What is customer experience management?

What is customer experience management?

Customer experience management (CEM) is the management of how customers respond to a firm across their whole journey of touchpoints. Its object is the customer experience. Lemon and Verhoef² (2016), reviewing the literature, conclude that “customer experience is a multidimensional construct focusing on a customer’s cognitive, emotional, behavioral, sensorial, and social responses to a firm’s offerings during the customer’s entire purchase journey”.

Homburg et al. (2017)¹ define the management of it from interviews with 52 managers in firms that practise it: “CEM refers to the cultural mindsets toward CEs, strategic directions for designing CEs, and firm capabilities for continually renewing CEs, with the goals of achieving and sustaining long-term customer loyalty.” (CEs are customer experiences.) Their first finding sets CEM apart from method alone: “our data suggest that CEM is an issue of corporate culture, whereas nascent literature focuses on CEM methods or processes”. They do not rank the three resources: practice, they write, has to “equally acknowledge all three resource types”, and whether the resources develop “sequentially or simultaneously” is left open.

In this guide, customer experience management means treating the customer’s journey across all touchpoints, including those the firm does not control, as the object of decisions across the firm, with a stated goal and a stated way of measuring progress towards it. It is not a survey programme, a single score or a department. The definition follows Homburg et al.¹ in treating mindset, direction and capability together, not a single method or survey, as what makes CEM.

The management of the experience is a young research field, though the study of the experience is not: Lemon and Verhoef (2016)² trace the roots of customer experience research to the 1960s. They write that “The literature on customer experience management is rather scarce”, and close with the judgement that “Although some bright spots exist, such as multichannel/omnichannel research, many aspects of customer experience are void of strong marketing scholarship” and that “In several areas, marketing practice has a strong head start.”

What is a customer journey, and what is a touchpoint?

The journey is the path; the touchpoints are its contacts. Lemon and Verhoef (2016)² define “the customer purchase journey as the process a customer goes through, across all stages and touch points, that makes up the customer experience”. They divide it, following earlier buying-process research, into three stages: “customer experience can be conceptualized in three overall stages: prepurchase, purchase, and postpurchase”. Citing managerial work on a “loyalty loop”, they add that after purchase “a trigger may occur that either leads to customer loyalty (through repurchase and further engagement) or begins the process anew”.

Homburg et al. (2017)¹ adopt a definition of a touchpoint from communication research: “any verbal (e.g., advertising) or nonverbal (e.g., product usage) incident a person perceives and consciously relates to a given firm or brand”. Lemon and Verhoef² sort touchpoints by who controls them: “We identify four categories of customer experience touch points: brand-owned, partner-owned, customer-owned, and social/external/independent.” Brand-owned touchpoints are designed and managed by the firm. Partner-owned ones are “jointly designed, managed, or controlled by the firm and one or more of its partners”, such as agencies and distribution partners. Customer-owned ones are “customer actions that are part of the overall customer experience but that the firm, its partners, or others do not influence or control”, and they “are most critical and prevalent postpurchase”. Social and external touchpoints include other customers, peers, independent sources and environments. Of other customers’ influence, especially during purchase or where consumption happens at or right after it, Lemon and Verhoef write, citing one study, that “These effects can be substantial and comparable to or even larger than advertising effects”.

The typology matters for management because control is partial. Firms, in Lemon and Verhoef’s² words, “can identify the touch points in the journey that they own or can influence and be cognizant of those touch points that they have no or minimal influence over”. In many B2B purchases the buyer is not the user, so the journey splits by role: the person who signs may meet different touchpoints from the person who lives with the product. That extension goes beyond the sources, which mention business buying only in passing.

What does customer experience management consist of?

Three resources, on the account of Homburg et al. (2017)¹, and eleven parts within them. Their framework comes from a grounded-theory study: they integrated “field-based insights of 52 managers engaging in CEM with supplementary literature”, and summarise CEM as “a firm-wide management approach that entails three main categories: a firm’s (1) cultural mindsets, (2) strategic directions, and (3) capabilities”. Homburg et al. use their own definition of the experience, with affective and relational responses where Lemon and Verhoef² name emotional and social ones.

The firms did not all weigh the three resources alike. Homburg et al. (2017)¹ found “a typology of four distinct CEM patterns, with firm size and exchange continuity delineating the pertinent contingency factors”. Exchange continuity is whether a firm’s core business consists of single, short-term exchanges (transactional) or of exchanges linked over time (relational). Small and medium-sized firms with a transactional core business stressed mindsets; small relational firms stressed capabilities as much as mindsets, above all adapting touchpoints with customers, and directions less often; large transactional firms stressed directions and capabilities; and “Large enterprises with a relational core business model showed the strongest tendency to put equal emphasis on all three CEM resources”. The patterns rest on how often themes came up in the interviews, in groups of roughly five to twenty firms. They found no sign that other factors mattered: “There was no evidence of other contingency factors of CEM, such as product/service dichotomy, competitive intensity”. For a B2B firm with renewals, the two relational patterns are the nearer comparison, on this guide’s reading, though the authors’ examples of both are consumer offerings.

How is customer experience management different from CRM?

