The clarity of definition: CRM, CE and CX. Should we care?

Definitions mean something. Paul Greenberg attempts to clarify the difference between CRM, customer engagement and customer experience so we don't have to argue it anymore. Why can't we all get along?

OK, take a deep breath. I'm going to spend some time distinguishing customer relationship management (CRM) from customer engagement management from customer experience management. Then you'll have to decide whether you care or not. I have some opinions on that which of course I will share. You know me.

So why should it matter at all? The reason is simple: CRM, the customer experience and customer engagement are not only legitimate concerns when it comes to business strategy for the next decade plus -- but they are paramount concerns. For example if you look at McKinsey's June 2014 "Digital Tipping Point" you find that the single most important reason that companies are innovating digitally is their desire for better customer engagement. Sixty-nine percent of the respondents - the largest percentage - tagged that as the primary reason. In study after study, there is data to show the interest in getting more involved and better involved with customers. But overall, the idea is that the more involved you get with a named customer the better off you are - but that has to be tempered by the cost of that increased involvement.

From the technology side, this has created a nightmare of buzzwords that are often used interchangeably but at the heart have, even if related, different meanings. So, what I aim to do in this article is clarify the definitions so that it is not a matter of who is calling who what and what is the same as the other what - if you catch my drift.

Here goes.

Customer Relationship Management (CRM)

There is a big difference between what I'd like CRM to have been and to be and what it is accepted as in the industry. My original and pretty well received definition of CRM (pre-2009) was the following:

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"CRM is a philosophy and a business strategy, supported by a system and a technology designed to improve human interaction in a business environment."

That was the CRM ideal (at least my ideal) until about 2009. Unfortunately or fortunately, two things happened. First and most telling, CRM was seen ONLY as the system and technology not the customer-facing philosophy and strategy that I hoped would be part of how it was defined. Second, we began to see the hype and rise of social channels and in 2008 actually, the first CRM technology to be called "Social CRM" and actually be that was created by Pivotal. What this led to was the rise of a distinction between Social CRM and (traditional) CRM with Social CRM defining a set of products tied to sales, marketing and customer service - as traditional CRM had always been - that integrated social channels into the actual product feature set.

In 2009, established a working definition of Social CRM that read in full, like this:

"Social CRM is a philosophy and a business strategy, supported by a technology platform, business rules, workflow, processes and social characteristics, designed to engage the customer in a collaborative conversation in order to provide mutually beneficial value in a trusted and transparent business environment. It's the company's programmatic response to the customer's control of the conversation."

That last phrase, which had three permutations "it's the company's response to the customer's control of the conversation" was, if you Google all three quoted many thousands of times, making it the de facto industry definition of Social CRM.

However, by 2011, I realized that there was no reason to call it Social CRM any longer since all CRM applications had social communications channels integration, so we might as well drop the "S" in "SCRM" and go back to calling it CRM. I also realized, rather regretfully, that CRM was not going to be accepted as a philosophy or business strategy as much as I'd that to be the case. It was and is accepted as a technology that supports and sustains sales, marketing and customer service operations and activities - making them more effective. It also was and is a system of record for customer data - be it transactional/structured or conversational/unstructured. However, there was a science to doing it well. So with that history and explanation, here is my current (working) definition of CRM as we march through 2015:

"Customer Relationship Management is a technology and system that sustains sales, marketing and customer service activities. It is designed to capture and interpret customer data, both structured and unstructured, and to sustain the management of the business side of customer related operations. CRM technology automates processes and workflows and helps organize and interpret data to support a company in engaging its customers more effectively."

It's almost sad (and kind of boring really) that it's been reduced to just the technology given what we (or at least I) hoped its promise was. That said, it's been a highly effective way to manage those customer-facing operations. It's pretty much standard to find some part of CRM system - be it sales, marketing automation or customer service operations - now delivered mostly in the cloud - at most larger companies. It is becoming an increasingly important purchase by small businesses too.

In fact, the market, since 2000 has done nothing but scale up in terms of revenues derived for software and associated services. Gartner Group claims that the 2014 global CRM market was in excess of $24 billion and that by 2017 it will be at $36.7 billion. Thus, it's hard to lament the reduction of CRM to its technology because it has been widely successful, despite the doomsayers who love claiming failure all day and night.

