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Issue of May 2005 

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Find, get, and keep them for good

CRM today goes much beyond the old principle, 'The customer is always right.' In its simplest form it's all about the processes and systems that let you to find, get, and keep your customers for good. by Jaspreet Singh

Imagine a world in which you can easily locate and buy the products you need, and receive ongoing service and support. Imagine that the provider naturally understood the products that are most relevant to you, the price you are willing to pay, and the most effective way of communicating with you. How would it be if the provider also understood the level of service and support that you expect, your preferred communication channels, their value to you and them, and what it would take to increase your loyalty?

What if the provider not only knew this information, but was also 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 CRM. For customers, the result is increased relevance and value.

CRM has its roots in the age-old principle of 'The customer is always right.' But CRM is much more than that since it identifies how to profitably act on that axiom-at all times and across all channels and functions. Moreover, even in its simplest form, CRM defines the way a company finds, gets, and keeps its customers.

The CRM bandwagon

Why are so many within the business community jumping on the CRM bandwagon? One could list a number of possible reasons relating to socio-cultural factors, and business and technical advances, but the real impetus for CRM today is its promise of competitive differentiation in a parity environment.

Today's corporates find it increasingly difficult, if not impossible, to compete on the basis of product alone. Technological advancements have enabled the near-immediate replication of product features and functions by competitors. These days just a few weeks stand between a new product launch and a saturation of the market with similar, reverse-engineered products made by competing manufacturers.

Can you think of many products that are truly unique? I can't. Price, which has traditionally been a basis of competitive differentiation, is no longer a means for many companies to compete. Complex channel networks have caused parity pricing. Promotional strategies no longer provide the necessary means for differentiation since buying clubs abound, and special offers and sales are the norm.

The adoption of a CRM strategy can provide a more meaningful sales and service experience. It can give customers a reason to frequent your business rather than that of your competitors. It can be a means of differentiation.

Businesses that adopt CRM recognise that their customers make buying decisions based on their overall experience-an experience that not only includes product and price, but also sales, service, recognition and support. If companies can get all of these factors right, on a consistent basis, they will be rewarded with ongoing customer loyalty and value which results in a larger profit margin.

Talk of the town

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 the need to keep customers coming back. Perhaps the closest business movement was the customer satisfaction efforts of the eighties.

These customer satisfaction initiatives, however, often ended with common means of measuring, but not necessarily improving, customer satisfaction. CRM is actually much broader than the principle that the customer is always right; it identifies how to profitably act on that premise, at all times, across all channels and functions.

Optimal value

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. They 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.

Strategic perspective

For companies to realise the full potential of CRM—ensuring they get the best return on their CRM investments and aren't wasting precious resources on building unnecessary capabilities—they must begin to incorporate a strategic perspective into all of their CRM efforts. In particular, they must address four critical strategies, and understand the key interplay between them, before investing in any CRM project.

1. Customer - Identifying the customers that the company wants, based on its existing business model and corporate mission.

2. Channel - Selecting the most appropriate and effective channels for reaching these customers.

3. Brand - Understanding how all interactions with customers (and not just advertising) contribute to the company's brand value.

4. CRM - Determining the most appropriate CRM capabilities for supporting these critical interaction points and channels to reach the chosen customers.

Internet's influence

It's impossible to discuss CRM without bringing to the fore the exponential growth of the Internet and its subset, the World Wide Web. The tremendous growth of the online community (business- and consumer-based) changed how a company manages its customers, and thus changes the very definition of customer relationship management.

Due to the influence of the Internet, businesses increasingly find that their customers are demanding the ability to interact with them in real-time. Yet, because the traditional customer relationship management systems are meant for use through independent channels, many a company stumbles in its delivery of a consistent customer experience across all its channels-from pre-sale to post-sale support.

Today's CRM tools provide linkages and integration of data from and through all customer touch points. The businesses that have integrated this new breed of CRM tools now have a competitive advantage.

Take the example of a company that has linked its website to its call centre. Now it can track a customer's sales history and buying habits. When a customer logs onto its website to buy an item and encounters a problem, an agent in the call centre can simultaneously talk to the customer, view the customer's history, and devise a sales pitch for a new item on the spot. The interaction may also yield valuable information about buying habits, which, if stored and analysed correctly, could affect future products or services. The result? The company has a satisfied customer, made a sale, and may have learned a bit more about its customer in the process.

Horror stories

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 programme that only captured a third of your total activity-and then rewarded you with irrelevant marketing promotions.

The central question is, how can you as a provider prevent those experiences that you as a customer would never want to encounter? How can you as a provider ensure that your customers have nothing short of wonderful shopping and service experiences? The key to any business' future success is its existing profitable customer base. This is accepted marketing wisdom, but sadly, it's one to which many companies just pay lip service. Here is how serious the problem has become.

Studies show that close to one-half of the businesses in operation today cannot identify the main causes of customer turnover even after the customer has been lost. Out of the small majority that state they can identify the reasons for their customer turnover, only a paltry 20 percent or so could specify how the process worked.

But even in that small group there was a noticeable inability to predict when a customer was at risk. If a company can't identify the customers at risk (which almost the entire business community admits it can't), what's to keep these companies from losing their most profitable customers?

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.

The author is Consultant, Business Solutions, IT Risk Management, PricewaterhouseCoopers


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