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 Chuck SchaefferIs CXM About to Replace CRM?
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CXM is the Next Category in the CRM Evolution

Several of the major CRM software publishers are individually and collectively changing their CRM messaging to either append or replace what we've now been calling Customer Relationship Management since about 1992. The new term that's now in vogue is Customer Experience Management—and neither the term nor its acronym (CEM, CXM or just CX) are anywhere near a shared understanding or consensus definition; but such is always the case with innovation and new business strategies.

Whether CXM is the next wave of marketing hyperbole or delivers new strategic value depends upon your perspective and how well the (formerly) CRM software vendors articulate the concept and its value. In this post, I'm going to share a strategic understanding of CXM which is not tied to any particular software vendor and then deliver follow-on posts (beginning with Oracle CX) exploring the varying definitions and use cases of CXM according to the major software vendors that are pushing this message and claiming to deliver exponential value.

Lets Start at the Beginning

To begin with some perspective, and give us a starting point to compare and contrast, lets quickly revisit what I consider generally shared definitions of both CRM and CXM.

CRM: Customer Relationship Management is a business strategy directed to understand, anticipate and respond to the needs of an enterprise's current and potential customers in order to grow the relationship value (again, I say generally accepted understanding as after 20 years of using the term the industry still has many variations).

CXM: Customer Experience Management includes both the individual experience in a single transaction as well as the sum of all experiences across all touch points and channels between a customer and a supplier over the duration of their relationship (this is a young definition and likely to be matured in short order with the new category focus).

So Why The New Nomenclature?

Two factors are contributing to the drive for CXM: The shift in control from seller to buyer and the need to achieve a sustainable competitive advantage. Both of these factors seek to apply superior customer service in new ways and therefore require new thinking (along with strategy, process and technology) to achieve what has thus far been an elusive objective.

Now that there's no denying that the social communication revolution has shifted the balance of power from suppliers to customers, business strategies and information systems implemented with "control" in mind are no longer needed.

Lets face it, CRM has a troubled history. In my podcast discussion last week with Forrester analyst Kate Leggett, she noted the issues quite succinctly—technology without accompanying strategy, silo'd software use, troubling implementation failure rates, the list goes on.

The reality is that for far too many CRM adopters, CRM has been the tool used to exercise governance, or oftentimes outright control, over customer facing staff with little regard to engaging, collaborating or satisfying customers—or designing processes and outcomes from the customers' perspective (i.e. from the outside-in instead of the inside-out). Instead, CRM software has been the application to give line of business managers visibility into staff performance—to see how many sales activities were performed yesterday, how many pipeline accounts haven't been called this week and why the forecast fell short again. In the contact center, CRM systems go so far as to employ prescriptive call scripts and decision trees so agents don't have to think or exercise judgment (and that's believed to be a good thing).

In fairness, leveraging CRM systems to measure performance and link system automation with organizational objectives is a much needed capability, but off the mark when the overarching objective of a customer-centric business strategy is nowhere to be found, and insufficient to deliver consistently superior customer service with every customer interaction.

So What Does CXM Bring to the Party?

CRM software has been successful as the customer system of record—in capturing, storing, processing and sharing data for staff management, process efficiency and business analysis purposes. But of course these goals provide little direct benefit for customers.

CXM moves the focus from using software tools to control customers and the staff that serve them, to applying technology to support a holistic customer-centric strategy and deliver relevant, personal and superior customer service in order to achieve competitive advantage. CXM technology moves the focus from data management to applying customer information at exactly the time and place it can be leveraged to better deliver consistent customer experiences that delight customers. CXM is more qualitative than quantitative with an underlying capability to making CRM information actionable and a much stronger goal toward customer outcomes.

Where CRM systems have struggled to make customer data actionable at the point and time where it can applied to benefit a customer interaction, CXM completes the information journey for a positive customer experience and measurable benefit.

In several ways, CXM is intended to deliver the last mile of CRM—the intersection of customer knowledge with customer fulfillment—and the capability to deliver that customer information across channels and devices at the exact time and location where it can be leveraged to positively affect a customer experience.

Why CX Now?

While the benefits of Customer Experience programs include repeat business, increased share of wallet, customer loyalty, customer advocacy and other measurable paybacks, the reality is that implementing CX strategies is not just a function of profit motives, but a matter of survival in increasingly competitive markets. To survive, companies must center the customer in front of all else and design products, services, fulfillment and support from the customer perspective.

CXM has made its way to the top of the CEO agenda. An IBM Global CEO Study conducted in late 2010 cited "getting closer to customers" as the #1 priority for CEOs in the next 5 years. A 2011 Bloomberg Businessweek survey discovered that "delivering a great customer experience" has become the new imperative—with 80 percent of the companies polled rating customer experience as a top strategic objective. While the concept of CXM is over a decade old, the dual impact of the global economic slowdown and the rise of social customers have collectively accelerated the strategic need for CX from the top of the organization.

Companies have also recognized business process efficiencies only get you so far. Further, mediocre, inconsistent and undifferentiated customer service is an invitation for your customers to shop their purchases with your competitors. Customer expectations are rising and it is increasingly easier for customers to switch suppliers. Customer experience objectives and programs address the business problem of commoditization by delivering a consistent and differentiated customer experience which may be the last sustainable competitive advantage.

