ROI for CEM? NWJ (No Way Jose)!

First things first: I don’t have a set formula for calculating a ROI on CEM.  Are you still with me?  Good… because what I do have is better than a formula – I have a method.  A method we used several times before, and it has proven to be successful.  So, if you are interested in knowing what you can get out of adopting CEM, read on.

First, want to make sure you did your homework.  In my previous post on experience management I told you to read the three notes I wrote on Customer Acquisition and Maintenance costs (just in case, #1, #2, and #3 here for your enjoyment).  I am going to assume that you did read them going forward.

The reason I am referring to those posts is that the formula you created for your customer acquisition and customer maintenance are going to be critical for your ROI calculation for CEM.  Two caveats: first, it is not possible to quantify quality – which means if you improve your experience you cannot put a number to it (as in saying “I am going to improve my experience by 10%”, or “I will improve my interactions with customers by 20%”).  Second, your mileage will vary – what works for one of you may not work for someone else.  That is why I have a method, not a formula for this.

Now, let’s focus on the ROI of from adopting a CEM strategy for your organization (you do remember this is an enterprise-wide implementation of a strategy – right?).  By creating better experiences you stand to get three benefits: reduced number of interactions (happy customers that have what they need don’t use customer service), shorter interactions (if they put off calling because they don’t like the experience, they may have 3-4 complex problems instead of a simple one), and reduced costs for training (the same systems that have better information for your customers will be used by your agents – greatly enhancing their powers with less training).

How do you decide which ones of these benefits apply to you?  Well, this is part where it depends.  If you are going to improve your customers’ experiences by offering more channels and more automation, you will have a reduced number of interactions (you may have some in other channels, but they would probably be cheaper).  If you are shortening the processing time, you are more likely to get easier and shorter interactions as well as fewer of them (customers won’t call just to “check” status).  If you are implementing more automation, better knowledge management or better access to back-office systems, then your training costs and interaction times should be greatly reduced.  You have to determine what makes sense for the actions you’d be taking.

Then, there is also the issue of increased revenues.  Depending on how you improve you experience, part of it may be offer management for specific situations, or the ability to increase revenue recognition, or even the ability to create new services and revenue sources.  All those should also be considered – and you are probably tired of me saying this – but they cannot be identified until you design your new experiences.

One final point on return on investment: if you make customer experience management part of your branding, as it should be, you will see that your customer acquisition costs (again, your calculation as detailed in my previous post) are going to be lower.  No, I am serious.  If your brand of excellent experiences becomes part of your overall brand, then customers will need less convincing to sign up, which will aid converting customers, thus reducing the cots of acquiring them.  And, if you think that I am saying that you cannot calculate your ROI until after you implement your experiences — no, I am not.  I am saying, your ROI will be based on assumptions and expectations of what that CEM implementation will be.

So, what do you think?  Does this method makes sense?  Let me know what you think..

Customer Service is Dead — Long Live Community Service!

I have had lots of requests lately dealing with social media, and how to make good use of this for Customer Service and CRM – even broadening the scope into the entire enterprise.  Of course, this is related to the “explosion” in twitter, plurk, Facebook, blogging and related tools.  But, is there something else there? is there value in implementing communities?

Yes, yes, yes, and yes.  This is the future of customer service.

I have been working with communities, back then called collaborative customer service or forums, for some eight years.  Of course, back then we had little to go on – some forums, communities were nascent at best –  and we could not see how it would work best.  I wrote about it as the intermediate step between Customer Interaction Hub and Secret Customer Service.  Got some interest, did some strategy work, small lab-based deployments but almost no one at that time even attempted to take on it fully.

Fast forward to today: communities are the rage – an integral part of Web 2.0. We still don’t have a clear path or a well defined purpose, but lots more is happening.  Now if the perfect time to get started – once the concept of community service becomes mainstream (12-18 months from now) it will move very, very fast for you to play catch up.  You can do this now and be prepared.

The benefits of implementing community service are astronomical.  There are plenty of case studies (Mercury Interactive, Cisco, Microsoft, and more) that have moved either part or their entire support structure to communities or forums and have increased their customer satisfaction, reduced their costs of customer maintenance – even found new ways to increase revenue!  All this by switching from traditional customer service models to community service.  So, how do you make the move?  Three things to get started:

1. Make sure your customers want it – Quite simple, there ain’t no community without people.  If your customers are not going to participate, nor do they feel they can get value out of it then the community will not succeed.  This is independent of topic, theme, method of operation or anything else.  Plenty of failures exist of communities launched without checking with customers first. Best way to start? start a community alongside the rest of your support structure.  Advertise it. Make it attractive. Populate it with good content. Commit time and resources to grow it.  then you start shifting people over slowly, finally make it the channel of choice.  Sounds simple; it is simple.

