Why Marketers Should Divert More of Their Budgets to CEM

The gang over at The Perfect Customer Experience have been on a roll this week with some really great posts.   Yesterday, Dale Wolf made the case for diverting some of your push marketing dollars into Customer Experience Management.  It’s such an obvious thing to me, yet so many organizations fail to see the opportunity.  Perhaps its an orthodoxy that keeps the money pouring into processes that have a low ROI.  In his post, Wolf provides a simple mathematical demonstration and a prescription:

“Let’s say the ad campaign had a cost of $10,000. It got 2% of the people into the store. That means 98% of the ad audience did not come to the store and 80% of the people that came to the store walked out of the store without buying. He spent $10,000 but only $1960 actually drove customers to a purchase. What a collosal waste!”  (note:  I’ve asked Wolf to explain how he got to $1960.  I calculated the figure to be $40, but what do I know).

“Now instead if he had spent more of his budget in learning what his customers actually wanted, he could build an experience that delivered on their needs, wants and aspirations. Then spend another part of his budget on building a customer database and use relatively inexpensive personalized email to tell them individually (or at least in small clusters) about the experience they will have in his store. He will begin pulling metrics that are in the +50% response rate.  Better yet, if he has invested in a truly differentiated, valued and consistently delivered experience that gets people talking, his investment will spread far and wide at virtually no cost.”

I think the biggest opportunity for organizations, and retailers in particular, to differentiate, is to focus significant resources on the delivering exceptional customer experiences.  That starts with asking customers what they want.  It also requires you to address those elements in the experience that are sources of dissatisfaction.  In fact, you will have limited success until you do this.  Word of mouth is a powerful thing and customers will tell others about great experiences.  They will also tell others about bad experiences and what’s worse, those friends will tell others.  For retailers who routinely misses customer expectations, spending money on push marketing is like trying fill a bucket that has a big whole in the bottom.  The best you can hope to do is keep some water in the bucket.  

Diverting that money to improving the experience of those who do come to your store will result in a higher close rate and higher loyalty and that’s where the real ROI is.

One thought on “Why Marketers Should Divert More of Their Budgets to CEM

  1. I would be inclined to agree with you (and Dale). But, for many senior execs (who still hold the key to fund initiatives), CEM is a buzzword, something not very well defined.

    When we say “marketers should divert budget to CEM” are we talking about changing Web site design? Web site functionality? Or the in-store experience? Customer service? All of the above?

    There are departments (and heads of those departments) with funding and budgets to [hopefully] improve their operations already. So, by “diverting” funds…. are we taking money AWAY from them … and if we are, who are we giving it to?

    The world of CEM needs a lot more precise definition and procedural rigor before senior execs in large firms will “divert” funds to it.

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