Putting the customer at the heart of your CRM programme

MyCustomer.com
12

For the last three weeks in this column we’ve been telling you that customer behaviour is changing, and you need to pay more attention to what they want from your organisation. Many of you are listening to that message. We published a presentation ‘Incorporating the customer’s needs into your CRM programme’ a month ago, and it has been downloaded around 500 times (483 at the time of writing). That is the second-most popular document this year. It has obviously struck a nerve, so this week’s editorial expands on the presentation by providing words to go with the pictures. You may find it helpful to have a copy of the presentation to hand whilst you read the editorial.

As we’ve said many times (see Why Marketing isn’t working any more.), there’s a crisis in Sales and Marketing. In the early 90’s Sales and Marketing costs typically represented 25% of overall company costs. By the late 90’s that had doubled to 50%. Either sales and marketing is becoming less effective, or production costs are shrinking rapidly. Anecdotal evidence suggests it’s the first. Our editorial on ‘why Marketing isn’t working any more’ has been the most-read editorial we’ve ever written, and recently, we heard a Proctor & Gamble presentation at a conference that, in précis, went as follows:

  • Advertising doesn’t work any more – there are no mass channels
  • Brand doesn’t work any more – own-label goods are taking larger and larger market share.
  • Product Innovation doesn’t work any more – competitors can have equivalent products on the market within three months of a successful new product launch.
  • We’ve tried CRM, but we don’t think it works for fast-moving consumer goods (FMCG)
  • Could somebody please help!!!

It is not only Sales and Marketing that doesn’t work. CRM seems to be having its own difficulties. IDC estimate (March ’03) that global annual spend on CRM is running at around $70 billion, and will have grown to $148 billion by 2005. Incidentally, these numbers are so large they’re difficult to get your head around them. I find it easier if I think of ‘Iraq war equivalents’. Current annual global spend on CRM software and hardware is roughly equivalent to the effort and energy that went into the Iraq war, and by 2005 we’ll be putting in the equivalent of two Iraq wars every year. Is that spend effective? Well, Gartner (again in March ‘03’) reckon that 42% of installed CRM software is unused, and we all know the difficulties of the remaining 58% in achieving ROI from those investments.

It’s obviously time for a re-think, so let’s start by going back to basics. The first point to make is that CRM will only work at the margin. If your products or services are awful, or your customer service isn’t up to scratch, CRM ain’t going to do a lot for you. So maybe, before you try and convince your customers that you love them, you might just review your products and services and your customer service to see if they’re good enough. If they’re not, then sort them out. It might also be worthwhile checking if CRM can have a significant impact on your business. For example, the impact of CRM on an automobile manufacturer (where the significant profit is made when you sell the car) is very different from that of a service provider such as Telco or Retail Financial Services provider (where when you acquire a customer, you’re losing money, and it’s only when the customer uses the service profitably that you can make money).

If you’re in the position where CRM can make a difference to your business, it’s almost certain that you’ll get value by building an understanding of your customers’ needs and value, known in the trade as a value / needs based segmentation. That starts to identify the opportunities for you in your customer base.

We also shouldn’t ignore the impact of price. If you’re not price-competitive, you’re making life harder for yourself. It used to be a truism that you can compete on price, product, or customer service, but not all three. I’m beginning to think that life, and competition, has got a lot tougher, and you really need to be close to market leading on all three areas.

So we’ve got market-leading products or services, customer service is excellent, and we’re price competitive, and we’ve implemented our needs / value based segmentation. What now?

Well, back to those editorials of the last three weeks. We really need to understand how customer behaviour is changing, and what needs they are developing. Let’s start by looking, at the top level at how those needs are changing. Quoting from last week’s editorial:

“For some time now, there has been increasing evidence that individuals’ behaviour is changing. The Centre for Customer Strategy in Australia has pointed to the emergence of the ‘Individual Consumer or I-con’ (see slides 9-11 of ‘Incorporating the customer’s needs into your CRM programme). Prism Services’ Buyer-Centric Markets Survey 2002 Summary and Recommendations outlines how UK companies think buyer behaviour is changing, and how they are responding to those changes. The British Life and Internet Project, with their surveys of UK use of the internet, have shown how the Internet is reducing the effectiveness of conventional marketing channels (see Internet reduces marketing effectiveness), and changing trust in, and usage of, conventional news channels (see Which channels were trusted for news of the Iraq war). However, The Support Economy provides the most detailed analysis of the sociological changes in Western individual behaviour, with the first 140 pages being devoted to a detailed analysis of the topic, significantly enriching our understanding.

