I recently started looking into Customer Value Management (CVM) and how it relates to CEM. In my mind there was less clarity on how these two disciplines interact with each other and how that interaction can be made better? After all, I still remember a quote from Mr Jagbir Singh, former group CTO of Airtel – “I am not doing CEM for charity. It has to make money for me”.
Let’s first understand the differences between CEM and CVM –
- Objective of CEM is to deliver consistent, superior experience at all interactions in order to build customer loyalty and eventually lifetime value. Objective of CVM is to improve profitability by targeted offerings at different interactions. So CEM is one of the enablers of CVM.
- Customer profitability is key metric for CVM but customer retention is for CEM. So CVM can provide key input to CEM in terms of differentiating customer experiences for different personas
- CVM requires understanding customer value drivers, migration patterns while CEM needs deep understanding of empathy and expectations
Operators incurs customer acquisition costs for every new customer as well as every customer renewal. Over a period of time, total revenue that a customer generates exceeds initial CAC as well as on-going maintenance costs of customer to generate positive contribution to business. For prepay customers, CLV is moderate but their break-even period is smaller – typically between 7-9 months. For postpay, CLV is higher but so is their break-even period – typically between 18-20 months.
If an operator delivers good customer experience through the consolidated use of data, analytics and subjective perceptions, it reduces the on-going maintenance costs of customers in terms of reduced calls to contact center and reduced time spent by back-end staff on resolving customer complaints. With good customer experience, it is easier to upsell and cross-sell new products and services. Data from various systems of CEM solution also enable to understand the customer behavior and interests that can be used for micro-targeted offers. Thus good CE helps reduced break-even period and increase CLV.
But CVM also helps to bring business focus for delivering customer experience management. Customer value based segmentation can show you which segments are your most valuable segments over a period of time. CVM analysis also shows areas of cost improvement and where CEM efforts should be focused. It also give important input into creating differentiated customer experience. For example, proactive care can be prioritized for customer segments with CLV beyond certain business determined value while self care channels should be optimized for use by lower CLV customer segments. Different CEM personas need different treatment and their net contribution to business is an important determinant for differentiating CEM.
Based on my experience, many operators have CEM initiatives but only a few have exhaustive CVM programs. For operators that have both CEM and CVM programs, there seems to be chinese wall between the two and hence full potential of both programs is not realised. I recommend strong linkage between both CEM and CVM initiatives so that CEM initiatives lead to increase CLV and different personas get relevant, differentiated customer experiences based on their value to the business.