Excerpts

Chapter One What It's Really All About Imagine a world in which you could readily locate and purchase the products and services that you need, coupled with receiving ongoing relevant communications and amazing service and support. Imagine that the provider understood: * The products that are most relevant to you * The price you are willing to pay * The most effective way of communicating with you * The level of service and support that you expect, and your preferred channels * Their value to you, and your value to them * What it would take to increase your loyalty What if the provider not only knew this information, but also was willing and able to readily, consistently, and effectively act on this information? You would have an optimal shopping and service experience--every day! This is the promise of customer relationship management (CRM). For customers, the result is increased relevance and value. For service providers, the result is what I am terming the customer differential; essentially a new level of competitive differentiation through impermeable customer relationships. Since many of you are likely frequent flyers, let's consider your ongoing relationship with airlines and assess how they manage their relationship with you, the customer. Let's assume that the leading provider in your area is Acme Airlines. If you fly frequently, your relationship with Acme most likely vacillates between exceptional and downright devastating. On a positive note: They typically get you where you need to go safely and on time. They offer you a wide range of vacation-package specials, some of which are of interest to you. They have the Acme Frequent Flyer Program, which provides you with ongoing recognition, convenience, and special privileges for your loyalty. Some of these rewards include a frequent flyer card and T-shirt, designated check-in desks at the airport, the opportunity to board the plane early, a special toll-free number that promises a shorter wait time, and occasional upgrades. Acme also issues points that can be redeemed for free travel. Acme also has a variety of partners that provide you with some of the same recognition, conveniences, and special privileges, as well as rewards. On the flip side: The process of tracking, claiming, and redeeming Acme points for free travel has proved to be a headache. The department in charge of this process doesn't seem to realize who you are or what you mean to Acme Airlines. The Acme-cobranded credit card provider also does not seem to care about your relationship with Acme Airlines or your loyalty to them. You have been to the Acme website three times now; it does not really seem to provide the customized experience that they advertise. Six weeks ago you e-mailed a complaint regarding a ticketing mistake to Acme's online customer service team and still have not received a response. Even though you are a very frequent flier on Acme, you do not seem to be rewarded preferential treatment by gate agents for discretionary services such as seat assignments, upgrades, or any other amenities. Acme's travel agent partners seem to sometimes be at odds with the airline. Acme leaves you on your own if you booked through an agent and is wary of offering any service or support. If you were to summarize your overall relationship with Acme Airlines, you would probably say that it is all right; or you might even say that it is a love-hate relationship depending on the situation. Acme seems to have good intentions and is proactive in developing sales and marketing promotions. However, they often fall short in their ongoing delivery of service and support. What could Acme Airlines do to secure your business and move you from being a lukewarm customer to a consistently satisfied loyal customer? How could your relationship with Acme be improved? CRM suggests that a consistent, positive customer experience across all channels and media and across all sales, marketing, and service functions can increase customer loyalty and advocacy. CRM is designed to be a win-win: Customers receive the shopping and service experience that they deserve; the provider receives ongoing loyalty resulting in increased business. We all have our own personal shopping and service "horror stories";--the phone rep who insulted your intelligence...the special promotion that was impossible to redeem...the loyalty program that only captured a third of your total activity, and then rewarded you with irrelevant marketing promotions. The key question is, how can you as a provider prevent those experiences that you as a customer would never want to encounter? Moreover, how can you as a provider ensure that your customers have nothing short of wonderful shopping and service experiences? If you are successful with CRM strategies, you can expect to rapidly gain a unique competitive advantage--you will have customers on your side. This customer differential is the key to success in the twenty-first century. CRM Defined CRM is suddenly the talk of the town. It is a worldwide focus on customers, covered now in popular media and within corporate boardrooms around the world. Never before has there been such a focus on keeping customers coming back. Perhaps the closest business movement was the customer satisfaction efforts of the 190s. These customer satisfaction initiatives, however, often ended with common means of measuring, but not necessarily improving, customer satisfaction. CRM is much broader than the age-old principle that "the customer is always right." CRM identifies how to profitably act on that premise, at all times, across all channels and functions. CRM is essentially a focus on providing optimal value to your customers--through the way you communicate with them, how you market to them, and how you service them--as well as through the traditional means of product, price, promotion, and place of distribution. Customers make buying decisions based on more than just price and more than just product. Customers make buying decisions based on their overall experience, which involves product and price, but also includes the nature of all their interactions with you. If you can consistently deliver on these marketing, sales, service, and support interactions, you will be richly rewarded with ongoing customer loyalty and value; therein lies significant competitive advantage. The CRM Process There is a universal, underlying cycle of activity that should drive all CRM initiatives. All initiatives and infrastructure development should somehow be linked to this core cycle of activity. As a cycle, the stages are interdependent and continuous. They are interdependent in that you cannot implement some stages without the others. Consider that: Customization of products and services for customers requires an understanding of who your customers are-- Interaction and delivery of increased value to customers requires development and customization of products and services to meet their needs-- Retention of customers requires this delivery of increased value The cycle is continuous in that relationships by their nature involve an ongoing series of interactions. As you repeat this cycle with any customer or group of customers: Your CRM strategies and initiatives will become increasingly sophisticated. Customers will take notice of what you are doing for them. You will thereby benefit from increased customer satisfaction, loyalty, and profitability, provided that you continue the cycle and continue to invest in customer relationships. As