the acquisition costs for new customers) and opens up the potential for additional sales (known as cross-selling). Saying this, Lothar Korn, Head of Marketing Communications, Audi AG states that “Total customer experience management is the key to everything … it's less costly to keep existing customers than acquire new ones, plain and simple.”.

The “social media” question is clearly regarded as being a sub-issue of the overarching challenge of establishing integrated customer management rather than as a free-standing challenge in the online area. At the same time, CMOs see a need to reinforce total customer experience management across all customer interactions and marketing communication with long-term loyalty programs. They regard the traditional loyalty program-industries such as the transportation industry (particularly airlines) as a role model. This approach of augmenting total customer experience management with loyalty programs is set to make inroads into the retail sector, in particular, in 2011.

Individual disciplines such as brand management or dialog marketing are regarded by CMOs more as “long-term, ingrained day-to-day business.” Even where there is a strong need for improvement in the individual disciplines, those challenges are still viewed as marginal compared to establishing a comprehensive TCE approach. There are certainly many reasons for this; however, in most cases they are due to 3 particular challenges:

• Other organizational units involved: Total customer experience management extends far beyond the functional limits of marketing. The tourism industry is a vivid example: While marketing usually focuses only on marketing communication, customers' perceptions are determined by all customer interactions related to the use of products and services, for example the competent advice from the ticket seller or the pleasant and polite manner of the ticket inspector or cabin crew. However, from an organizational perspective, these areas belong to different departments outside of marketing, such as passenger transport or related service areas. The situation in the automotive industry is similar: While marketing usually proclaims sovereignty over marketing communication, product management or development are usually responsible for the actual product. Similarly, all after-sales services are also located outside of marketing.
• Change management: Project experience has shown that aside from inadequate processes and systems, the biggest hurdles for implementing systematic TCE are in changing employee behavior. Independent of the size of the organization, resistance can arise due to
  • Variance with existing organizational norms and traditions
  • Interdependence with subsystems that are difficult to understand or delimit
  • Privileges, taboos or resistance to external ideas (“not invented here”)

Resistance is particularly strong among people who rely primarily on their own experience, who only believe in one way of doing things, and who have an extremely low tolerance for risk. Resistance is strongest in groups, on the other hand, when the group members have a strong group identity or feelings of superiority. The result: Such a process of change aimed at reorienting all customer interfaces requires not only significant effort, but also tends to take several years to reach fruition.

• Insufficient measurability: The success of a high-quality and brand-consistent orchestration of all customer interactions is only susceptible to direct tracking with indicators in the rarest of cases, and even then it is all but impossible to quantify the effects in terms of sales.
• Insufficiently integrated processes and systems: Insufficiently integrated processes and supporting IT systems undermine the very notion of high-quality customer interaction. Call-center agents, for instance, generally do not know whether the customer has already been contacted by a partner in the sales organization (e.g. an independent dealer in car or mobile phone sales). Even after more than 10 years of Internet experience, customer queries may be received by the manufacturer via the Web and yet have to be transmitted to a local sales partner after a series of manual steps to bridge integration gaps. While this may be viewed as an inconvenient if acceptable procedure where customer volumes are low, it is all but untenable in the high-volume B2C environment.
• Insufficient data quality: While customer orientation has been a frequent topic of discussion in recent years, most companies have barely touched on the subject of how to systematically gather and utilize customer data as a foundation for comprehensive TCE. They do not use the customer data they gather to identify their most important customers (like new customers and key accounts), nor do they aggregate different information sources from different functional areas in the company (like technical support hotlines, the order department, all the way to online behavior). Studies and projects have shown that the numerous theoretical and practical discussions surrounding the need for systematic management and use of customer data as well as related procedures such as data mining, predictive analysis (i.e. predicting future customer behavior) or microgeographic or use-based segmentation have as yet failed to become reality for most companies. Data collected passively by keeping records of all sales interactions and customer data collected actively (using direct questions) are hardly ever used systematically or in an integrated way. The call for excellent data quality goes unheard in most cases. The causes are manifold:
  • Distribution of essential customer data to different data processing systems and several functional areas has the effect of limiting the “unified view of the customer” postulated for CRM to the customer data in a single area
  • Customer contacts and interactions are often regarded as “proprietary” knowledge by sales staff and tend to be maintained among an agent's personal contacts (say, in Outlook) rather than in an accessible CRM system which would make this (private) customer knowledge replicable and transparent
  • Maintenance of customer data is not prioritized due to the associated effort in the midst of daily activities
  • Customer data is not immediately available in the required granularity
  • Customer data management is generally regarded as a one-off process and cost at the expense of continuous, long-term data maintenance in a regular process

CMOs and board members agree that their engagement with total customer experience management is less about further elaborating the subject in conceptual terms than implementing it efficiently. Indeed, even companies (e.g. insurance companies) that have been pushing the issue for some time already concede that they still “have a long way to go.” The challenges described above mean that implementation generally takes years, usually proceeds in small, intermediate steps and – as a rule – takes longer than the average term of a marketing director, which at just over two years is an extraordinarily tight timeframe for changes of this order of magnitude.

The total customer experience is therefore increasingly viewed as the measuring stick for successfully integrated marketing – integrated not only across all communication channels, but the entire customer experience with the brand, its products and services. Taking the argument to its logical conclusion, this should affect the overall leadership of the company, particularly if responsibility for total customer experience management is distributed across multiple areas of the company. In the discussions and workshops on possible scenarios for directed organizational implementation, three different scenarios emerge:

• Marketing has the “Total Customer Experience Lead”: In these companies, the marketing department or CMO has the recognized lead role, sometimes accompanied by titles such as “Customer Experience Officer.”
• “Total Customer Experience Lead“ is in the hands of the company leadership: In these companies, this function is embodied by top management and is attributed a far greater significance than mere marketing communication and sales figures. The interviews and projects demonstrate that locating the issue above the marketing rung correlates positively with the satisfaction with the respective initiatives. The reason: Other parts of the company are measured by the “total customer experience” as well.
• No recognized “Total Customer Experience Lead”: In this rather inauspicious scenario, marketing does generally claim the leadership role for the “total customer experience,” but is de facto unable a.) to place the issue as a long-term board priority and b.) win over other departments for coordinated prioritization and measure planning aimed at cross-departmental optimization.

On the whole, CMOs rate the performance of their companies in terms of the total customer experience negatively: 58% of respondents gave their companies a “Three” (“Satisfactory”) or worse, down to “Failing” grades. Thus there is significantly more room for improvement in regard to the overall company view than in regard to the marketing function in itself.

In discussions on CMOs perceptions of their own TCE performance, there emerges an unexpectedly large discrepancy between the self-assessments of conceptual aspects on the one hand and operational implementation on the other. On average, the difference between assessments for conceptualization and operational implementation ranged from 1-2 grades. Thus from the CMOs' point of view, the problem is not a lack of understanding of the need to implement the “total customer experience” approach or how to do so; rather, the primary challenge is in operationalizing it and pushing through implementation across all relevant areas of the company on an integrated marketing platform.

Further interesting readings:

• Strauss, R.E.: Marketing Planning by Design. Systematic Planning for Successful Marketing Strategy, London: Wiley & Sons, 2008.
  http://eu.wiley.com/WileyCDA/WileyTitle/productCd-0470721677.html
• Strauss, R.E.; Schuricht, U. S.: The Future CMO – 8 Building Blocks for Success, Thought Leadership Paper, CMO Community, March 2010.
• Strauss, R. E.; Heydecke, J.: The CMO Agenda 2011, Thought Leadership Paper, CMO Community, November 2010.