By its object and its goal. Homburg et al. (2017)¹ set CEM beside market orientation and customer relationship management. In their comparison, the primary goal of market orientation is “Customer satisfaction and market performance”, of CRM “Customer retention and profit maximization”, and of CEM “Customer loyalty and long-term growth”. Market orientation works through using market data inside the firm, CRM through planning and monitoring customer relationships, and CEM through the continual design, prioritization, monitoring and adaptation of experiences. Their table records no cultural mindset for CRM at all, which they read as CRM “largely ignoring attributes of corporate culture”. Lemon and Verhoef (2016)² note that some firms treat CEM as part of advanced CRM, but side with Homburg et al. that the two differ on many aspects, and put one of them in a line: “CRM has a stronger value extraction focus, whereas customer experience management emphasizes value creation more strongly”.

Customer experience is also broader than two neighbouring constructs. Lemon and Verhoef² (2016) write that “Customer satisfaction could be one of the components of customer experience, focusing on the customer’s cognitive evaluation of the experience.” Customer engagement is a construct of a different kind, which in their words “focuses on the extent to which the customer reaches out to and initiates contact with the firm, whether attitudinally or behaviorally”. Van Doorn et al. (2010)³ take its behavioural side and define customer engagement behaviour as “the customers’ behavioral manifestation toward a brand or firm, beyond purchase, resulting from motivational drivers”, including “word-of-mouth (WOM) activity, recommendations, helping other customers, blogging, writing reviews, and even engaging in legal action”. Such behaviour can be “both positive (i.e., posting a positive brand message on a blog) and negative (i.e., organizing public actions against a firm)”. Lemon and Verhoef treat engagement as one part of the experience: “we view customer engagement emerging as a component of customer experience through specific interactional touch points”.

The boundaries are not settled. Lemon and Verhoef (2016)² note that “no research has clearly shown the nomological network of customer experience”, that is, how it relates to the neighbouring constructs.

How is customer experience measured?

Only in parts, so far. Lemon and Verhoef (2016)² call overall experience scales an early field: “While no strong customer experience scales have been developed”, candidates exist, among them a brand experience scale, and they suggest established service-quality dimensions as a starting point. In practice, firms rely on feedback metrics that “typically do not capture the full customer experience as we define it in this article”. Firms, they add, tend to use “simple, usually single-item measures that are easily understood by top management and can be included in marketing dashboards”.

Their summary of the studies that compare satisfaction, the net promoter score (NPS) and other feedback metrics is sober: “Customer satisfaction and NPS perform equally well in predicting firm performance and customer behavior, although the predictive performance differs between specific contexts.” Metrics focused on one domain, “(e.g., Customer Effort Score) are not strong in predicting future performance”, and “Multiple customer feedback metrics predict customer behavior better than a single metric.”

Measuring what each touchpoint contributes is harder. Lemon and Verhoef (2016)² note that in attribution models “touch point effects can be endogenous, leading to erroneous conclusions and resource allocation”, because customers meet different touchpoints at different stages of the funnel. A touchpoint that customers use near purchase can look effective because of where they are in the journey, not because of what it does. The voice-of-customer essay makes the related point that what customers say in a survey is not what they choose.

The practical rule this guide draws is that no single score stands for the customer experience. A firm that reports one feedback metric should say which part of the journey it covers, and a firm that combines usage, support and survey inputs into an index, as a customer health score does, should say what the index predicts rather than call it the experience.

How do you write a customer experience plan down?

As a record of the journey, one touchpoint per row: the stage, who controls the touchpoint, the response the firm wants, the indicator it watches and who acts next. The record follows Lemon and Verhoef’s² stages and touchpoint categories and the four capabilities Homburg et al.¹ name: design, prioritization, monitoring and adaptation.

A worked illustration, with no company data: a software firm maps the first ninety days after a contract is signed. The record has a brand-owned row for the onboarding call, a partner-owned row for the implementation partner’s kickoff, a customer-owned row for the internal rollout the customer runs itself, and a social row for what other customers say in user forums. The firm can design the first, agree standards for the second, and only watch the third and fourth. Each row names the response sought (for the user, confidence in the first workflow; for the buyer, evidence that the purchase was right) and one indicator other than a satisfaction score.

How a firm should organise around the record is an open question in the research. Lemon and Verhoef² (2016) report firms reorganising to “remove existing silos around brands, customer segments, channels, research/insights”. They also doubt that a firm can control the journey itself: “Management control is probably an illusion in an era in which customers are empowered”, because customers shape their own journeys. They add that the customer journey and channel literature “has made little progress in explaining how firms can manage the entire customer journey and experience”.

Where does the evidence on customer experience management stop?

At description. Homburg et al. (2017)¹ is a qualitative study, and the authors list its limits: “grounded theory procedures rely on the interpretation of researchers coding qualitative data”, and “one in-depth interview was conducted for each firm”. They propose that scholars “quantitatively test its effects on customer loyalty” and “investigate its financial consequences”, which their study does not do. Its firms, between 97 and 164,000 employees, came from manufacturing and services (among them financial services, retailing, and information and communication), in what the authors call consumer industries.

Lemon and Verhoef (2016)² is a review that organises what is known and calls for research; Van Doorn et al. (2010) is a conceptual paper. None of the three tests whether managing the experience raises loyalty, revenue or profit, and none studies B2B journeys directly. The B2B illustrations in this guide are the author’s reasoning and have not been tested.