2. Make sure your company can support it – Despite claims to the contrary, the most successful examples of community service are those where the company commits time, resources, knowledge and participants to them.  If your experts are involved in the community, take interest in it, answer questions and receive feedback from customers the community will grow and become useful to you.  If no one from your company ever enters the community, and it builds with its own content and resources, if you seem not to care about the feedback and knowledge built in it, then it will be a failure.

3. Let it be – I know this is hard to understand, but you have to let the content be free.  Monitoring content, censoring entries, and controlling what goes where and how it flows through your community is not the way to go.  Think Wikipedia and self-regulating content.  It is likely that you will have to do some policing to get it started, but go lightly and err on the side of freedom.  Once the community is up and running, make sure you use reputation tools built into them so the people that matter the most (engineers and outside experts as an example) can be recognized.  Communities center around self-elected leaders and they are the ones that will control the content and quality of the community. Feel free to court them – but try not to control them.

Final word of advice.  If you read my blog on customer experience management you know that I will advise you to integrate your community into your CEM strategy.  Yet, I will also advice you to make sure that you treat communities as the most important link between you and your customers since there is nothing that can replace the direct link you can have with them – and the free flow of information both ways.

Are you working with communities? How is it going?  Do you see yoursefl replacing customer service with community service?

Welcome to the Real World, Neo

Yeah, yeah, yeah.  I’ll admit it – I love”The Matrix” (not the sequels as much as the original).  It can be used in so many ways to explain technologies and trends.  I am not talking about the aesthetics of “bullet time”, nor whether it could possibly exist.  I am talking about the actual world where the movie takes place.  Sure, there are plenty other metaphors for life as well, but the one that interests me the most is how that alternate universe explains so well where we are going today with our technologies.

Let’s say that Web 1.0 was about the infrastructure.  We put together the servers, we built the connections, we laid the “pipes”, and we created an amazing infrastructure to connect virtually everyone in this world to everyone else.  We, in Thomas L Friedman’s words, flattened the world. Problem was, we did not know what to do with it.  Sure, we had the standard ecommerce applications, some self-service solutions, interactive connection to easy applications, we created and used static, non-leveraged content.  The basics that you would expect to find in any other connected world.  Except for a sense of community, smarts, and automation. The “sharing” was not real, it was just accessing some static content (or partially dynamic static content) via a dumb-down interface.  Better than what we had, but not the best.  In Matrix-terms, this were the individual machines that were plotting to take over the world.

Now, let’s fast forward to Web 2.0.  There are lots of definitions out there for Web 2.0 – almost as many as startups trying to make it in it. Tim O’Reilly is credited with coining the term and describing it initially.  We use lots of new technologies, new models, and new applications.  Web 2.0 is about leveraging the infrastructure.  We are moving away from the static content, come-and-find-me model we created in Web 1.0 and we are creating dynamic applications, using distributed architecture models, dynamic and useful content, access and integration levels never before used or seen.  We are, in short, using the network.  Making the network become the application, and the content itself.  We are, in matrix-terms, beginning to create the matrix itself.  Alas, we still don’t’ have intelligence built into the system to self-regulate, auto-manage, or self-organize.  Yet, Web 2.0 (and Enterprise 2.0 by extension) is about using content to make the infrastructure useful.

Of course, there is a futuristic state of the world that is Web 3.0.  No, it is not defined anywhere that I know, nor am I creating a new term (come on, I just grew the version number by one, how hard is that to do).  I am presenting my version of a likely model we will use in the future of the Internet, applications, content – and how we interact with them and each other.  We built an infrastructure, we created the content to populate it – now we are making it useful.  Truly useful.  We are talking about self-organizing systems, ultimate automation, self-categorization – even intent-driven systems (Michael Maoz and I wrote about this back in the Gartner days).  Think the way computers worked in “Star Wars”, think the way the Matrix operates.  A neural network that realizes there is no corner to far-fetched, no content unusable, no connection impossible.  This – Web 3.0 – is the core of the Matrix.

Now, I am not proclaiming that we are all going to be batteries in 20-25 years or any time after that.  But, the model fits well to where we are taking our technology world.  As we continue to evolve, you will see some of the things we thought impossible even five years ago become reality.  Self-managing, automated, independent systems that perform flawlessly without us noticing them.  Secret Customer Service (another concept I worked on while at Gartner) finally emerges.  Self-organizing, dynamic communities form ad-hoc to tackle each and every problem.  Computers become more independent, and we become more advanced as a group.  We become a global tribe that has its own heartbeat, and interacts with technology to simplify our lives.

