Forrester Research puts the business of loyalty in perspective when it says, “We have entered the age of the customer — an age in which customer obsession matters more than any other strategic imperative, requiring firms to focus their strategy, energy, and budget on processes that enhance knowledge of, and engagement with, customers.”
In today’s volatile, fast-paced commercial world, strategies and operations are more customer centric than ever before. Everything surrounding the customer is an obvious priority for businesses as that is what drives value and helps them build competitive advantage.
- Change for long-term benefit
The idea of building business value through customer loyalty is changing, and it demands amendments in the roles and outlook of key stakeholders, particularly in that of the CFOs and CMOs. They can no longer operate as singular entities, exclusive of each other. They have a lot more in common than ever before.
Businesses are under intense pressure to build value, while minimizing risks and costs. They are required to justify and multiply return on investments on assets. But how tangible assets (such as property, plant, equipment and inventory) and intangible assets (such as customer, brand, loyalty, intellectual capital) drive the value of a company has changed massively. Intangible assets now contribute almost 80 per cent of return on investment, as against the earlier 20 per cent.
And in achieving this CFOs and CMOs share crucial and common objectives. Both the C-level executives are under tremendous pressure to deliver sustainable financial results in the near term and in the longer term. And they are also under pressure from a tenure perspective, with an average of 24 and 36 months.
Customers, loyalty and customer intelligence, therefore, form the bedrock of growth and strategies for CFOs and CMOs. And it is imperative for both executives to share common ground if they want to know where the business should be investing and what kind of returns they should be expecting.
- Make loyalty a strategic imperative
Maybe it is not. And you might want to look at it for your own good. Forrester Research says that only 15 per cent of firms operate at a strategic level of customer intelligence. These are firms that have managed to turn customer knowledge into a corporate asset and they apply it to drive corporate strategy and business operations.
Firms that use customer intelligence at a strategy level drive improvements in customer acquisition, retention, satisfaction, revenue, profitability, and customer value in the short term as well as in the long term. But the thing to remember is that strategically intelligent firms will most likely have a senior-level sponsor or champion: a C-level customer intelligence evangelist. This is the person who successfully leads, makes innovations and reinvents the strategy from time to time for long-term business impact.
- Work in tandem
Motivated by their unique business objectives, the CFO and CMO have shared a natural tension for decades. Both these C-level executives are trying to drive the business from two different perspectives: the CMO is targeting the business from a customer experience perspective and the CFO is driving it from a financial perspective. And more often than not they tend to disagree.
Measurement is major road block that often resists CFOs and CMOs to be on common ground. CFOs and marketing departments do not have robust methods to measure customer experience, loyalty and customer life-time value. And they often struggle in presenting their case to the CFO to make investments in brands, in customer loyalty and employee training to drive better customer experience. As such these investments in these areas become the first things to be ticked off the list by the CFO when there is pressure from the financial perspective.
So many of the high-performing companies have nowadays adopted a more methodical and data-driven approach and have used the idea of business value as a competitive advantage. These companies capture consumer transaction behaviour and arrive at meaningful insights as to what will drive their strategy, as against looking at multiple things from a non-financial perspective. This approach helps CFOs and CMOs understand requirements and constraints and find solutions, strategies and implementation methods (together) for long-term growth and success.
- Collaboration is integral
CFOs and CMOs have a common objective: to build customer value and improve financial profitability. They approach similar objectives from different perspectives. To be able to complement each other’s functional objective to achieve their larger strategic goals, CFOs and CMOs are increasingly building a working relationship. They are finding time in their busy schedules to meet, share interests and build rapport.
Understanding both sides of any risk is critical for CFOs and CMOs. But what is the best way to do it? To begin with, they should be able to think creatively and collaboratively, not only about the risks of the proposed marketing action, but also the risk of not acting. Generally speaking, CFOs are familiar with a variety of risk assessment. With the help of the CFO, CMOs should perform risk assessments of marketing strategies and become comfortable with the appropriate assessment tools. While CMOs are often not as adept at assessing risk, CFOs are often not as comfortable at assessing the risk of not acting. By collaborating on both sides of risk, it is more likely that the business will arrive at a decision that best fits the situation and the organization.
- Stay connected to stay profitable
As businesses, we unanimously agree that the three major pillars that set the base for long-term competitiveness are efficiency, innovation and customer intimacy. It is absolutely essential to maximize efficiency as realistically as possible. New ideas and innovations are good ways to achieve it. Innovation is the lifeblood of growing organizations, particularly the ones in manufacturing and technology businesses. But beyond everything else, it is crucial to retain the customer centric approach. This will help achieve continuous progress and make growth more sustainable.
As Jerry Rebel, the CFO of Jack in the Box suggested, "The CFO-CMO relationship is one of the most important in today's risk-sensitive, growth-focused environments." In the end, the real emphasis — and real business value — hinges on prioritizing the relationship, learning to speak the other's language, and respecting the unique point of view that each brings.”
About the Author
Anirban Dutta is Managing Director, LoyaltyOne India and a senior loyalty leader with deep expertise in the retail and financial services sector.
LoyaltyOne is a global leader on custom loyalty services, customer analytics and coalition loyalty. LoyaltyOne aims to transform the landscape of the Indian loyalty industry by creating value through customer centric marketing, retail analytics, customer lifecycle management, data privacy and usage. For more information, visit www.loyalty.com/india.
Article Source: STOrai Magazine