5 Steps to Upgrade Customer Engagement
McKinsey experts say customers are demanding very different kinds of relationships with companies and suggest ways leaders can jump-start customer engagement across their organization.
August 29 2012 by ChiefExecutive.net
Coming to grips with the rapidly evolving behavior of consumers and business customers, is no small thing say Tom French, Laura LaBerge and Paul Magill, leaders in the marketing and sales practice at McKinsey & Co. Customers are increasingly selective about which brands they will use. They form impressions from every encounter and post withering online reviews. The authors of a McKinsey Quarterly article last year, say these rapidly changing touch points has made customer relations managers out of everyone.
Companies are struggling to determine the appropriate role of marketing for their business. Although this challenge is difficult, “companies need not be frozen in place while they wait for a complete picture of the answer to emerge.” The authors offer five “no regrets” moves “to help senior executives to move beyond their function-by-function view of customer engagement and to improve the coordination of activities across the broad range of touch points they must care about. By widening the lens companies use to view customer-engagement needs, enabling more rapid responses, and building internal lines of communication, these steps create nimbler organizations with more pervasive marketing.” Below is a summary of their recommendations:
1. Hold a customer-engagement summit
Almost all companies have annual or semi-annual business-planning processes that bring senior managers together from units and functions to discuss strategies and objectives. Yet few undertake a similar process to discuss how to engage with the lifeblood of all companies: customers. We recommend holding such a summit, with a participant list that starts right at the top and cuts across units and functions. At one US health insurer, for example, the CEO’s direct involvement sparked a company-wide dialogue about how dramatically customer behavior had changed and the breadth and speed of the tactics required to keep up.
The focus of such a summit is customer engagement, which should not be confused with the customer experience; engagement goes beyond managing the experience at touch points to include all the ways companies motivate customers to invest in an ongoing relationship with a product or brand.
2. Create a customer-engagement council
One of the first outcomes of a customer-engagement summit will probably be the realization that an ongoing forum for focusing management’s attention on engagement is needed. This doesn’t have to be yet another marketing committee. In fact, your customer-engagement council may already exist under another name, such as the strategic-planning or brand council. The purpose is to bring together all primary forms of engagement— marketing, communications, service, sales, product management, and so on—to coordinate tactics across touch points in a more timely manner.
This council, which should be an operational and decision-making body, must translate the findings of the customer-engagement summit into specific actions at individual touch points. To accomplish this goal, the council’s membership needs to be large enough to ensure that all key players are represented but small enough to make decisions efficiently. One high-technology company, for example, included 17 people on the engagement council. Because it is difficult to make it function efficiently with more than a dozen or so members, decision making in practice rested with a core group comprising the chief marketing officer and the heads of the company’s three primary divisions; subteams of the council coordinated its decisions with the company’s other entities when necessary. These councils are most effective when chaired by the same person who leads the customer-engagement summit, such as the CMO or the head of communications, strategy, sales, or service.
3. Appoint a ‘chief content officer’
Companies across industries—from luxury goods to retailing, financial services, automotive, and even professional sports—are creating versions of this role. All are adopting a journalistic approach to recognize hot issues and shaping emerging sentiment by delivering compelling content that forges stronger emotional bonds with consumers. The CCO role is designed to provide the on-brand, topical, and provocative content needed to engage customers. The CCO must develop and manage all aspects of the supply chain for content, ranging from deciding where and how it’s sourced to overseeing the external agencies and in-house creative talent generating it.
Companies shouldn’t forget that even with a CCO in place, designing and executing a content strategy still requires coordination with several key business areas. The group responsible for gathering and analyzing customer insights, for example, may need a new mandate to support the CCO by providing research on what customers and segments require, as well as where, when, and how that content can most effectively be delivered.
4. Create a ‘listening center’
Engagement is a conversation, yet companies are increasingly excluded from many of the most important discussions. More social and other media are available to mobilize your fans and opponents than ever before, and any interaction between a customer and your company could be the match that starts a viral fire. In this environment, companies should establish listening centers that monitor what is being said about their organizations, products, and services on social media, blogs, and other online forums.
Such monitoring should be hardwired into the business to shorten response times during real and potential crises, complement internal metrics and traditional tracking research on brand performance, feed consumer feedback into the product-development process, and serve as a platform for testing customer reactions. We’re already seeing listening centers established across a broad swath of sectors from financial services to hospitality to consumer goods. A French telecommunications company not only monitors online activity but also has a tool kit of prepared responses. “I can’t predict what crisis will hit,” a senior executive at the company said. “But depending on the magnitude of it, I know the people I need to get in the room and what to discuss.”
5. Challenge your total customer-engagement budget
Many companies struggle to figure out how they can afford all the new tactics, vehicles, and content types required to engage with customers effectively. We propose a different mind-set: recognizing that there’s plenty of money, but in the wrong places. Companies can now communicate with customers much more productively: digital and social channels, for example, are radically cheaper (and sometimes more effective) than traditional media communications or face-to-face sales visits. When you make trade-offs across functions, you can free large amounts of money to invest elsewhere; if the experience of customers is so positive that they voluntarily serve as advocates for your brand.
What prevents many companies from realizing these productivity gains and cross-function trade-offs is a failure to look at total spending on customer engagement. They don’t see the opportunities to make trade-offs across functions and optimize the impact of investments across the entire set of touch points. Most budget on a function-by-function basis, and measure impact the same way. When you look at these expenditures and investments that way, there is almost never enough money, because each function seeks increased funding to improve the customer interactions for which it is accountable. That’s a losing game.
Instead, add up what you spend on customer engagement—in areas such as sales, service, operations, and product management, as well as in marketing. Then identify all the radically cheaper approaches you could take and ask, for example, how you would take them if your budget was 15 percent of its current size or how a competitor in an emerging market would approach this problem. Such exercises help to break the ingrained assumptions and conventional wisdom that creep into organizations and to highlight overlooked opportunities.
More customer interactions across more touch points are shaping the degree of engagement a customer feels with your company. The critical barrier to harnessing the potential value in this shift is organizational—companies that learn to design and execute effective customer-engagement strategies will have the advantage; the others will lose ground. Until then, these five steps can get you moving in the right direction.