What About My CRM Investment?

The core functions typically performed by CRM software systems aren't going away.

Customer management systems—whether called CRM or by another name—are essential as the customer system of record. These applications are needed to collect data from every source that creates customer data, segment that data into manageable data sets, make sense of the data (discover correlations, patterns, insight and opportunities) and make it available for delivery to the resource that can consume it or use it to benefit a customer interaction or other organizational goal.

The maturation cycle of advancing from customer data to customer interaction is getting more complex. Tracking customer demographics and transactional history is the starting point. Recording customer preferences, adding unstructured and social data, supporting mobile and other channels, and linking all this data so that it is injected to the right business process at just the right time to benefit customer interactions dramatically increases the complexity. In the battle for customers and the public skewing for poor customer service, CRM systems are even more essential to bring data management, process automation and business intelligence together in a way that manages this complexity and aids the customer data to customer interaction cycle.

CRM software will continue to be the workhorse that captures, churns and delivers what is needed to support CX initiatives—and further integrate or compliment new, purpose-built CX applications which focus on collaboration, communication, personalization and specific customer interaction outcomes.

CXM is less about a new software category to replace CRM and more about solving a decades old CRM software limitation of delivering the right data at the right place and completing the last mile of the customer interaction.

What's Next for CX?

CXM is still a nascent topic certain to be mislabeled, misused and even hijacked before a common understanding is reached. And such variation will initially cause many business leaders to wonder if the whole concept is hyperbole or a potential game changer.

Make no mistake, the rewards are clear, measurable and sustainable. In a Forrester study titled The Customer Experience Quality Framework, survey respondents shared that the quality of the customer experience impacts loyalty (81%), advocacy (81%) and increased spending (73%).

Companies that succeed in delivering consistently positive customer experiences will enjoy increased referrals, loyalty, advocacy, customer share, repeat business, top line revenues and vocal advocates promoting the brand in online and offline channels. Companies that sit the sidelines will become the source for their forward looking competitors to secure net new market share. End

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Comments (4) — Comments for this page are closed —

Guest Steve McKnight
  I've heard some pundits suggest that the transition from CRM to CXM is comparable to business efficiency versus customer effectiveness. But I think such an analogy is overly simplistic and far too broad. While its hard to say exactly how CRM or other software should support CX, I’m sure you are right when you suggest this strategy will be stretched by many vendors in many different directions. In fact I’m sure some CRM software vendors will wrap themselves in the CX banner (creating innovation by name change) which is unfortunate as there really is a big opportunity here.

Guest John Paul Narowski
 

Great article Chuck, thanks for starting this conversation. I agree that companies should focus on the customer experience rather than "managing" the needs of customers. Each touchpoint offers an opportunity to improve the customer experience - and businesses need to start paying attention to the overall customer experience across all of these touchpoints.

I like your point that traditional CRM functions aren't going away - far from it. And I agree that there are new features that can help businesses improve the customer experience. But creating a great customer experience is more than just software - it's the approach, the mentality, and the culture of the business that makes or breaks the customer experience (assuming the business has decent software, employees and organization, of course.)

The customer service environment is changing – today’s customers are more informed and more demanding. Customer service is no longer an afterthought – it’s a competitive tool that’s intimately connected with marketing and sales teams. Customers are forward thinking – they take service into account when making big purchases, and they will choose the product backed up by better service when they can. They are willing to spend a bit more with a company they can trust. Looking at things from the customers' perspective, and building a great relationship by making each experience a positive one, are becoming crucial aspects of business. They help build trust. Customer service is no longer just a department - it's a philosophy, and providing a positive customer experience needs to be the focus of every employee. John-Paul Narowski, Founder - karmaCRM, www.karmacrm.com.


Guest Gary Newman
  I’m a new CMO and have been charged by the CEO to implement a CX program. Any advice in how to get started?
  Chuck Chuck Schaeffer
   

Sure. First, make sure the CX program is not a ‘Marketing’ program. As a CMO you may be in good position to demonstrate leadership and contribute to a cross-departmental team. But CX is far more than just marketing and every department that impacts touch points along the customer journey must be an integral member of the program.

Second, find your initial baseline by understanding what customers think of the customer experience they receive from your company. Forrester VP and principal analyst, Kerry Bodine, suggests that marketers can determine customers’ perceptions by asking three questions: Is the company meeting the customers needs? Is the company easy to interact with? And is interacting with the company enjoyable? The answers to these questions will reveal improvement areas that can then be prioritized for resolution.

Third, when implementing CX programs make sure to measure the right metrics. Marketers can find a nearly limitless number of customer activities to measure, but in reality, finding just the few that matter most is best advised. NPS (Net Promoter Score) is a good starting point for measuring customer satisfaction. Aligning NPS to CLV (Customer Lifetime Value) is important in demonstrating that NPS is more than just a feel-good score. Also consider including less subjective criteria such as referral value to CLV. It’s often a good idea to include demographic along with transactional metrics (customer share, customer tenure, purchase frequency, customer profitability) to understand customer value in a way that can then be used to grow more successful CX and customer relationships with targeted efforts.

 

 

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CX is less about a new software category to replace CRM and more about solving a decades old CRM software limitation of delivering the right data at the right place and completing the last mile of the customer interaction.

 

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