This key performance indicator is changing the way executives are judged — here’s how to adapt and achieve success.
CEOs have never been under greater pressure to deliver financial results. It is how they’re rated, ranked, and judged by investors, directors, analysts, and most other stakeholders.
A company’s financial results don’t just influence how CEOs are compensated; they’re also the yardstick for whether they keep the job. The constant pressure to improve top-line sales while managing costs is measured quarter by quarter; and while some may say this short-term performance standard puts long-range planning at risk, the time allotted to deliver financial gains continues to decrease. Case in point: Ron Johnson was at J.C. Penney just 17 months before getting the boot.
So what are the implications for the CMO in this must-show-growth environment? After several years of acquiring ad agencies, a New York holding company CEO once told his agency presidents, “Acquisition is not a growth strategy.” Clearly, if mergers and acquisitions were the answer, the CMO would have a more comfortable role. But with organic growth now a leading key performance indicator, chief marketers shoulder much of the responsibility for developing growth strategies that drive top-line sales performance. There are five areas of meaningful impact that can help CMOs identify strategic growth initiatives uniquely suited to their company.
CUSTOMER EXPERIENCE MANAGEMENT
Customer experience management, or CEM, is the process of managing a customer’s exposure, engagement, and interaction with a brand. Creating a brand-centric, unique experience at every touch point is the goal—a very different exercise than traditional marketing and advertising’s focus on brand communications. In the CEM model, companies’ experience architects examine customer motivations, purchase behavior, the environment, brand communications, and the operational infrastructure in detail and focus on optimizing the customer experience in every channel, across all communication and delivery platforms.
Given the myriad channels that allow customers to access a brand —word-of-mouth, traditional media, packaging, sampling, website, social/ digital, mobile, call center, blogs, and selling environment — consistency significantly impacts brand awareness and perceptions. But the consumer’s engagement experience at each touch point is a much more powerful indicator of the decision to buy or not to buy.
CEM is not an easy strategy. Rooted in a customer centric mentality, it transforms the way an entire company does business. For many, this requires a cultural change in which marketers work closer with operations, product designers, and IT than ever before. But for brand marketers who shift from traditional advertising solutions to CEM strategies (focused on optimizing the customer experience), the payoff is in increased sales driven by deeper knowledge of and stronger relationships with customers. This is a more sustainable approach to growing a brand that is far more effective than traditional loyalty programs. When done well, this growth strategy nets short-term sales and long-term brand ambassadors.
Innovation is no longer a key growth driver for just a limited group of categories, such as automobile, pharmaceutical, and technology brands. Today, it is a necessary strategic initiative that touches virtually every type of product and service. Solid, organic growth depends on a company’s ability to make innovative changes designed to keep the brand and its value proposition relevant and desirable.
The book If It Ain’t Broke, Break It, by Robert Kriegel and Louis Palter, posits that if you’re not continually reinventing your brand, business model, customer experience, and products, you can count on some competitor out there devising a better, faster, cheaper way of serving and stealing your customer.
The kind of innovation that drives sustainable growth is rooted in creating a strategic advantage in the marketplace. It’s not the “a-ha” moment that occurs during a series of brainstorming ideation sessions. Profitable innovation is a dynamic process of continually evaluating spaces in which you can win and developing changes that fill that gap. You have to uncover consumers’ ever-evolving needs and desires — and understand where your brand falls short of their expectations.
Companies successful at organic growth have a deep understanding of their customers. The insights they gain by knowing, tracking, following, and predicting customer needs and behaviors set the stage for innovation, customer experience, brand promise, and value. Technology has given marketers an added dimension for developing meaningful customer insights.
Much is being said about big data and how companies are using the massive amounts of information at their disposal. Data is driving business decision-making in every department, division, and level of companies today. For marketers, data has enormous implications for everything, from where budget investments are made to where the customer looks when they enter the aisle.
The first step is to find meaningful information from massive amounts of data. The second is turning that information into useful insights that foster smart decisions and create value for the customer. From data mining, or discovering useful information, to machine learning, which focuses on predicting outcomes, CMOs who can turn 10,000 pages of data into 10 valuable insights will generate disproportionate growth.
And while data provides a reliable tool in building this knowledge, high-growth companies seem to know that insight is also gained on the front lines. It is staggering how few companies spend time in their stores, learning from their own customers.
The single most important quick-service restaurant consumer insight in the last 10 years was uncovered by McDonald’s, when observational researchers noticed how many moms came in to buy Happy Meals for their kids, then sat in the restaurant, chatting on their cell phones with a cup of Starbucks coffee, but consuming no McDonald’s menu offerings. Few — if any — menu items actually appealed to them. The company responded with a barrage of products, from premium salads to quality chicken sandwiches, and, later, McCafé beverages, that drove sales at higher-than-category rates for nearly a decade.
Brand relevance is created by the sum of all consumers’ experiences with the brand, its competitors, and even influencer brands in other categories. Loss of relevance can be both self-inflicted and imposed by competitors’ innovations that set higher customer expectations.
