A Framework for Customer Experience Management


By
V. Kalyani
P. Praveen Babu
First Year MBA
School of Management
Sri Krishna College of Engineering and Technology
Kuniamuthur PO, Coimbatore–8
 


Introduction

The key goal of marketing is to develop deep, enduring relationships with all people or organisations that could directly or indirectly affect the success of the firm's marketing activities. Thus relationship marketing paves the way for attaining this goal.

Relationship marketing involves cultivating the right kind of relationship with the right constituent group.


It will not be apt under this present scenario to just concentrate on customer relationship management. In addition to that customer experience management must be looked upon heavily.

Customer experience management (CEM) is "the process of strategically managing a customer's entire experience with a product or a company ". CEM is a methodology that tries to overcome the gap between the company and the customer.

Importance of CEM:

According to Schmitt, a brand creates five different types of experiences:

* Sense
* Feel
* Think
* Act
* Relate

 In each case, Schmitt distinguishes between hard-wired and acquired experiential response levels. He maintains that marketers can provide experiences for customers through a set of experience providers:

1. Communication: Advertising, public relations, annual reports and newsletters.
2. Visual/verbal identity: Names, logos and transportation vehicles.
3. Product presence: Product design, packaging and point-of-sale displays.
4. Co-branding: Event marketing and sponsorships, alliances and partnerships, licensing and product placement in movies or televisions.
5. Environment: Retail and public spaces, trade boots, corporate buildings, office interiors and factories.
6. Web sites and electronic media: Corporate sites, product or service sites, CD-ROM's, automated e-mails, online advertising and intranets.
7. People: Sales people, customer service representatives, technical support or report providers, company's spokepersons and CEO and other executives.

CEM recognizes, as does all of marketing since the early 1970s, that customers are a company's most valuable asset. What makes CEM different from traditional marketing is that it claims that marketing theory has seldom been implemented adequately.

CEM's critique of traditional marketing

The development of customer experience management originally started with a critique of three existing marketing concepts. It concluded that the following three concepts do not go far enough:

  • Marketing concept - Since the 1970s there has been a gradual shift from a product-, technology-, and sales-focused orientation towards a customer- and market-oriented approach by determining the wants and needs of customers and satisfying them more efficiently or effectively as compared to competitors. However, the approach is still mostly functional, with similarities and differences between competitors being defined mostly by product features and customer benefits. In addition, the customer is perceived as being rational, which is in most cases not the case, as e.g. Kahneman and Tversky's Prospect theory has proven. Also, it is asserted that market research is mostly analytical leaving little room for qualitative assessments of customer relationhships towards products, services, or brands. It is claimed (by Shultz) that traditional marketing, in practice, takes an inside-out approach (starting with internal variables like production capabilities and available capital then moving to external variables like customer needs), rather than taking an outside-in approach as marketing theory requires.
  • Customer relationship management is claimed to be deficient because it primarily consists of database and software programs used in call centers and thus, focuses too much on quantitative data. By doing this, it is led by transactions rather than a desire to build lasting relationships with customers.
  • Customer satisfaction is an outcome-oriented attitude deriving from customers who compare the performance or value of the product with their expectations of it. It is claimed that the customer satisfaction approach depends too heavily on outcome oriented measures like satisfaction and too superficially on direct experiential measures. A customer is said to be satisfied when a product's performance is above the cutomer's expectations. Thus, traditional customer satisfaction techniques are deficient if they don't help firms to understand and manage customers' experiences, experiences that lead to the following equation: good experience = satisfaction.
  • CEM helps to achieve a truly customer focused management concept by strategically managing the customer's experience with a brand.

The CEM Technique

CEM is a methodology that tries to overcome the gap between theory and practice by reformulating basic marketing principles. The result is that CEM stresses four aspects of marketing management :

  • CEM focuses on all sorts of customer-related issues
  • CEM combines the analytical and the creative
  • CEM considers both, strategy and implementation
  • CEM operates internally and externally

Although all marketing management and strategic management does all of these, CEM supporters claim that they have a methodology that will yield better results. Being convinced that the marketing concept is too product-centered, Customer relationship management too focused on quantitative data, and customer satisfaction too functional, CEM looks for another perspective on the relationship of a consumer with a product or service. And what's key? The experience linked to it is the key.

This enables companies to strategically manage a customer's experience with a brand and by doing so, achieve a truly customer focused management concept. To accomplish this, a framework is required based on clearly defined company objectives. So far, the following five steps have been suggested in the literature that should help managers understand and manage the "customer experience":

Step 1: Analyzing the Experiential world of the customer

  • analyze sociocultural context of the customer (needs/wants/lifestyle)
  • analyze business concept (requirements/solutions)

Step 2: Building the Experiential platform

  • connection between strategy and implementation
  • specifies the value that the customer can expect from the product (EVP = experiential value promise)

Whereas steps 1 (Analysis) and 2 (Strategy) form the basis for CEM, steps 3, 4, and 5 are focusing on Implementation.

Step 3: Designing the Brand experience

  • experiential features, product aesthetics, "look and feel", e.g. logos

Step 4: Structuring the Customer interface

  • all sorts of dynamic exchanges and contract points with customers
  • intangible elements (i.e. value, attitude, behaviour)

Step 5: Engaging in Continuous Experiential innovation

  • anything that improves end customers' personal lives and business customers' working lives

And finally, to bring all pieces together, a holistic approach is required that provides a linkage between the different steps and connects them with the organization:

    * CEM integration
    * CEM organization

Examples of CEM

* "Best New Airline of the Year Award 2005" – Kingfisher airlines

Given by Centre for Asia Pacific Aviation for its significant innovation and outstanding customer experience.

