Driving Customer Loyalty in the New Economy
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What keeps executives up at night? I've talked to many of them in my career and almost always the topic of conversation focuses like a laser beam on the issue of market share. Not surprising really - even a first year MBA school student will tell you that market share is the life-blood of businesses. The formula for increasing/keeping market share used to be well understood: build a great product, market and sell it effectively, keep operational costs in line and watch your business grow.
So what's the problem? In today's world the economic freeway is littered with the road-kill of companies that followed this formula. The painful bottom line is that the world has changed - attracting and (more importantly keeping) customers has become the top imperative for market share success.
Those pesky customers! The internet economy has brought unprecedented visibility, personalization, control and accountability directly into the hands of customers (witness FedEx, Amazon). Now ALL businesses are expected to deliver these precious assets - and if they don't, switching costs are lower than ever. Consumers are more willing than ever to chase a 'better deal' by moving their banking, long distance, mobile phone, package shipping, cable TV, consumer electronic and book purchases from one company to another. The commoditization of whole industries, combined with deregulation and tough economic times only means this trend will continue - and not in favor of enterprises that don't take care of their most precious asset: their customers.
The Five Steps to Customer Service Nirvana
So what's an over-wrought CEO to do? Canceling CRM initiatives to save money is certainly not the right answer! Customer defections will certainly result - and that's expensive. Many now famous studies from Harvard and others have confirmed that in many industries, it costs at least 5 times more to acquire new customers than keep existing customers happy. So how do companies increase market share, while lowering Total Cost of Ownership (TCO) at the same time? The solution is a measured approach to customer care that involves 6 essential ingredients.
1. Establish a customer-focused culture throughout the organization
Let's face it - if it's not your problem, why worry about it? Many companies have incorporated this philosophy into the very fabric of customer satisfaction. They seem to think that the only department that owns keeping customers satisfied is the service organization! As consumers, we all know this is not the case. In the end, it doesn't matter whether you lose a customer because they have a negative experience dealing with a clerk at a branch office, a field service technician, someone in finance, or a sales person. The end result is the same - the customer is gone. And the service organization is often tagged as the guilty party.
The very first step to establishing a world-class, customer-focused enterprise is to change the essential culture of the organization. Make customer satisfaction a priority - everyone's priority. Measure satisfaction (see Number 3 below) and then adjust compensation plans to remind everyone what's at stake. Talk about delighting customers - at staff meetings, in company meetings, in the lunch room, on conference calls and in email. Invest in employee training on how to deal quickly and effectively with customer issues. Make sure employees have the tools they need to handle current customer issues effectively. Employees will not only begin to get the message, but you'll be surprised how creative and eager the organization will get behind this kind of initiative.
2. Make sure there is executive ownership for CRM initiatives
Time and again, CRM initiatives fail because they are delegated "down" to the "appropriate" department. The fact is, building a world-class customer service company has to become an executive sponsored program, with board of director's-level visibility and accountability.
3. Establish plans and ROI metrics
This is where the rubber meets the road. There are many books and guides on the market today to help build and calculate ROI models for CRM programs - we won't try to cover that vast set of material here. But at the end of the day, they can all be boiled down to one of three incentives: increased revenue, decreased costs or improved customer service. What's important is to have absolute agreement on what's important for YOUR organization.
Approach the problem of ROI methodically - remember this is a science, not an art. Invest the time and effort to build a critical set of tools that will help nail this down:
CRM ROI Model: this tool will allow you to calculate benefits of CRM investment - whether it is increased sales productivity, lowered costs in your contact center through reduced call loads (i.e. web-self service), or fewer field service dispatches, to name some examples. Total Cost of Ownership (TCO) includes three essential elements: people costs, technology costs and process costs. When calculating ROI, be careful to take into account all elements that make up the TCO of the program - not only obvious costs like technology, but so-called 'hidden' costs like customizations, training, staff turnover due to skills mismatch, maintenance, and business process changes, to name a few. Successful program managers will also build in monthly assumptions and best case/worst case scenarios into the TCO model. And make sure to understand not only the cost/benefit calculations, but the time it will take to break even on the program investments. This becomes extremely important when setting expectations to the executive team.
CRM Project Plan: this is a detailed, week-by-week map of the people, technology and process tasks that must be accomplished to achieve success. It may sound obvious, but make sure to write down a detailed list of functional, process and reporting requirements for your customer care system. Get everyone on the project team to agree on the list, including what's most important to get done first - a phased approach to implementation is often a key ingredient to success (see Number 3 below). Once you build the plan, expect it to change. But make every effort to keep the plan current and use the plan as a religious 'reality check' on progress. The project plan can also be an effective vehicle for fighting the inevitable 'feature-creep' that takes place in large-scale CRM projects. There should be executive-level visibility and accountability into the project plan.
