Customer Strategist Çağlar Gogus: What the C-Suite Needs to Know About Customer Management
C-level executives have enormous demands on their time and focus. But if they're concerned about the operational performance of their organizations, as most senior executives are, then it would serve them well to pay greater attention to customer management issues, especially on a more granular level.
With the recent economic turmoil, there is a significant loss of trust amongst customers towards several industries. Recent turmoil also reminded regulator bodies around the world to put the customer back on top of the focus for several industries and also for those businesses in which customers are the only source of organic growth. In such an environment, are executives taking ownership of their customers sufficiently?
First, CEOs and CMOs need to take ownership of customer management programs and drive these initiatives forward in order to underscore the importance of managing customer relationships with other managers and employees. Second, senior executives should pay greater attention to the use of KPIs (Key Performance Indicators) to help measure the effectiveness of customer management efforts. For instance, a bank could apply KPIs around metrics such as amount of cross-selling that occurs, share of customer, return on customer (ROC) and customer loyalty.
At a high level, executives don't place a strong enough emphasis on how different organizational units interact. Most companies are accustomed to working on a product level or on a channel level. Once you've put the customer into the picture, executives can create an organizational structure which coordinates the activities between the different business divisions to examine how the three areas - product, channel and customer -- operate cooperatively.
It's also essential to work the customer component into the budget and planning cycles. Often the budget will reflect the product and the channels but not the customer.
Finally, C-level executives must also consider the customer culture of their organizations at the customer touch point (dealer, within its branches and among its salespeople) level. This often requires a mindset shift. Employees who are in customer-facing and customer-focused roles need to receive different types of training and different types of coaching programs as well as different types of rewards and recognition for how they treat customers.
Opportunity Knocks
Another aspect of customer management that C-level executives often fail to address is the development of a business case for these types of initiatives. These programs take a lot of time and usually have a sizeable budget attached to them. Corporate leaders need to set a strong baseline and measure progress. There needs to be a solid, well-constructed roadmap with clear milestones. In addition, business KPIs need to be applied to those milestones.
There are several types of KPIs that can be applied to customer management initiatives, including return on customer (ROC), customer lifetime value and share of wallet. For banks, the major KPIs are customer retention; the number of products used by each customer and reductions in churn and reflection of these to lifetime value and economic profit on capital.
Still, it's important for executives to apply KPIs at granular product and customer segment levels. That way the results are more attractive and interesting for board-level executives to analyze.
There are other actionable steps that senior executives can take to address customer management. For instance, the formation of a customer council, which could include representation among an organization's top B2B customers and other line of business leaders, is a practical step.
I do a lot of work in the banking sector so I'll speak to my experiences there. Banks used to make a significant investment to inorganic growth such as mergers and acquisitions. They also generated a lot of income from complex financial instruments. Once the market collapsed and more stringent regulations were put in place, banking leaders realized they needed to make more income from their existing customer bases. Since then they've had to become much more customer-centric.
The direction for these programs has to come from the top.
Çağlar Gogus is a partner at Peppers & Rogers Group. Contact him at cgogus@1to1.com.
With the recent economic turmoil, there is a significant loss of trust amongst customers towards several industries. Recent turmoil also reminded regulator bodies around the world to put the customer back on top of the focus for several industries and also for those businesses in which customers are the only source of organic growth. In such an environment, are executives taking ownership of their customers sufficiently?
First, CEOs and CMOs need to take ownership of customer management programs and drive these initiatives forward in order to underscore the importance of managing customer relationships with other managers and employees. Second, senior executives should pay greater attention to the use of KPIs (Key Performance Indicators) to help measure the effectiveness of customer management efforts. For instance, a bank could apply KPIs around metrics such as amount of cross-selling that occurs, share of customer, return on customer (ROC) and customer loyalty.
At a high level, executives don't place a strong enough emphasis on how different organizational units interact. Most companies are accustomed to working on a product level or on a channel level. Once you've put the customer into the picture, executives can create an organizational structure which coordinates the activities between the different business divisions to examine how the three areas - product, channel and customer -- operate cooperatively.
It's also essential to work the customer component into the budget and planning cycles. Often the budget will reflect the product and the channels but not the customer.
Finally, C-level executives must also consider the customer culture of their organizations at the customer touch point (dealer, within its branches and among its salespeople) level. This often requires a mindset shift. Employees who are in customer-facing and customer-focused roles need to receive different types of training and different types of coaching programs as well as different types of rewards and recognition for how they treat customers.
Opportunity Knocks
Another aspect of customer management that C-level executives often fail to address is the development of a business case for these types of initiatives. These programs take a lot of time and usually have a sizeable budget attached to them. Corporate leaders need to set a strong baseline and measure progress. There needs to be a solid, well-constructed roadmap with clear milestones. In addition, business KPIs need to be applied to those milestones.
There are several types of KPIs that can be applied to customer management initiatives, including return on customer (ROC), customer lifetime value and share of wallet. For banks, the major KPIs are customer retention; the number of products used by each customer and reductions in churn and reflection of these to lifetime value and economic profit on capital.
Still, it's important for executives to apply KPIs at granular product and customer segment levels. That way the results are more attractive and interesting for board-level executives to analyze.
There are other actionable steps that senior executives can take to address customer management. For instance, the formation of a customer council, which could include representation among an organization's top B2B customers and other line of business leaders, is a practical step.
I do a lot of work in the banking sector so I'll speak to my experiences there. Banks used to make a significant investment to inorganic growth such as mergers and acquisitions. They also generated a lot of income from complex financial instruments. Once the market collapsed and more stringent regulations were put in place, banking leaders realized they needed to make more income from their existing customer bases. Since then they've had to become much more customer-centric.
The direction for these programs has to come from the top.
Çağlar Gogus is a partner at Peppers & Rogers Group. Contact him at cgogus@1to1.com.
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