When well-run businesses are mom-and-pop small, customer relationship management (CRM) is as seamless and automatic as office gossip. Every worker knows who the regular customers are and their preferences and peculiarities. Everyone knows which customers pay their bills on time and which spend the most money with the company. Better yet, this valuable information is routinely used to build a growing list of loyal customers willing to pay for the services they value.
“Ed? Hi this is Matt Barry down at A-1 Trucking. You still want that load of plywood? Well, we're making an extra run to Oregon tomorrow and we could put it on the flatbed for you. Great. Consider it done.”
Today, in the world of big corporations, highly mobile workers and numerous product and service choices in every market category, building a file of loyal paying customers through superior personalized service is much tougher to achieve, even for companies with the will to do so. How many times have sales managers heard the complaint, “We were just starting to get somewhere with that account. Now they've got a whole new team of people onboard, they're considering other options and it's back to square one”?
In its earliest days, computer-based CRM systems were generally viewed as a way for even the largest companies to capture and store detailed information about customers with the eventual goal of delivering more personalized service.
“CRM in the past was often viewed as a data collection exercise,” says Thilo Koslowski, lead automotive analyst for Gartner 2. “The process was sometimes burdensome and companies were simply expected to know how to use the information. As a result, a great many CRM systems are still under-utilized. Now there's a much stronger focus on analytics, on using customer information to help improve various businesses processes within an organization from sales to product development. The goals have changed, too.
CRM REVISITED AND REVISED
“Today, there is really a second wave of interest in CRM,” Koslowski observes. “Companies are looking at how they can use CRM to build customer loyalty, create new processes that become category differentiators and expand their success. There are huge opportunities within the automotive and trucking industries.
“Think about how Lexus focuses on providing a great customer experience, for example,” he explains. “They collect lots of information from each customer and use it the next time that customer interacts with the company to make his or her experience even better, from service scheduling, to loaner cars, to doing a good job explaining the work that was done on the vehicle, to completing a quality vehicle inspection process.”
Lior Arussy, founder and president of Strativity Group, Inc. (www.strativitygroup.com), a global consulting firm advising organizations on creating lasting and profitable relationships with customers, agrees. “The core CRM question is, ‘How can you justify your price?’” he says. “Good CRM implementation should help you discover how to extend the total value and total experience customers have with your company. It should help you to know which are your most profitable customers and how to make them want to do more business with you.”
At Strativity, CRM is referred to as CEM, Customer Experience Management, stressing the importance of customers' actual experiences with a company rather than the more abstract idea of relationship building.
“Many companies are taking customer relationships for granted,” Arussy explains. “CEM is not about taking advantage of a loyal customer base to do things like cross-sell or up-sell. It is about delivering extremely attractive, alluring and positive experiences routinely, about loving your customer so much that their loyalty is not really a financial decision.
“Organizations have to be able to look beyond their core function (in the case of fleets, moving freight) to the total customer experience, the total process. Customers, including shippers, will always be price sensitive,” he adds, “but the problem is not with the customer. Companies have to have more to give them.
“In various industries where the services are often seen as a commodity by customers, we see the same patterns,” Arussy continues. “Companies can't maintain their margins; they can't keep their value proposition; they can't even keep their customers. We believe that there are no mature, tired industries, only tired executives who do not have the energy to re-invent themselves.”
An example Arussy likes to offer is Starbucks. “If pricing is always the key deciding factor for customers, how do companies like Starbucks get away with it?” he asks. “Coffee is a mature market, thousands of years old. The real cost of each cup of Starbucks coffee is much less than the selling price and everybody knows it, but customers are happy to stand in line and wait their turn to pay for the experience.”
“CRM can't fix everything, but it can help companies to look past pricing to other things that even price-sensitive customers may consider worth paying for,” adds Thilo Koslowski. It can help you to identify your high- and low-value customers and understand what they each really care about.”
NEW METRICS FOR SUCCESS
“It is important for companies to define their business strategy first, including the role the customer plays,” Koslowski notes. “Then you can decide how you will develop processes to accomplish that and finally how you can apply technologies like CRM systems to help get the job done. Technology is a great aid because it enables you to gather customer data almost seamlessly and then analyze huge amounts of information, but that is part of the process, not the point. Companies themselves have to grasp CRM as a guiding principle, a core value.”
“Customer experience management is really a strategic approach to loving your customer and getting them to pay for it,” Arussy adds. “This means that the old measures of success like customer satisfaction are not sufficient. In addition to rebuilding processes, companies have to rebuild their scorecard, too. The new metrics for success should include:
The percentage you get of customers' total budgets for this category;
Customers' willingness to pay a premium price;
Customers' expressions of strong preference for your company.