Make incremental improvements - don't try to reinvent the world
Remember Rome wasn't built in a day. Neither are successful, customer-focused organizations. While the vision of blended sales, service and marketing is often pushed by vendors, in reality most successful CRM projects focus on a single functional area or department. As part of the planning process detailed above, decide on a reasonable, achievable set of goals and objectives for each phase of the program. Understand that process and culture changes often take longer to implement than the technology itself.
4. Invest in the right technology
The CRM market will undergo an important set of changes in the next couple of years, caused by the 'technology backlash' we are now experiencing. Hard to believe, but vendors have been over-committing and under-delivering on the promises of CRM! The heady days of the late '90's economy have given way to some fundamental truths:
Second generation CRM solutions are expensive to implement - often 3 to 5 times more expensive than the software licenses themselves. Customers often find that a vendor's own application suite does not integrate or upgrade from one architecture version to another. Customization and integration are necessary for any CRM technology on the market today - but excessive and unplanned costs have blown many a corporate CRM project budget and timeline.
So choose technology that is easy to customize. Demand a product whose customization costs are less than the license costs. You should also ask to see how much of the product can be customized by non-programmers - nothing is more irritating than having to make simple changes in workflow, service level agreements or the GUI of the application and having to 'wait in line' with the IT department.
Second generation CRM solutions don't reinforce cultural and process changes required to make CRM programs successful. In the old model, only the agents in the call center, or the sales force have access to the CRM system. Why? It's too expensive to purchase licenses and customize for all the other groups that need access to the system. This reinforces the cultural message that only the customer service organization owns making customers. As we've discussed, all the money in the world invested in technology will not guarantee improvements in loyalty, if the entire organization - and indeed, the entire value network - does not own customer satisfaction.
Call avoidance is not the onlystrategy - much has been written about Web self-service as an effective call avoidance strategy designed to lower customer service operations costs. While effectively implemented Web self-service for repetitive solutions should be part of your overall CRM strategy - don't rely on it to solve complex problems or drive increased revenue. And don't expect customer satisfaction metrics to automatically improve solely as a result of this strategy. We've seen poorly designed Web self-service systems actually increase calls into contact centers.
How do you attack the cost/benefit opportunity for more complex issues that can't be solved by the customer themselves? Solving complex issues demands collaboration - with the customer having full roles-based visibility into the progress of the solution, not just the status of the case. Need proof? Just look at FedEx - they were the first to deliver this kind of visibility and accountability in their industry - and ended up changing things for everyone.
Best of breed still makes sense - while many CRM vendors aggressively market integrated application suites, don't automatically assume that's what you need to be successful with your customer care initiative. Integrated sales, marketing and service systems are the 'Holy Grail' of CRM, but most CRM projects today are still departmental in nature. And it's often the smaller companies that offer the most innovative and cost-effective products - solutions that may be a better fit for your immediate needs. If this is the case, understand the trade-offs involved and make sure the vendor you partner with has a product road map that's in sync with your plans.
Architecture matters - make sure to choose a solution that 'future-proofs' your investments in technology. Look for a 3-tier architecture that is standards-based (e.g. J2EE, SOAP, BEA Weblogic, IBM Websphere, etc.) and gives you flexibility in integration (a major additional cost for many CRM systems), upgrades and adding new components to the system.
5. Ruthlessly measure progress against plans
Once the CRM initiative is underway, make sure to measure progress against the project plan. Most successful CRM projects roll out pilot implementations to a smaller customer set before unleashing the whole customer service system all at once. It may even be helpful to run focus group studies with customers to get direct feedback on how the system is designed before delivering the final version. The benefits are obvious - you can learn, make mistakes and tune the system without putting the entire customer base at risk. You may also find champions within the customer base ready to validate your approach.
When the full CRM system goes live, use the metrics developed in Number 3 to measure the effectiveness of your customer focused system, processes and culture. Be prepared to fine-tune the approach as you gather data. Make sure to aggressively internally market positive results, as this will be the fuel you will need to take the next steps in your phased project implementation.
Tough economic times are putting even more pressure on large and small organizations to become customer focused. Customers - the life-blood of business - are demanding accountability, visibility, security and control in all their interactions with companies. Despite the failing record of many CRM initiatives to-date, there are some effective ways to use technology for competitive advantage. By following a few simple rules and keeping your objectives clear, companies can reduce risk and become the customer-oriented leaders in their industries.
[Mitch Bishop is Vice President Marketing at TightLink Corp.]
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