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However, the CRM market is once again morphing into something but not what you think. At its core, it's not changing. We are dealing with a mature market that is in fact here to stay and will continue to growth - in total and by its core three pieces. Recently we are seeing more highly specialized additions becoming an increasingly large part of the technology being made available.

Sales optimization/enablement is a great example: Companies provide algorithms for determining the "best next action" - that is, what does the salesperson have to do next to optimize his/her chances of closing a deal? - or sales intelligence so that you can understand who is influencing who among the many possible options. The same concept of specialization that leads to at least marginally better results is one of the hottest areas in the CRM universe.

The alignment of sales and marketing and the applications that allow for marketing and sales to work conjointly are another area that CRM is seeing growth. But, ultimately, it's what it has been for more than two decades. The customer facing departments' operational technologies refreshed for the cloud, personalized for the individual and automated for processes, drives CRM.

So how is it morphing then? In order to know that we have to clarify the definitions of some of the other terms.

Customer Experience

What this is not is almost as important as what this is. First, what it is:

"How a customer feels about a company over time"

Bruce Temkin, who is in my mind, the top customer experience analyst and advisor in the world, has this as his definition of customer experience:

"The perception that customers have of their interactions with an organization."

Customer experience thus is a feeling that a customer has about a company that can be good or bad; can meet expectations, fall below them, or exceed expectations. There is a discipline called customer experience management (CXM in contemporary parlance) that Bruce defines:

The discipline of increasing loyalty by exceeding customers' needs and expectations

I would differ slightly here. I think of it a bit more agnostically. I think that

"CXM is a business science that has the purpose of determining the strategy and programs that can make the customer feel good enough about the company to want to continue to do business with the company."

In a way, it goes to the heart of a customer's relationship with a company, though it's combined with CRM and customer engagement in rather complex and occasionally stupefying ways. To put that relationship in the simplest terms, it goes like this:

"If a customer likes you and continues to like you, they will do business with you. If they don't, they won't."

I don't think I can define it any more simply than that. But note something I didn't say in the CXM part. I did NOT associate it with any technology at all. I said science, strategy, and programs. The reason I didn't is simple. There is no such thing as customer experience management technology. You cannot enable a feeling over time by technology. You have systems of record with CRM. You have systems of engagement associated with technology. Did you ever hear of a system of experience? That's because there isn't one.

I don't want to make this a tautological argument. Think of this. Most of what you see called customer experience technology is either just a repackaged name for customer analytics or in the case of one product is a digital asset management tool. (Product name upon request - but not required here. I'm not trying single out companies. Only the customer experience management technology market as a whole - which is bogus.) Even sentiment analysis, which is about interpretation of emotional states of customers, isn't enabling anything - its identifying something. That's what I'm talking about when I say customer analytics. Nothing we haven't seen before - a long time before.

However, the science of CXM as a strategic and programmatic methodology is both time honored and can be highly effective in developing a long-term approach to what you want to evoke from your customers. Just don't call the technologies out there CXM technologies. They are bad and confusing terms - and you won't enable the emotions of a customer using them - because you can't.

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One more thing when it comes to customer experience.

What I've described so far is a science, it is strategic, and it isn't technology. There is one other area of customer experience that is tactical - and still isn't technology. That is the area of consumable experiences.

Consumable experiences

If you look at the business models that are starting to prevail as we continue through the second decade of the 21st century, you come to a certain conclusion - or I do at least. Products and services are no longer sufficient to entice the customer's loyalty - and certainly not their advocacy. Because we are dealing with a digital customer - which means savvy customers who utilize tools to, at varying levels, take control over their own lives - the business has to offer products and services, sure, but also tools and what I call consumable experiences.

