RSR Research: Hiring a Customer-Focused Exec is Slow Going
Through a special arrangement, what follows is an excerpt of a current article from Retail Paradox, RSR Research’s weekly analysis on emerging issues facing retailers, presented here for discussion.
It’s no surprise that the marketing executive has about as much cachet as the IT executive in your typical retail enterprise. The two big gorillas in the room are merchandising and store operations and, for a long time, retail has needed it to be that way.
But the world has changed. The good news is that a lot of retailers recognize it. The bad news is they haven’t figured out yet what to do about it — or worse yet, haven’t accepted the inevitable. Someone must own the customer experience. I know personally, I’ve even waffled on that statement, as our research has shown that retailers have been very unwilling to go down a path towards a "chief customer experience officer" or something like it. But our latest marketing report has crystallized my thinking.
In our report, Marketing in Retail: Making the Case for the CMO, we found that retailers seem to be preparing for some of the major organizational changes that concentrating power into a customer experience executive role would require. That’s good news. But any organizational changes, especially to that degree, take literally years to take hold, and retailers really just don’t have that long.
Here’s how I know why that’s true. More and more I hear from vendors that have some really cool solutions — ones with great potential to enhance the customer experience. Some have especially been focused on stores, where the customer experience is increasingly on the ropes compared to the online experience. Their primary frustration is that they have no one to sell their solutions to. Store ops nods their heads and say, "Yes, this is great!" But their primary objective is trying to squeeze as much productivity out of a dwindling or already dwindled labor budget. They don’t have any room to consider investments into customer experience. And the marketing organization doesn’t have nearly enough sway (or budget, really) to make an investment decision that would impact store operations to any great degree.
So retailers can argue till the day is long that they may or may not need an executive focused on the customer experience, but when the reality is that great solutions languish simply because the person who should champion those initiatives just doesn’t exist — now, we have a problem.
Discussion Questions
What hurdles do retailers face in raising customer service oversight to the executive level? Is a customer experience executive role the answer or can another organizational reshuffle achieve the same focus?
I believe it’s been proven time and time again that retail organizations focused on pleasing each customer are the most successful businesses.
But, when we start to have a discussion about executives in the organization, I think it’s a bigger question centered around customer service but also the overarching topic of omnichannel. Should we add a Director of Customer Service? Should we add a Director of Omnichannel?
The goal must be a focus on eliminating siloed functions within the company in order to please each customer and provide a consistent brand experience across all channels. How that plays out regarding titles on business cards remains to be seen.
When sales are not meeting projections and customer surveys point to lapses in service, when retailers are feeling the pain, they will turn to customer service. Until then, too many retailers consider customer service a necessary, expensive evil, rather than a necessity for increasing profits.
Retailers like Costco, Nordstrom and Amazon should be beacons for the industry, showing how great customer service can positively contribute to profitability.
Customer service comes with a cost. It’s a cost that retailers should consider. This means elevating it within the organization, so that it has an equal seat at the decision making table.
Certainly one of the barriers to transitioning to a more customer-focused approach to the business is understanding the monetary connection to all things related to customer marketing back to traditional sales, profit, and expense management numbers. Clearly, despite much progress in this area, most retailers still heavily rely on these traditional metrics to run their business.
In order to accelerate this process, CEOs and COOs should provide their marketing departments the opportunity and resources to provide those performance links. While most retailers understand that there is some level of positive correlation between customer satisfaction and sales performance, most do not have the data to monetize that impact or other customer experiential aspects of the business, such as service levels in the store, the targeting of relevant content to the shopper, and shopper-centric store layouts.
If it gets measured, it gets managed…the adage says. Retailers who have an intuitive sense that customer-focused initiatives are a good thing should provide a means to measure just how good they are.
Nikki has described the problem with her usual depth of insight. I have another perspective on the conclusion though. Forcing something like “customer experience” into a portfolio that belongs to ‘A’ someone is a big mistake and would become the problem, not solve it.
