The Quest for Customer Centricity--Part II

Editor's note: In the November cover story for CRM magazine, we identified the first three of nine steps you should take in your quest to achieve customer centricity. They were:

The First step: Locate your starting point.

The Second step: Determine if your focus is where it should be.

The Third step: Establish a baseline.

In this, the second installment of the series, we will discuss the remaining tasks in this process and offer additional tips on motivating employees to buy into your company's transformation.

The Fourth step: Re-assess how you segment and value clients. You probably know who your biggest customers are--after all, it's in your company's best interest to focus on them. Often, however, the traditional metrics used by organizations to identify key clients aren't the most effective ones. This was true at Cable & Wireless, a 140-year-old British telephone company whose focus for future growth is on global IP and on data services and solutions for business customers.

As a telephone company, Cable & Wireless segmented customers based on size, meaning a Fortune 500 organization would have priority over a midsize customer, even if the midsize client accounted for more business. Recently, the company re-evaluated this method and began utilizing different metrics.

"We're looking at other factors, such as the revenue generated by each customer," explains Cory VanGundy, senior director of e-enablement at Cable & Wireless. "We've now geared segmentations more towards what we are delivering to the market--representing a move away from the voice and "commoditized" types of products and into IP. And we're building in other relevant data as well, like a client's proximity to a POP (point of presence)--the little box you see on street corners. If they're near a POP, it's less costly and more efficient for us to service them, so we're factoring that cost savings into the equation."

As VanGundy's example illustrates, sometimes segmenting purely on revenue-per-customer doesn't go far enough. Gartner analyst Gareth Herschel agrees. "Often," he says, "companies try to simplify a multidimensional customer relationship into a single dimension--such as profitability. Their goal in doing so is to stratify their marketing, sales and service to respond to the client, but by limiting the client to a single dimension or segment, they can miss the more fundamental aspects of the relationship. The rule of thumb is that statistical segments do not equal customer segments."

To further illustrate this point, Herschel cites credit card companies, which have at least three segments of high-value customers: those with a high revolving balance, those with a high transaction volume--which earn hefty commissions from retailers--and those with infrequent large purchases that take several months to pay off. "In terms of profitability," he says, "each segment may look similar, but their relationships with the company are very different. Likewise, the optimal nature of the relationship each should have with the company is very different." Treating each of these customers the same because they account for a similar amount of revenue--while not necessarily a bad tactic--might not prove the most optimal strategy in terms of generating further profit.

From a valuation perspective, it's also important to view customers not only in terms of how much revenue they're responsible for, but also in terms of projected growth for their industry and their potential within that industry.

The Fifth step: Identify profitable behaviors and the
factors that promote them. Among customers that account for the majority of your revenue, which behaviors do they share? How can you better encourage those behaviors, especially within other segments of your client base? For instance, Herschel says, should you encourage calling into the service center because it provides a cross-selling opportunity, or should you discourage it because it's more costly than sending key clients to your Web site?

According to Herschel, as you identify profitable customers and their behaviors, it's important to factor in each client's location within its lifecycle and also its potential lifetime value. If a not-so-profitable customer today matches the profile of some of your highest revenue-generating accounts, more attention from you now might prove sufficient to increase the value of those customers at present or in the future. "Every company," Herschel says, "should be identifying factors that help it pinpoint, acquire and retain customers that will be profitable in the long term."

The Sixth step: Put your face in front of the client. One of the best ways to understand and respond to customers is to spend one-on-one time with them. As numerous organizations are now discovering, there are lots of innovative ways to do this. Monthly or quarterly, for instance, you might assign sales or service employees to touch base with key clients--either in person or by phone. Rather than being a sales call, this contact enables you to take a temperature of the relationship and ideally, to offer some type of value-add (such as pertinent industry information). Outside of your largest accounts, employees should regularly touch base with a random sampling of the rest of the customer base as well.