Sounds interesting? Welcome to the real world – you.

It is All About the Experience, You Know?

While I was at Gartner I wrote a lot about Customer Experience Management (CEM).  I mean a whole lot.  I co-wrote a guide to doing CEM with Ed Thompson (if you have a Gartner account, you just have to read what he writes – and if you can make it to one of his presentations, you will be a better professional for it – promise).  I wrote lots of individual research notes, presentations, case studies, lots and lots and lots.  I spent a very long time talking to vendors and end-users about it, making sure they understood what it was, how to approach it, and how to succeed at it.  You see, the little secret that few people know is that Enterprise Feedback Management, Surveys, Analytics and all that other stuff is not more than a sub-set of CEM.  Without Feedback, there would be no CEM – alas, without CEM Feedback would be as dull as… well, an air sandwich (come on, don’t make me explain it — two slices of bread, nothing in between… i was raised in Argentina, what do you want?).

Because everything you do with feedback, actually let me take that back.  Everything you do with your customers is about the experience.  There is no other way around it.  I was reminded of that this week, as I was doing some research into Social Media, SOA, Web 2.0, Web 3.0 (yes, we already have that), and Web 4.0 (that one is mine, not yet defined formally – working on it).  All these wonderful technologies will do absolutely nothing to improve your relationships with your customers if you don’t put them to good use – that is, use them to build a better experience.  After all, it is all about the experience – you know?

So, how do you get started in the world of CEM? First, repeat after me: CEM is not a technology (pause for you to repeat), CEM is not a tool (pause), there are no CEM Vendors.  Go back and repeat it again.  Good.  That is the secret of your success (no, not like Michale J Fox).  You will, as you embark in CEM, receive no help from software, hardware, or vendors despite their promises.  You can, if you want, ask for assistance from your friendly consultant (say, me), or do some research (work with Gartner – trust me on this, Ed Thompson and Jim Davies are superb).  You can try some of the “vendors” and “software” available for CEM (Google lists 2.9 MM entries for software, 250K for vendors) but trust me – there is nothing there for you.

Second, focus on the three Ps of CEM. Yes, the famous People, Process, and Politics.  As you develop your strategy for CEM (you already knew this was coming, it is not software or hardware, it has to be an enterprise-wide strategy – right?) remember that you will have to change your processes, train your people, and affect your politics.  The principles of Change Management will be your best friend, and prior experience with enterprise-wide projects your best ally.  If you don’t have any of these, don’t start – failure is at hand.  Make sure you know what you are getting into as you start working towards your goal.

Third, remember that CEM is an iterative process.  There is no end to it, just steps towards an improved experience.  Once you conquered the first set of processes, the first level of complex integration between interactions you will begin to receive feedback from your customers – that is how you know it is iterative.  Once you get this responses, you get to start again and continue to improve your (now better) experience.

Of course, I’d be remiss if I did not mention ROI for this investment.  Because, as you work improving your experiences you will need to show the return on the investment.  There may be no vendors or software associated with it, but it still require changes to process, training, potentially some EFM software if you don’t already have it, same with analytics and business processes software and systems.  There is a cost associated with it — and your CFO wants to see the return on the investment.  So, how do you prove the return in your investment?

Well, that is left for the next entry… but until then, do some homework and read my previous series on cost of customer acquisition and cost of customer maintenance.  Trust me, you will need them to go through the ROI of CEM.

Are you ready to get into CEM? What are you doing right now with it?

Using Email for Customer Service? Here’s How to do it Well

I must confess, I created most of the content for this post for a presentation I did at the last SSPA conference in Vegas.

It was a very interesting conference to be honest.  I was afraid no one was going to be at my presentation, but I ended up with standing-room only, and lots of questions.  My fear came from the fact that John Ragsdale, the VP of Research and SSPA and a great analyst, keynoted with a presentation talking about the end of email for customer service.  My presentation was called “The Second Coming of Email in Customer Service”.  Yeah, just like that.  He did a great job on his.

So, what is there to say about the second coming of email in customer service? lots and lots.  Please remember that I was with Gartner for seven years, sometimes it is hard to let old habits die.  So, I am going to talk in the same way I did at the conference – the Gartner Hype Cycle.  In case you are not familiar with it, the short version is that all technologies have lots of hype and few implementations initially.  The hype grows faster than the knowledge of what to do with it.  Eventually, the hype brings more adopters – yet we still don’t know much about what to do with it.  With time, and now that we have lots of people using it, we learn how to take better advantage of it and eventually get to use the technology productively, and that causes the second wave of adoption: knowing how to use it.