The idea of a consumable experience is simple. Think of a Mattel's American Girl doll store. If you have a daughter and she is of sufficiently young age and if you can afford it, she is likely to own an American Girl doll. The doll is not just a well-made doll, but it is a doll with a rich and evolved historic back-story. It has accessories like clothing and furniture to go with the story and the historic period or the cultural type - at a price of course. But that isn't all. There are American Girl stores at major upscale malls around the U.S. and should you venture into one with your daughter and her American Girl doll in tow, you're more than likely to have lunch, have a haircut and get nails done, and watch a play - with the doll! You're also more than likely to pay about $400 for the privilege of seeing your very happy daughter bonding with the doll doing all these things. Yet you will go back and do it again -because of the smile on your daughter's face. That's a consumable experience.

Joe Pine, the first to focus on this back in 1999 when he wrote the important and prescient "The Experience Economy." Here are a couple of key (edited) paragraphs from an article he wrote in the Harvard Business Review that pre-dated even the book (1998).

"Economists have typically lumped experiences in with services, but experiences are a distinct economic offering, as different from services as services are from goods. Today we can identify and describe this fourth economic offering because consumers unquestionably desire experiences, and more and more businesses are responding by explicitly designing and promoting them. As services, like goods before them, increasingly become commoditized--think of long-distance telephone services sold solely on price--experiences have emerged as the next step in what we call the progression of economic value. From now on, leading-edge companies--whether they sell to consumers or businesses--will find that the next competitive battleground lies in staging experiences.

An experience occurs when a company intentionally uses services as the stage, and goods as props, to engage individual customers in a way that creates a memorable event. Commodities are fungible, goods tangible, services intangible, and experiences memorable..."

That, bunkies, is what a consumable experience just is!

So I hope that so far, I've managed to clarify what CRM is and isn't and what CX is and isn't. Now we move onto customer engagement - the biggest is (and isn't) in this entire discussion.

Customer Engagement

There is a big difference between customer experience and customer engagement in how they are defined and how to think about them even though they are often used interchangeably. What they have in common is time matters. But they are very different though have as we will see a chicken and egg kind of thing going.

There are many definitions of customer engagement out there. Peppers and Rogers have one that is accurate but a bit simpler than is needed at this point - "proactive involvement." That's entirely right. But there is more to it, though it's a good start.

I like mine (of course) best:

"The ongoing interactions between company and customer, offered by the company chosen by the customer."

There is a lot in that one sentence - actually an entire book, which I happen to be writing (a bit too slowly) for publication by Harvard Business Press in 2016. However, for the sake of Paul Greenberg-style brevity -under 10,000 words - and for the sake of original material for the book, I'm going to give you a short version of what customer engagement means both strategically and technologically.

Keep in mind one thing. People, and thus customers, are self-interested. That's a good thing, not a bad thing. That means in this era of the empowered and even occasionally entitled customer that when it boils down to it, we want what we want - and on the company side of things - we expect that the company will provide it or we will tell our compadres that they didn't. Or actually, since we are a generous and giving species that if they did provide it, we will blab that to our compadres too.

But the thing is that each of us wants what we want and it is probably in specific different from what the next person wants. Generally, and this is important, there will be some combinations of things that more than one of us want but each of us also has a unique combination of things that we want. The trick for companies is to be able to not only give us enough of what we want to make us want more from them but to also control the costs of doing that. It ain't easy.

To start doing that, however, the company has to have a mindset that is not exactly what we hear all the time from the pundits of customer feeling. Typically, we hear that we should delight the customer all the time. Bunkum. B.S. No way. Not true. Ridiculous.

Why do I say that? You thought I was a nice person? I like to think I am. I'm a former leftist and union organizer too. So I'm generally a customer advocate. But I'm not ridiculous. Think about all the things you want from a company if you could have them and how delightful that would be and how much you'd love that company. Multiply that times, oh, say, 300 million if you're a Citi Group customer. Then if you're Citi Group, declare bankruptcy because if they tried to give every single customer what they each wanted and then some - since delight in customer terms means exceeding expectations -they'd be broke - and fast.

So what you have to do when it comes to the customer is have the mindset that you will give them what is good enough for them to continue interacting with you. That means, for example, if the customer is involved in a service interaction of some routine kind - say a request for an address, be an omnichannel mensch and provide that customer with an address easily and automatically no matter what medium they choose to ask for that address in e.g. phone, web, text, tweet, Facebook message, LinkedIn - whatever. Take my word for it, the customer asking for the address isn't asking for something more than the address, they are asking for the address. You give that to them and you meet their expectations - well, then that's a form of delight too. Meaning, you didn't screw it up.