Another strategy that sends a powerful message and helps nurture extra-strong relationships is sending certain employees through a client's internal training programs. Employees could also participate in work sessions, says Craig Cunningham, CEO of Customer Integrated Solutions, a consultancy that helps companies sustain growth through client-driven initiatives. "I've been involved in a couple of situations in which companies scheduled work sessions with their largest clients," he says. "At one of these, they're video taping the sessions and showing the videos to about 10,000 employees. That's a great tactic. It puts a face on the customer for your entire workplace and helps drive employees' understanding of client needs."

Cunningham is also a big proponent of customer observation, citing Intuit as an example. During its development of Quicken, Intuit brought users into labs and even sent engineers into people's homes to see how they used the product. Doing so took engineers a step beyond what customers verbalized and enabled them to see how clients physically used the product. "This type of observation gives you a depth of understanding beyond which customers can articulate," Cunningham says. "It gets you past what clients think they need and helps you see what they really require."

The Seventh step: Review your roster. One hot trend of late is that of adding a new title to the executive roster--that of the chief customer officer (CCO). This person, which sometimes leads a team, drives client relationships from the highest levels and functions as a liaison between customers and the company. When this title appears in the corporate ranks, it sends a strong message to customers that they are taken seriously.

According to Jeff Friedman, whose company, North Highland, provides management and technology consulting services, a chief responsibility of the CCO is to determine how customers should be treated. When the customer contacts the call center, for instance, they should be treated in X manner. If the customer fits X profile, they should have X type of interaction. When the vice president of sales calls on them, he or she should provide Y level of service based on parameters defined for that client segment.

Friedman says that many organizations are not yet ready to put someone in the CCO slot. "Among other things, the CCO is in charge of driving the processes that foster customer centricity, but this person can't be effective if no formal processes are in place." As an interim solution, Friedman recommends creating a migration path to the position. "You might say, 'Here's how a CCO would look in this organization. Here's how we can realign around customer segments. But we haven't redefined our segments well enough to put someone in charge of them yet. Let's put interim people in charge of the segments until we've developed sufficient understanding, at which point we can officially designate a CCO.'"

The Eighth step: Flip the hierarchy. In realigning around the customer, many businesses will achieve greater success if they can flip the organizational hierarchy on its side. This doesn't mean the CEO no longer sits at the top. Rather, various positions in the company become "service providers" to those owning the customer interaction.

Think of it like this: A director of customer service may not officially report to the vice president of sales, but if the call center is highly sales-oriented, then the director unofficially functions as a service provider to the sales vice president. "We're not talking about hard-line reporting here, but rather a situation in which various people become service providers to whomever manages customer touch points," Friedman says.

Friedman says that change like this can't happen overnight, and again he recommends creating a migration path. "It's a bottom-up approach. You can't just anoint a person the title of CCO and announce that everyone is now a service provider to this new position. That tactic doesn't take into account the gradual change employees must go through. People have a very traditional notion of the hierarchy--especially when they're executives who ascended to their roles through the traditional chain of command--and it's a big change for them to think of servicing someone else."

The Final step: strategize and execute. You've surveyed clients, met with them in person, and taken numerous other steps to better understand their needs. You've also taken a fresh look at your customer segmentations and revamped the way you value key clients. Now for the tricky part: Doing something with your findings.

Unfortunately, there's no universal battle plan. Each company will have its own unique quest for customer-centricity, based largely on its individual strengths and shortcomings. Still, a few factors are worth emphasizing.

First, it's critical to develop processes that enable you to act on your findings. Without such processes and someone who officially drives them, the quest is doomed to fail. Second, as with any large project, start with quick wins--those that are the least costly and provide the most bang for the buck. Set a timeline that emphasizes both short- and long-term goals. Finally, realize that a quest of this magnitude can only succeed if it has executive sponsorship behind it.

The quest now awaits you. Loyal clients and increased revenues are positioned at the end. Since your competitors may already be embarking upon their own quests, don't wait till it's too late to pursue yours.