you move from one stage to the next, you gain insight and understanding that supports and enhances your subsequent efforts. As shown in the cycle, for any organization, business starts with the acquisition of customers. However, any successful CRM initiative is highly dependent on a solid understanding of customers. Thus, our discussion starts there. Understand and Differentiate You cannot have a relationship with customers unless you understand them--what they value, what services are important to them, how and when they prefer to interact, and what they want to buy. Customer understanding involves: Customer Profiling. This process identifies customer demographic and geographic characteristics such as age, size of household, and proximity to your nearest retail location. If you are profiling businesses rather than consumers, information such as vertical industry, number of employees, and company revenues is important. Customer Segmentation. The objective is to identify logical, unique groups of customers that have similar characteristics and demonstrate similar behaviors relative to the purchase and use of your products. While the promise of "one-to-one marketing" sounds appealing, identification and differentiation of customer segments is a practical place to start. Primary Research. This effort is undertaken to understand customer needs and attitudes relative to your products, services, and organization as a whole. Customer Valuation. You must quantify how and how much each customer group contributes to your organization's current profitability as well as future potential value. This understanding should become increasingly rich and increasingly useful as you continue to interact with your customers. Interact and Deliver Interaction is also a critical component of any CRM initiative. Interactive, interaction, interactivity--these are overused terms in today's electronic world, so it is important to define what we mean by interaction. For many the word interactive has become synonymous with "electronic" or "online." However, we cannot lose sight of the two-way reciprocal nature of the term. Most websites today are far less interactive than their offline counterparts. Most offline channels, media, and points of customer contact are far less interactive than they used to be. We have automated most customer touchpoints around efficiency rather than interaction. Therefore, our attempts to personalize those automated, mechanized touches that we have with a customer--by acknowledging them by name at the checkout counter or on their return visit to your website--are met with limited enthusiasm by customers. Remember that interaction does not occur solely through marketing and sales channels. Customers interact in many different ways with many different areas of the organization, ranging from distribution and shipping to customer service to your website. To foster relationships, organizations need to ensure that all areas of the organization: Have easy access to relevant, useful customer information. This could range from a customer's product or service preferences to their desired means of receiving communications from your organization. Are trained in how to use this customer information in order to tailor their interactions with customers based on both customer needs and potential customer value. With access to information and appropriate training, organizations will be prepared to steadily increase the value they deliver to customers. Acquire and Retain The more you interact with your customers and learn about them, the easier it is to pinpoint those of greatest value to your organization. This insight should drive your acquisition efforts as you attempt to attract those who "look like"; your most valuable customers. Your understanding of your most valuable customer segments can make these acquisition efforts increasingly effective, because you can target using the right channel, right media, right product, right offer, right timing, and most relevant message. Beyond acquisition, successful customer retention involves getting it "right"; on an ongoing basis. Successful retention of your customers is based very simply on the organization's ability to consistently deliver on three principles: Maintain interaction; provide an ongoing forum for a two-way dialogue and never stop listening. Continue to deliver on the customer's definition of value. Remember that customers change as they move through different life stages; be alert for the changes and be prepared to modify your service and value proposition as they change. In keeping with these principles, the CRM cycle continues. As you move from one stage to the next, you gain insight and understanding that enhances your subsequent efforts. Your development initiatives become increasingly sophisticated, as does your implementation of CRM processes and your resulting differentiation in the marketplace. What Are the Bottom-Line Benefits of CRM? If you were successful in making customer relationships your primary means of competitive differentiation, what might happen to your bottom line? Imagine these scenarios: What if you had more relevant and timely customer information accessible in the call center? What if your website was customized to customers' individual interests? What if your sales representative understood each organization's procurement process? What if your marketing communications were targeted to individual customers' interests and your offers were most relevant to their needs? While these all sound like wonderful improvements, the trick is to tie them to the bottom line. It may be obvious to you that these and other improvements have an impact on customer acquisition, penetration, retention, and reactivation. It becomes even more obvious that changing these customer metrics can have a major impact on revenues, profitability, and competitive differentiation. Yet unless the relationships between these factors are clearly quantified, the broad impact of CRM across your organization may go unrecognized or understated. Therefore, it is important that you are able to project how your improvements relate directly to your organization's bottom line. According to Terri Dial, president and CEO of Wells Fargo Bank, "Much of the time, the opening of a new customer account is simply an opportunity to lose money. Most single-account households are unprofitable. We have to build a relationship to make a profit. If we can build a relationship, then we can keep a customer. If we keep customers through relationship building--and not product pushing--they will reward us by buying more, buying profitably, and keeping more of their money with us." Dial's understanding of customer relationship management is definitely a key to this top-tier financial services organization's success. The bottom line is that CRM initiatives can affect all aspects of provider behavior and related customer behavior. Costs can be reduced and revenues increased. If your efforts can influence even a single behavior or customer-related metric, the payback can be enormous. Your investments in CRM initiatives will result in exponential returns, provided that they are executed well. Consider the cost of not implementing CRM. Consider the gradual or rapid exodus of your customers...Can you really afford not to implement CRM? Excerpted from The Customer Differential by Melinda Nykamp. Copyright © 2001 by Melinda Nykamp. Excerpted by permission. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.