295 — Four Smart CRM Decisions

by David Sims, CRMGuru.com Contributing Editor
Thanks to CRMGuru.com

If you could sum up in one word the outcome of all smart CRM decisions, that one word would be “loyal relationships.” And anyone who thinks “loyal relationships” is two words needs to keep reading.

“Loyal.” As in customers’ loyalty to a company—your company, darnit. Loyalty—everyone knows nobody has it, everyone wants everyone else to have it, how do you foster it? There are smart CRM decisions you can make to acquire and maintain customer loyalty—and they’re not hard to make or understand, they’re just tough to do.

Favorite corporate mantras are “reduce costs” and “increase customer loyalty.” In their newsletter, Inside 1to1, Peppers and Rogers revealed that Cisco Systems’ Web-based CRM strategy, involving sales, service, order tracking and software downloads has saved Cisco nearly $270 million in operating expenses. Bully, but “the greater benefit is Cisco’s reduced customer attrition and increased customer loyalty,” they say.

Brief history of a dark time: During the late 80s through the early 90s, attempts to “reduce costs” were ascendant. This and this alone was seen as the solution to increased competition. Businesses inflicted gruesome campaigns of delayering, reengineering and restructuring on their people. Didn’t work, did it? Probably because land, labor, and capital are no longer at the heart of growth. Nowadays businesses are channeling all that holy zeal to efforts that promise to “increase customer loyalty,” ever since someone figured out that serving customers better than your competition encourages them to return for more and be a little less price-sensitive. In other words, through a consistent, ongoing relationship that builds loyalty businesses stand to benefit from many more purchases that each customer will make over the years.

When my wife and I were living in Istanbul we would walk past any number of corner markets to shop at our regular bakkal—in large part because the proprietor, Remzi, could have written the CRM textbooks for Harvard Business School. Just as seminal Swiss psychiatrist Carl Jung, upon reading William Blake’s poetry declared “there is nothing I have said or written about the mind that this man did not know,” there’s nothing about proper, correct CRM that Remzi doesn’t do intuitively, since if he didn’t have a firm base of loyal customer relationships he’d be stocking shelves in a bakkal that did.

“If you’re a corner store or small business, you can know your customers well and take care of the relationships you have,” says Janice Anderson, vice president of CRM Solutions for Lucent Technologies. “You get more of their wallet and loyalty since you have taken the time to care about them. Your growth strategy commits to relationships with customers.” This is the idea, after all, behind such “loyalty” programs as air miles

Julie Fitzpatrick, senior vice president of marketing for Chicago-based eLoyalty, agrees. “Loyalty,” she says, “is the result of building past positive experiences with an individual that builds trust and, ultimately, loyalty. Recognize the unique situation of a customer at any point in time,” Fitzpatrick says. “Consider the customer’s value, their current business situation, proximity to purchase and history of goodwill to the organization.”

Sermon illustration: Remzi would take credit if we were short that day. If my wife had already bought the yogurt he’d tell me not to. When we balked at the dubious-looking—to Western eyes, although they were delicious—tub of fresh apricots from Konya he let us try a couple—he knew if we tasted them he’d sell a few kilos. If we got bad eggs he’d give us replacements. When the really good fresh figs and hazelnuts came in he’d point us to the right bin. Hey, he knew how many bakkals we walked past every day.

Prescribing rules that recognize this uniqueness entrenches the customer-centric approach. Let’s say you’ve just shipped the last sack of Kona coffee beans out the door, and a high-value customer orders a hundred sacks. Anyone can and would say “Oh, gee, sorry, we just shipped out the last lot. Look, you get the first hundred sacks that come in.” That’s not CRM. Knowing if that customer would prefer a groveling e-mail or a groveling phone call apologizing, promising an all-out effort to scrounge the order, free expedited shipping and offering a five percent discount on their next order, and writing that down as official company procedure, that’s CRM.

Measuring the effectiveness of these actions against loyalty is, in Fitzpatrick’s estimation, “probably the most neglected area in CRM.” Organizations need to thoughtfully measure if such actions actually move a customer to buy more, select other items from your company and tell their friends about you. A friend wrote complaining to barnesandnoble.com that she couldn’t send a gift certificate—she’d missed a link on the site. They sent her an apology and a $10 gift certificate—and it was her fault! She’s spent a couple hundred dollars with them since then.

“Relationships.” The point of loyalty, of course, is to build customer relationships. Great service—still the much-appreciated exception rather than the norm—is necessary, but not sufficient for relationships, which is why they call it Customer Relationship Management, not Great Service Management. “If you give poor service you won’t have a relationship for long,” Anderson says, “and even if you give great service, you might not have a relationship if you don’t take care of that relationship, knowing your customers’ preferences.”

If you stop at service you might not get to the great relationship. In Anderson’s view you also need what she calls “the keys to understand how to do CRM”:

-Knowing who you want to serve. Identify your customer segment, your high-value customers and what they like.

-A clear picture of who you are in the matter of serving them. What’s you value? What are you really selling them? Are you reliable? Are you the most creative? “It’s not just a list of products, you need to focus on what you’re trying to be to your customers,” Anderson says.

-Consistent service. Consistent service is great service, says Anderson: “Design what consistency looks like. It’s a version of the brand; you almost never have an experience where the brand goes nowhere, with every interaction it goes up or down. If you consistently deliver on promises you’re fulfilling your brand.”

-A low-cost structure. An e-business perishes without one. It’s part of the business model in almost every industry now—if you keep operating as if you’re getting $200 a trade when you’re getting $8 a trade you’re going out of business fast.

If you’re a Turkish corner bakkal you have the institutional memory to do this intuitively. More sophisticated operations—Turkish Airlines, say—need a set of e-business tools to take care of customers in the moment and consistently provide that “know me” experience customers crave.

The negative way to express all this, of course, is “exit barriers,” as if you’re trying to build the Berlin Wall around your client base. East Germany concentrated on exit barriers, West Germany concentrated on giving the citizenry enough reasons not to emigrate. Lycos’ giving out “Lycos Points” to users of their portal is CRM, Microsoft presetting its Explorer browser to default to MSN as a homepage is an exit barrier. Some would call AOL’s highly successful customer collaboration program an “exit barrier,” but to me offering chat rooms, buddy lists and instant messaging sounds suspiciously like well-practiced CRM.

It gets murky—is process integration an exit barrier or good, aggressive CRM? Probably a bit of both. Integrating business processes with customers to improve speed, quality and cost is good CRM, but when the relationship becomes onerous for one of the parties it sure must seem like a ball and chain. But most of what goes under the rubric “exit barrier”—mass customization, risk reduction and trust, brand affinity, collaboration, and personalization—can do without the negative connotations. It’s the flies and honey deal.

“Strategically, as you’re moving customers up the ladder of loyalty, you can deepen bonds using CRM since both parties share in each others’ planning,” says Jim Blaschke, CEO and managing partner of Framingham, Mass.-based Archer Consulting, Inc. “You get good feedback, and it’s much more a symbiotic relationship instead of just one organization selling some stuff to another.”

Right now the paybacks to successful CRM are extraordinary. In a couple years your payback for getting CRM right will be staying in business because, as Anderson says, “the young MBAs these days aren’t going to work in New York. They’re sitting around thinking ‘how am I going to disrupt things?’ They’re applying creativity to places where things are going to get disrupted and then everyone will have to adapt. That’s going to add a lot of value. It’s going to unleash a lot of value and a lot of disruption.”

The smart decision, since you can’t beat ’em, would be to join ’em.

Dossiers – Empresas