These measures indicate when you have connected with customers beyond your core function. They tell you when your company is delivering experiences that your customers really value.”
Customer service: promises vs. reality
New Jersey-based Strativity Group, Inc. recently completed a year-long study of attitudes toward customer loyalty and customer experience management on the part of customer service and marketing executives in the United States and Europe. According to Strativity founder and president Lior Arussy, the study found major discrepancies between companies' messages about the critical importance of their customers and the daily realities of their businesses.
“CFOs and other executives miss a lot because of their limited perspective,” Arussy notes. “They look at their businesses in a purely transactional way, which results in a lack of real understanding about what their customers are seeking and actually experiencing.” For example, even though customer service is high on the“declared” agenda, the Strativity study found that:
The study describes these results as “alarming,” and concludes that: “If the general conviction among the leaders is that about two-thirds do not have the tools, authority or investment to service customers, they will act accordingly. The likelihood of delivering excellence and differentiating service is remote. In an era with an ever-increasing commoditization of products and services, companies are increasingly more dependent on their service personnel to create differentiating, premium, commanding [customer] experiences. The results indicate that they are far from being able to do so.”
Only 37% of the survey respondents agreed that they have the tools and authority to solve customer problems
46% reported that their executives are not meeting frequently with customers
60% claimed that their relationships with customers are not well-defined and structured
Only 32% claimed that their compensation is tied to quality of service
Only 36.9% agreed that their company invests more in its people than technology
“An integrated approach to identifying, acquiring and retaining customers…CRM helps organizations maximize the value of every customer interaction and drive superior corporate performance.” — Siebel Systems, Inc., (www.siebel.com) a major provider of CRM software solutions.
Smaller is better
Big customer satisfaction from small work groups
Dr. William E. Halal, Professor of Management, Dept. of Management Science at George Washington University, is widely recognized as an authority on strategic management and emerging technologies. He has written and lectured extensively on what is working and not working in American business today, including a recent article for The Futurist, “The Intelligent Internet: The promise of smart computers and e-commerce,” (March-April 2004) and a book “The Infinite Resource: Creating and Leading the Knowledge Enterprise” (San Francisco: Jossey-Bass, 1998).
Fleet Owner magazine recently had the opportunity to talk with Professor Halal about the theory and practice of Customer Relationship Management (CRM) as it exists in corporations today.
FO: Has the use of automated Customer Relationship Management (CRM) systems improved the level of customer service overall?
Halal: Routinely capturing, analyzing and utilizing information about your customers in order to help guide strategic business decisions and enhance customers' experiences with your company is certainly a worthwhile activity. After all, the customer is really the only one who knows what he or she wants, what they value in the way of service and what his or her actual experiences with your company have been.
That said, however, a good deal of what has been done in the area of automating customer relationship management has simply been automated complexity — lots of people spending lots of time entering lots of data that is not used as intended to build loyalty among the customers you want to keep.
FO: In your opinion, then, why have so many CRM programs failed to deliver as promised?
Halal: It seems to me that one of the basic problems is with the structure of big organizations. There is often not much connection between top management and the people on the front lines who really deal with customers every day. Sometimes these employees do not even have a clear understanding of what is expected of them in terms of customer service, what actions they can take on the spot to address customer problems or why doing it right matters to the company. There are also no incentives and rewards in place for doing the right thing for customers, even if employees know what that is. Instead, bonuses and recognition are offered based upon other metrics entirely, such as meeting sales quotas, signing up new customers or reducing operating costs. Customer service may be first on the company mission statement, but last on the employees' to-do list.
FO: Do you have an alternative for companies that are serious about building a solid base of loyal customers who value (and are willing to pay for) the level of service they receive?
Halal: If large organizations were to divide themselves into a collection of small profit centers, small business units with small sets of customers, they could recreate the customer service dynamics of the mom-and-pop business. Imagine, for example, having teams of technicians running their maintenance bays as small businesses-within-a-business with clear measures of performance, profit goals, financial statements and so on. They would know all their customers and all their customers would know them.
When this happens, everything else falls into place. These small business units find ways to manage costs, to create loyal customer bases and to grow their businesses because it is in their own best interest to do so. You have created a structure where people feel a sense of ownership and responsibility, where they can say, “This is my unit. I know we can achieve these things together.” There is no technology substitute for this level of personal commitment and involvement. In the largest sense, this is really a matter of applying our principles of democracy and free enterprise to the business environment.