This dynamic occurred when BlackBerry lost relevance, despite overwhelming penetration among highvalue customers who, at one point, were emotionally engaged super-fans. Even power brands like Coca-Cola and McDonald’s have suffered loss of relevance, yet came back by staying true to values that made them relevant in the first place, coupled with a perpetually dynamic brand voice. The lesson is that staying relevant requires continuous brand renewal.
Successful growth brands strengthen relevance by continually finding new ways to increase their emotional bond with customers, by working hard at being loved. Zappos.com grew fivefold in six years by creating a culture around going to extremes for customers. They use their interactions with customers as an opportunity to create lasting memories, and then celebrate exceptional examples of great service throughout the organization to continue the courtship.
Growth brands like Chipotle tap into customers’ values and design their branding, product offerings, messaging, and customer experience around issues people care deeply about. They become vehicles for customers to express their values, versus simply a means to solve a need or fulfill a desire. The result is greater relevance and loyalty. The challenge with this approach is to align customers’ values with the firm’s values to create a profitable model that’s sustainable and genuine.
Of course, the best defense is to never lose relevance in the first place. Madonna has reinvented her brand many times over the years, maintaining relevance and influencing other artists across several generations in a category notorious for rapidly shifting consumer tastes and one-hit wonders.
VALUE CREATION FOR THE CUSTOMER
Before a company can grow shareholder value, its first responsibility is customer value creation — that is, to ensure there is real value in their value proposition. The ultimate arbiters of value are its customers, so determining what they value is the first step in establishing the vitality and growth trajectory of a brand.
The economic challenges of the last seven years caused a fundamental shift in consumer attitudes about value, away from instant gratification and toward considered consumption. While American consumers’ aspirations and expectations remain relatively high, 70 percent have cut spending, are more cautious about purchases, and insist on getting value for their money. The upshot is that a brand’s value equation — what consumers get for what they pay — has become an even greater determinant of the strength of the brand value proposition.
Within this context, brands need to reassess and adjust their value proposition to remain vital. Consider how growing retail brands like Target, which touts “Expect More. Pay Less.” emphasize the “what you get” aspect of the equation while ensuring that pricing is competitive on an absolute basis. Not to be outdone, after 19 years, Wal-Mart shifted to a benefit-based value proposition, “Save More. Live Better.” from its one-dimensional, price-focused “Always Low Prices” promise. It’s part of a more sustainable repositioning that includes store reimagining and product offering upgrades, which are other key elements of the value proposition.
The big takeaway is that there is no room for the “if it ain’t broke, don’t fix it” mentality in today’s marketplace. Delivering on the CEO’s drive for financial results through organic growth demands that CMOs continuously uncover actionable insights; improve their brands’ value proposition, relevance, and customer experience; and foster a culture of innovation that drives forward momentum.
Empathy in Innovation
By Stacey Closser
Henry Ford once famously said, “If I had asked people what they wanted, they would have said faster horses.” Despite a century of novel examples to the contrary, companies have been looking to customers to tell them what they want — whether it’s through customer surveys, data mining, demographic segmentation, or market research. Statistics and past buying behavior are often seen as a way into the customer psyche. They’re not. But there is a way. It’s an approach borrowed from another discipline that is gaining traction in business, and it’s referred to as design thinking.
Businesses are finding that design thinking is good not just for crafting innovative products, but also for resolving very complex business problems, improving the customer experience, and inventing new business models and strategies.
“At the center of design thinking is a human being, not a system or profile or market,” explains Nate Rosenberg Jr., a consultant with Insigniam. “A human being who has perceptions, thoughts, feelings, a family, past experiences, and deep desires.”
Gaining new insights from a human being requires empathy. Research has found that humans possess “mirror neurons,” which react to the emotions of others and allow us to imagine life from others’ perspectives. By using empathy, innovators no longer see customers as merely a set of characteristics; they instead gain insight into their life experiences and, most importantly, their needs.
The Institute of Design at Stanford University details the following process for design thinking: empathize, define, ideate, prototype, test.
The first step is often the most difficult for people who are used to using deductive reasoning to evaluate past behavior and then infer a solution. To truly empathize, the innovator must have no agenda. “You’re not empathizing to find a solution, you’re empathizing to see something new and reframe the problem,” says Rosenberg.
He encourages innovators to get out of the office and not just talk to, but also observe customers. Watch them interact with the product and take notes on what they could be seeing, thinking, and feeling. As an example, he refers to the process that led to the design of GE Healthcare’s MR Adventure Series CT scanners. Only after observing the way a frightened girl and her family felt about the MRI machine — and seeing it from her perspective — did the designer fully understand what was wrong with the award winning machine that had already taken him two years to perfect.
“Understanding that the environment where the scanning was done simply didn’t work for younger children was a wake-up call. It was also a new challenge,” said industrial designer Doug Dietz in his TED Talk on the subject. By empathizing with young patients, he and his team were able to meet the challenge with colorful, creative solutions. The resulting line of MRI machines has achieved considerable success, both for GE and for pediatric healthcare. Watch his powerful TED Talk to see how he accomplished this.
Employing empathy in the innovation process is likely to boost your team’s creativity and effectiveness; but even better, it’s a chance to exercise your humanity.