In 2014, Anna Byrne of the International Customer Management Institute (ICMI) wrote, "98% of a customers' interaction with your customer service may be routine queries easily solved and 2% might be complex problems." What this suggests and that she refers to from another article is that customers want to have their queries answered quickly and in the manner that they want the queries answered. "Efficiency is more important than delight." That means, as I call it, good enough.

If you think about this then, the company has to figure out a few things:

  1. In what manner is it best to interact in a routine fashion with customer? In an exceptional circumstance?
  2. What are a sufficient number of communications channels to provide to the customer to allow that customer to interact with the company? Aberdeen's Omar Minkara in his 2013 research on Omni-channel Customer Care suggests that the best performing companies offer a minimum of seven channels. They make a very important point that I have often made too that omnichannel strategies, unlike multichannel strategies, require consistent user experience across not just channels but devices. That is a KEY point. So you might provide the channels, but you have to optimize for the devices as well.
  3. What is the optimal "package" of products, services, tools and consumable experiences they can offer a customer individually that serves the purpose of providing use value to the customer, getting value from the customer in return and makes the customer feel as if the company knows them - and values them? What I'm NOT going to do here is go into how that can be done - it can. But that's the subject of my book and future blog posts. Just suffice to say, it can do be done. But what I will say is that optimal for the customer also means cost-effective for the company. It not only has to appeal to the self-interested individual customer but be something the company can offer that is good enough to bring them back and that they can afford to offer. Again, the secrets of how to do that are available, just not in this post. Too much.

So let's take that back to why my definition of customer engagement? I repeat it here.

"The ongoing interactions between company and customer offered by the company, chosen by the customer."

To explain.

  1. If the interactions aren't bidirectional (between company and customer) they aren't interactions
  2. If they aren't ongoing then the customer is not engaged for more than a moment, and thus the company has failed at keeping that customer involved.
  3. Offered by the company - the company has to be able to provide the customer what they want to have. However, the company is constrained by cost, time, labor, regulation etc. in what they can offer. So they have to figure out what is the array of goods, services, tools and consumable experiences that they can offer to a group of customers that still satisfies the needs of the individual customer. It also has to be an affordable market basket.
  4. Chosen by the customer - most importantly, that array of products, services, tools and consumable experiences (PSTCE?) has to be presented to the customer so that they can choose what parts they want. The ability to choose might be more important than the actual selection. It gives the customer control of what they get while getting things that make them feel as if the company values them because these things all appeal to them in a personalized (not personal) way.

That's customer engagement.

One more point. There is a HUGE somewhat nascent customer engagement technology market, unlike a non-existent customer experience technology market (see above to be clear). There are 20 identified components (here is a post where I identified about 18 of them) which incorporate a LOT of pieces - all customer facing. That's why as CRM has systems of record, customer engagement has systems of engagement ranging from gamification to customer identity management to customer analytics etc.

The intertwining of the three - and then some.

Finally, let's take a quick look at how all three of these operate together.

There is a bit of a chicken and egg thing when it comes to customer engagement and customer experience. Do sufficient and occasionally excellent interactions (engagement) foster a great feeling about the company (experience)? Or does that great feeling about the company foster good enough and even excellent interactions with the company?

The answer is both are right and who cares?

Ultimately, the idea is to acquire and retain the customers by meeting your customers' requirements to the extent possible. Those requirements change over time and the company has to adjust to those changes. The other part of the formulation is that the customer optimally becomes an advocate or at least loyal and is a profitable customer. Customer engagement - the ongoing interactions between the two parties leading to a great "I love this company" feeling (or not) - customer experience - which lead to better interactions and more forgiveness for problems, are both part of the equation. CRM's role is to manage not the customer relationship - the constant wrong-headed misstatement about it from its naysayers, but to manage the business operations related to the customer. It also is required to capture, keep, and analyze the data about the customer so that insights can lead to a better engagement leading to a great experience, which enhances those ongoing interactions.

BOOM! (He drops the mike).

I'm here all year.

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