This default position of adding another box to the org chart is what’s led us to vision-less, fear-driven and stalled bureaucracies. This is old Newtonian thinking. We made that mistake back in the quality movement. Once someone was put in charge of “quality” everyone else sighed with relief because now it wasn’t their problem. In many speeches I made the point that the organizations with the biggest quality problems were those with a Director of Quality.
The thing is we all agree that the customer’s experience is the responsibility of EVERYONE even remotely connected to the retailer. What is missing is the energetic ‘alignment’ between those players. The role of leadership is to align all that energy and focus it on the highest possibilities for the customer. The sad truth is many retailers have actually and deliberately built in what amounts to ‘anti-customer’ policies and practices.
Will there be more Directors of Customer Experience? Probably. But don’t expect anything but more rules, constraint and pretense.
There are no hurdles to overcome in the adaptation of an executive position, simply pass the budget and hire someone. Empowering the position to fulfill its mission in spite of interference and resistance from Merchandising and Operations is the tricky part. Making purchasing, advertising, merchandising and sales/customer service integrated parts of a new marketing department might be a start in the right direction.
What is in fact necessary is for retailers to revisit the scope and objectives of merchandising. The option of engaging and or removing this “gorilla” with a new C?O will in most cases push the company into turmoil and chaos at a time when it needs to seamlessly update sales techniques to thrive in a modern 21st century market. It may be more productive to include the employees that “got you there” with a simple mandate to make the necessary changes without exception and with new sales goals and job descriptions for all.
I was just speaking with a former CMO of a major national grocery retailer last week and we discussed this very topic. In particular, the grocery industry has been very focused on merchandising (squeeze vendors for more money including discounts) and operations (which is focused as the article stated on optimizing labor costs). If your year-end review is about the increased dollars you collected from brands or the dollars you saved operationally, it is tough to justify any time on the actual customer experience.
I am not convinced another executive needs to be added, but a shift in how people are reviewed and the customer needs to be at the center of attention. When retailers invest in programs that help them manage, measure and constantly improve their customer experience, you are bound to see increased revenue that far exceeds the investment made. More importantly, you are building trust and long-term loyalty (if there is such a thing anymore) with customers.
This change comes from the very top of the organization and needs to be an honest directive that executives can manage, measure and improve. If your year-end bonus is tied to not only income you create from brands and or money you save in labor, but also heavily weighted on measurable customer experience, you are bound to see the focus and energy change within a retailer. Just ask some of the best customer experience retailers in the country including Coach and Meijer. What gets measured gets improved.
As Mark said, if it gets measured it gets managed. And as he further pointed out, “retailers who have an intuitive sense that customer-focused initiatives are a good thing should provide a means to measure just how good they are.” I wholeheartedly agree…we find that when we measure customer feedback that there is much more focus placed on it since there are concrete feedback metrics whereby a retailer can see how well (or not) that they are currently performing with satisfying and addressing customer needs. It seems that a dedicated focus on this in the executive ranks could only provide even more focus on this critical area.
I once stood up in front of a large room of retailers and asked them to raise their hands if they shopped in their own stores. They raised their hands. I then asked them to lower their hands if they meant that their WIVES shopped there. Nearly all the hands went down. There is no substitute for personal experience in the store, and and it is beyond obvious that someone should be accountable.
Your analysis is well-reasoned, as we have come to expect from you, Nikki. The balancing act you describe — between the necessary priorities of store operations and merchandising — does seem to leave little room for initiatives oriented toward the shopper.
I agree it must be a C-level priority. Maybe adopting some updated vocabulary would help drive new thinking. Chief Customer Officer comes close, but the role has too often been crudely interpreted to signify the capture of customer relationships as if they were some kind of property. Customer Experience Officer carries with it another flawed implication — that great shopping outcomes can be ensured through in-store legerdemain or by training employees better.