For the first time in the Indian skies, Kingfisher Airlines offers world-class in-flight entertainment with personal video screens for every seat. There's a wide selection of 5 video channels and 10 audio channels available on- board. Also on offer are extra-wide seats and spacious legroom, delicious gourmet meals, international-class cabin crew and a whole host of comforts and delights. Kingfisher Airlines also facilitates doorstep delivery of tickets on guest request.

* Blue Dart Express Limited, South Asia's largest integrated air express, courier and logistics company

Their focus was on providing customers with quality service and an enhanced customer experience, they continued to upgrade and expand their infrastructure, by adding new facilities in Lucknow, Mumbai, Pune, Ahmedabad, Meerut and Jaipur, and moving to a new, state-of-the- art warehouse facility in Delhi

* Pizza hut

It recognises frequent callers and the context of their call enabling the customer to be routed to the agent who can best fulfil their requirements, whether its a new order, changes to an existing order or a status inquiry on an existing order.

Pizza Hut operators can access up-to-date information on its outlets in the catchment area, enabling them to select the Pizza Hut store that can fulfil the customer order quickest, thereby meeting its commitment to deliver hot pizza quickly.

* Hindustan Lever – an IT project

The new service was intended to be friendly and personal. For this, an innovative communication route was adopted. The entire service was branded as Infra Jini to give users an idea of the friendly and personal nature of the service." This little "infrastructure genie" gave the service a personal touch and was popularized by means of posters and mailers. The Infra Jini is also present on the desktops as a clickable icon, which took the user to the website from where he can log a call online.

* Taj group of hotels

Providing the 'frequent customer' with much higher luxury facilities at no extra cost.

* Crossword bookstall

This bookstall allows its customers to go through any book without any compulsion to purchase the book.

* Airtel – Vpuja 51

Airtel customers in Mumbai are given a special feature along with their connection which helps them to perform the famous Vinayagar pooja by simply sending an sms.

The Experience Economy

The Experience Economy is an advanced service economy which has begun to sell "mass customization" services that are similar to theatre, using underlying goods and services as props.

Businesses must orchestrate memorable events for their customers, they argue, and that memory itself becomes the product - the "experience". More advanced experience businesses can begin charging for the value of the "transformation" that an experience offers, e.g. as education offerings might do if they were able to participate in the value that is created by the educated individual. This, they argue, is a natural progression in the value added by the business over and above its inputs.

Five ways of marketing a product or service

A core argument is that because of technology, increasing competition, and the increasing expectations of consumers, services today are starting to look like commodities. Products can be placed on a continum from undifferentiated (referred to as commodities) to highly differentiated. Just as service markets build on goods markets which in turn build on commodity markets, so transformation and experience markets build on these newly commoditized services, e.g. Internet bandwidth, consulting help.

The classification for each stage in the evolution of products is:

  • If you charge for undifferentiated stuff, then you are in the commodity business.
  • If you charge for distinctive tangible things, then you are in the goods business.
  • If you charge for the activities you perform, then you are in the service business.
  • If you charge for the feeling customers have because of engaging you, then you are in the experience business.
  • If you charge for the benefit customers (or "guests") receive as a result of spending that time, you are in the transformation business.

Proceeding to the next stage more or less requires giving away products at the more commodified level. For instance, to charge for service, e.g. new car warranties, one must be prepared to give away new cars to replace 'lemons'. And, to charge for transformations, one must be prepared to risk there being no payment for the time you spend working with customers who don't "transform".

Pine and Gilmore draw on Walt Disney, AOL, Nordstrom, Starbucks, Saturn and IBM as examples.

Criticisms

Their thesis has been criticized as an example of an over-hyped business philosophy arising from or in the dotcom boom and a rising economy in the U.S. that was tolerant of high prices, inflated claims, and no limitations of supply - or investment. Detracters contrast it with other service economy theses such as Natural Capitalism, in which there is a clear focus on making measurably better use of scarce resources, usually considered to be the basis of economics. They claim service management should stress efficiency more than effectiveness.

CEM organization

Organizing for customer experience management includes three tasks:

  • Financial planning of CEM in terms of customers - CEM's ultimate goal is a fair and mutually beneficial long-term business relationship between a company and its customers. Customers will reward the company financially by doing business with it. The value of the customer to the firm, referred to as customer equity, will increase,and the company will grow and be profitable.
  • Allocation of organizational resources - Improving the customer experience, and thus increasing customer equity, requires internal resources. The company needs to ask what financial, structural, and personnel resources it needs to engage in CEM to deliver an ongoing desirable experience to customers. Resources must be allocated to the brand experience, the customer interface, and innovation.
  • Enhancement of the employee experience - The concept of experience applies also to the internal customers, the company's employees. What all employees, across all levels, get from an experience-oriented organization is a more rewarding employee experience that includes a new form of professional and personal development. Employees of such an organization live a more experiential and thus more satisfying and productive life. They are also more motivated and capable of delivering a great experience to customers.

Conclusion:

Customers are the company's only true profit centre.The main aim of the CEM is to maximise the customer value i.e. cultivating long term relationships with the customer.Nowadays the customers are becoming smarter and more price conscious and more demanding.So inorder to retain the satisfied and loyal customers,the company has to adapt the CEM to establish good relation with the customers and retain them.
 


V. Kalyani
P. Praveen Babu
First Year MBA
School of Management
Sri Krishna College of Engineering and Technology
Kuniamuthur PO, Coimbatore–8
 

Source : E-mail April 13, 2006

 

     

 

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