So, my contention is that email for customer service (or ERMS – email response management systems) is now climbing the slope and becoming more productive.  We are learning how to use it better, and how to make it work for us while generating revenue or saving us money.  This is the good part, because now we can not only tell new adopters how to use it better – we can go back to existing users and show them how to optimize it.  That is my passion, taking something that is not performing as well as it should, use best practices and lessons learned, and make it work better.  And, that is where we are today with the use of email for customer service.

We are, finally some would say, learning how to make it work as expected, how to save money using it for customer service, and how to do it well.  That is what my presentation dealt with – using best practices to improve the use of email in customer service.

I don’t have lots of time to explain in detail how this works, so I am going to summarize here the six best practices I highlighted in the presentation and prompt you to watch it onlne to see the rest.

1) Choose the best transactions to use with email

2) Automate the low-level interactions

3) Create and Maintain SLAs that are appropriate for the channel and interaction

4) Change your tracking metrics to effectiveness, not efficiency

5) Implement and use feedback on the value to customers

6) Hire, Train, and Maintain the proper skills for email interactions

I welcome comments, questions, and concerns. Please reply in the comments below, or email me directly (ekolsky [at] evergance (dot) com).  BTW, SSPA, KANA, and eVergance are planning a really cool webcast together to discuss the topic of Email in Customer Service.  We don’t have the final details yet, but is going to be on December 4th.  Send me an email, or leave me a comment, and we will add your name to he distribution list for it.

Thoughts? Comments? Complaints? Please let me know…

The Evil Lies in Properly Calculated Customer Maintenance Costs

(Part 3 of 3)

Part 1 – Is it Really More Expensive to Get New Customers?

Part 2- Segmented Customer Acquisition Costs Saves the Day

OK, on the final part of this three part series – how to calculate your customer maintenance costs.  Yes, this is the longest one as far as the number of metrics to track, but if you have been following the series you know where this is going.  Check out the previous two entries before you continue on this one, trust me – it makes more sense that way.

As you know, I advocate an individual approach to calculating customer acquisition costs, and customer maintenance costs.  You already read that I believe that true business decisions cannot be made in a bundle.  You cannot decide to cut costs for customer maintenance across the board, hurting those customers that need service but cannot get it since someone else abused it.  You cannot decide to implement a specific channel or program only for a segment of your customers just because you may think that, for example, business users will benefit more.  You have to make decisions based on the true costs of getting each customer, retaining and servicing them.

When it comes to customer maintenance costs, most companies just take the total they spend on customer service (by their definition) each year and divide it by the total number of customers.  Simple, and ineffective.  You can harbor expensive customers (constantly demanding service) as well as not properly reward inexpensive ones (they never, or rarely, require service).  You can ignore budding problems, such as the excessive cost of a specific segment, tool, or channel, by not properly focusing.  What is the solution? There are two things you have to consider for properly measuring customer maintenance costs.

First, the overhead costs you have for maintaining a customer service operation.  This is where you can see real savings when outsourcing, for example, or by decreasing specific sunk maintenance costs (such as what happens when you optimize your KM initiative).  This is the base cost per customer — not per interaction — for infrastructure deployment.

Second, I am assuming you already know your transaction costs per channel, broken down into different type of transactions (if not, as they say on TV – get them!).  Monitor interactions and add those costs to each personalized customer maintenance cost as they happen – yes, that also means web self-service or similar automated transaction tools (e.g. IVR) which tend to be ignored by most organizations since they are either cheaper than regular channels, or there is no prescribed way to track users through those channels (you may even have to ask users to log-in to get service).

OK, so this gives you a basic cost per customer for maintenance.  Now, the final step is to compare each personalized costs against the average per segment, channel, or transaction – and assign bonus points (or deduct from the total cost of maintenance) to those that are below the average.  This will reward those customers that don’t abuse the system with increased access to different tools, technologies, or even a higher status with the organization – depending on your business decision on who gets access to what.  Of course, you need to constantly (once a month would be fine, no longer) update the scores, the averages, the bonus points, and the status of each customer to ensure they receive all their benefits.

Chances are that you will have to make some small to medium changes in the way you measure and monitor your data and interactions; you will be surprised at how much certain segments or channels will cost you to maintain, and change your opinion on who is your best customer.  A simple per-customer benefit calculation (revenue minus cost) will allow you to create literally segments-on-the-fly as needed, based on all new different metrics, benchmarks, and results.

Are you ready to try a new approach to rewarding good customers and bechmarking your true costs?  Who knows, maybe you get to debunk the original entry for this series “a new customer is X times more expensive to acquire than to retain a current one”.

Ready to prove the myth wrong? Let me know how this goes for you…