I’d propose we substitute CSS – for Chief of Shopper Success. This orients the objectives where they should be — in the mind of the shopper. Great service may be as simple as being consistently in-stock on promoted items. Success may be a matter of obtaining what is promised with minimal stress and at a fair value. The final definition of shopper success must be defined by shoppers themselves, and retailers must adopt practices to pay active attention in order to learn and respond to those preferences.
The CSS would be charged with ensuring that these ordinary events occur with absolute dependability, eliminating all forms of friction from the shopper’s experience. He or she would be responsible for defining shopper success metrics and relating retail practices to those outcomes. Can we visualize a “Shopper Success Index”? Can we learn to correlate this with metrics of financial performance?
As you indicate, there are tools available today that can be applied to this task, but few decision makers who can address this within their mandate. I believe the retailers with highest Shopper Success Index will be long-term winners. It will take some C-level vision for retailers to act on the opportunity.
Let me go out on a limb here and say some things that I have no stats to back. Just my observations. Cathy’s point is my favorite because it reminds us that we work in an industry that is largely male at the helm. The problem is that we serve a largely female customer. (OK, we know there are some categories where this is not the case, but you know what I mean.) Folks, there are men that ‘get’ customer experience, especially if they are under 30, but the boomers in our industry, not so much. Until this is supplemented with a focus, measurement, accountability and initiatives only those retailers who ‘get it’ already will be the winners.
The greatest hurdle that retailers face in raising customer experience to be an executive issue is the focus on extensive use of discounts and strict cost management as the way to achieve success. Retailers are still playing from the same playbook that they were 10 or more years ago, not recognizing that the online experience has changed so much that customers often feel that they can receive experience, service and support from virtual retailers that is superior to what they can receive in the store today.
To improve the customer experience, retailers must invest in technology, training and talent management in a way that signifies to the whole organization that the customer experience at the store level is the highest priority. No single organizational reshuffle can achieve that focus.
However, one of my retail clients recently installed a chief customer officer, whose single focus is the improvement and measurement of customer experience throughout all the stores in the chain. The creation and implementation of that position is heartening to me. However, we will have to wait in the long term to see if he can be successful at shifting priorities and focus across a large organization.
One of the biggest hurdles, and Mark just alluded to this, is the short-term focus at most publicly traded retailers on quarterly results. This phenomenon is not limited to retail but it’s a major barrier to investing for the long-term. Ironically Apple, a company that most retail execs admire, and Amazon, one they love to hate, have both made major breakthroughs in the past by ignoring the pressure to chase the quarter and instead having the fortitude to invest for the long haul.
Would a company appoint a “Director of Profitability”? Probably not, since the view is that everyone is responsible for that…couldn’t the same be said for customer service?
I’m sorry, I actually don’t see ANY hurdles to creating real, LIVE CMOs in retail or CPG manufacturers. As we know few exist today, however, I am seeing more and more innovative companies in both industries creating this position.
As studies have shown, by 2015 the CMO will have more budget, influence and decision making power than the CIO on technology.
The challenge, as noted, is that most retailers focus on the metrics of short-term financial results and not the metrics of long-term brand equity built on customer experiences and levels of employee and customer engagement built upon a true retail brand. The ‘business’ of retail has largely driven out the true merchants and true customer experience practitioners. Luckily there are a few who remind us that long-term value is built on the brand and the experience, not on short-term results.
I have met a few retail executives that seem to understand shoppers, in the aggregate and as individuals. But I do not believe there is enough shopper expertise available to bring competent “shopper management” to the C-suite. The industry has existed as merchant warehousemen for many years, managing the physical side of the store, and the massive supply chain management challenges/opportunities, while shoppers served themselves (SELF-service).
Coincidentally, I have recently written on measurement and management. The blunt fact is that measurement of shoppers (as contrasted with their purchases) is largely a matter of measuring the shoppers’ TIME. If you do not measure the time of shoppers, you cannot adequately manage shoppers. This isn’t a hobby horse, but the foundation of shoppers and their behavior. To ignore it as THE proper metric of shopping is tantamount to ignoring shoppers. Could you imagine THAT happening?! 😉