Customer experience management (CEM) is "the process of strategically managing a customer's entire experience with a product or a company" (Schmitt, 2003, p. 17).
Marketing research has shown that about 70 to 80% of all products are perceived as commodities, that is, seen as being more-or-less the same as competing products. This makes marketing the product difficult. Marketers have taken various approaches to this problem including: branding, product differentiation, market segmentation, and relationship marketing.
Relationship marketing, (also called loyalty marketing) focuses on establishing and building a long term relationship between a company and a customer. There are several approaches that have been espoused including customer experience management, customer relationship management, loyalty programs, and database marketing.
CEMs critique of traditional marketing
The development of customer experience management originally started with a critique of three existing marketing concepts. It concluded that the following three concepts do not go far enough:
- Marketing concept--Since the 1970s there has been a gradual shift from a product-, technology-, and sales-focused orientation towards a customer- and market-oriented approach by determining the wants and needs of customers and satisfying them more efficiently or effectively as compared to competitors. However, the approach is still mostly functional, with similarities and differences between competitors being defined mostly by product features and customer benefits. In addition, the customer is perceived as being rational, which is in most cases not the case, as e.g. Kahneman and Tversky's Prospect theory has proven. Also, it is asserted that market research is mostly analytical leaving little room for qualitative assessments of customer relationhships towards products, services, or brands. It is claimed (by Shultz) that traditional marketing, in practice, takes an inside-out approach (starting with internal variables like production capabilities and available capital then moving to external variables like customer needs), rather than taking an outside-in approach as marketing theory requires.
- Customer relationship management is claimed to be deficient because it primarily consists of database and software programs used in call centers and thus, focuses too much on quantitative data. By doing this, it is lead by transactions rather than a desire to build lasting relationships with customers.
- Customer satisfaction is an outcome-oriented attitude deriving from customers who compare the performance or value of the product with their expectations of it. It is claimed that the customer satisfaction approach depends too heavily on outcome oriented measures like satisfaction and too superficially on direct experiential measures. A customer is said to be satisfied when a products performance if it is above the cutomers' expectations. Thus, traditional customer satisfaction techniques are deficient if they don't help firms to understand and manage customers' experiences, experiences that lead to the following equation: good experience = satisfaction.
CEM recognizes, as does all of marketing since the early 1970s, that customers are a company’s most valuable asset. What makes CEM different from traditional marketing is that it claims that marketing theory has seldom been immplemented adequately.
The CEM technique
CEM is a methodology that tries to overcome the gap between theory and practice by reformulating basic marketing principles. The result is that CEM stresses four aspects of marketing management :
- CEM focuses on all sorts of customer-related issues
- CEM combines the analytical and the creative
- CEM considers both, strategy and implementation
- CEM operates internally and externally
Although all marketing management and strategic management does all of these, CEM supporters claim that they have a methodology that will yield better results. Being convinced that the marketing concept is too product-centered, Customer relationship management too focused on quantitative data, and customer satisfaction too functional, CEM looks for another perspective on the relationship of a consumer with a product or service. And what's key? The experience linked to it is the key.
This enables companies to strategically manage a customer's experience with a brand and by doing so, achieve a truly customer focused management concept. To accomplish this, a framework is required based on clearly defined company objectives. So far, the following five steps have been suggested in the litarture that should help managers understand and manage the "customer experience":
Step 1: Analyzing the Experiential world of the customer
- analyze sociocultural context of the customer (needs/wants/lifestyle)
- analyze business concept (requirements/solutions)
Step 2: Building the Experiential platform
- connection between strategy and implementation
- specifies the value that the customer can expect from the product (EVP = experiential value promise)
Whereas steps 1 (Analysis) and 2 (Strategy) form the basis for CEM, steps 3, 4, and 5 are focusing on Implementation.
Step 3: Designing the Brand experience
- experiential features, product aesthetics, “look and feel”, e.g. logos
Step 4: Structuring the Customer interface
- all sorts of dynamic exchanges and contract points with customers
- intangible elements (i.e. value, attitude, behaviour)
Step 5: Engaging in Continuous Experiential innovation
- anything that improves end customers' personal lives and business customers' working lives
And finally, to bring all pieces together, a holistic approach is required that provides a linkage between the different steps and connects them with the organization:
Examples of CEM
Looking at the current business literature, it appears as if CEM might be following CRM as one of the leading concepts for the years to come. Several books have been written on "Experience" in the last decade and a half, not all of them actually using the term customer experience management. "Experience" authors include Bernd Schmitt, Jerry Zaltman, Pine/Gilmore, Patricia Seybold, Shaun Smith, and Gerhard Schulze to name just a few. The term customer experience management is being used most obviously by Bernd Schmitt. Various leading consultancies now offer CEM Consulting.
- Schmitt, B. (2003) Customer Experience Management, The Free Press, New York, 2001.
- Schmitt, B. and Simonson, A. (1997) In Marketing Aesthetics:The strategic management of brands, identity, and image The Free Press, New York, 1997.
- Pine, J. and Gilmore, J. (1999) The Experience Economy, Harvard Business School Press, Boston, 1999.