What's CEM all about? Perhaps this quick intro will help you place things into perspective:

From the Porter’s value chain days (that was originally applied to manufacturing during its boom), much has changed. Everything we were doing to be successful under Porter’s guidance is still needed... but it’s just not enough.

Along with price, selection, quality and availability we now have to deal with a highly fluid customer base. The prevailing pattern now is for people to periodically switch to our competitors or adopt a generalized behavior of non-loyalty purchasing whereas ten years ago loyalty was where it was at. Certainly even in the best of circumstances, loyalty now is a much slimmer and unforgiving type of loyalty than what we had before.

That mean’s along with the other things we are doing we have to do something about:
• keeping our existing customers
• expanding our relationship with our customers and
• attracting new customers to the fold.

This is the new part of the 21st century value chain as captured in the CEMM model here: In the 21st century, we must manage our customers’ expectations. We must address elevating the expectation we “deliver” to our customers. We must provide uniformly satisfying customer interactions across our entire organization.

That is where the challenge and opportunity exists for controlling and growing our revenue.

Increasing our Market Share

If we are to attract new customers at a reasonable acquisition cost then we must have a compelling customer value proposition. The relationship of our customer value proposition to that of our competitors determines the amount of new customers we can potentially attract without resorting to high-cost marketing acquisition practices.

The Customer Pool/ Competitor Graph describes this market dynamic. The more leading our value proposition is the more customers we attract while at the same time the fewer competitors we have vying for these same customers.

When seeking to increase revenues through new customer growth we must drive our customer value proposition as far out in the leading category as possible.

Customer Retention and Relationship Expansion

But we can’t just rely on our customer value proposition. In the customer-driven economy of the 21st century we must also deliver “success without exception” to our customers.

This is the customer experience and it determines three things:
1) If a new customer becomes a “profitable” customer
2) The breadth and duration of the customer relationship
3) Any viral new customer growth from positive “word of mouth” These effects are captured in the Customer Value Chain Effects graph. Here we can see that new customers start at a loss (financially) to the business.

The transition from loss to profit occurs when enough business has been transacted between the customer and the business – the Loss to Profit Transition.

Once past this transition the customer relationship becomes a profitable relationship for the business. From this point forward the breadth and duration of that relationship directly impacts both our Revenue and our Profitability.

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