Zuboff and Maxmin (the authors) summarise these changes in behaviour as three key individual aspirations: sanctuary (where I can own my choices, control my time, and shape the quality of my experience); voice (with which I can express my uniqueness and self-worth); and connection (seeking out trusted others who can provide the support necessary to fulfil the needs associated with sanctuary and voice). The authors contend that we are shifting the structure of consumption towards ‘the individuation of consumption’, with requirements for deep support from our suppliers.”

This is all great stuff, full of deep sociological import, but what does it mean for my CRM programme today? The most important recommendation that I make in this editorial is to ask you to review your CRM programme to see how much it takes into account the customers’ needs. Go on. Do it. Add a task to your outstanding activities – ‘Review CRM programme for customers’ needs’.

What should you do in that task? I think there are three different areas we need to consider:

  • The customers’ needs for your products and services,
  • The customers’ user / system requirements from your CRM system
  • And most importantly, the customers’ / buyers’ problems that your products and services help solve.

We’ll look at each of those three areas in turn.

Firstly, the customers’ needs for your products and services. We’ve already discussed the importance of this earlier in this editorial, but how do you find out what customers think of your products and services? Well data mining your customer database to generate needs / value segmentation, and/or propensity models will give you a rough feel, but it won’t get you detailed knowledge of gaps, problems, etc. Probably the best internal source of customer feedback on products and services is the front-line staff. Do you talk to them on a regular basis? A growing number of organisations are having regular meetings between marketing and CSAs in the call-centre / contact center to provide customer feedback to marketing. Michael Dell is reputed to spend time listening to calls in the call-centre on every overseas trip. Does your CEO do that? I’ve even heard of some revolutionary companies involving CSAs in the design of campaigns! But this is still second-hand information. Why not follow Prime Minister Blair’s example and start using customer focus groups to get the truth from the horse’s mouth, as it were?

The second area I want to discuss is understanding customers’ user / system requirements. This is based on an old truth from the IT industry that you only get good systems if you understand users’ requirements. Now the users of a CRM system are not mainly the sales department, or marketing, or the call center, or front-line staff, but the customers themselves. CRM systems automate those processes that go between customers and the organisation (primarily marketing, sales, and service), and so the customer is, in one way or another, a user of the system. As users, they also have one important difference compared with staff. If they don’t like your system they can go away without having to find another job, and when they do that, you lose money. Increasingly, valuable customers want added value services and demand low time-cost environments. So they don’t want to listen to recorded music for hours, or navigate up and down VRU menus when they phone the call-centre, even if it saves you money; they don’t want to spend hours navigating a poorly-designed web-site, because you adopted a cheapskate approach to web-site design; and they want transactions designed to fit the way they think, and not the way your internal organisation thinks, even if that makes the transactions more complex and more expensive for you to implement.

How many marks out of ten do you give yourself for involving your customers’ in specifying their requirements for your CRM system? For most of you, the answer is a big, fat, zero! If you’re feeling a little bit like that, then think about investing some time and effort into customer mapping (see Deliver the benefits from CRM by putting the C into CRM - Part 1 and Part 2), or scenario analysis (see How to be a hero - by using Personal Scenarios ) to start to understand what your customers’ needs are.

But the issues we’ve discussed until now are trivial compared with the third area I want to discuss. What you need to understand is that every time someone purchases something from you, it’s a symptom of a problem they have. Just like businesses, people are looking for solutions to their problems, not the purchase of objects or services. Understanding what the customer’s problem is, is key to supporting the customer well.

Let me give you two examples:

  • Two people walk into a white-goods shop to purchase a refrigerator. The first wants a ‘fridge to replace the one which has just broken down which is filled with consumables which are fast going-off. The second is planning a kitchen for his new home. Don’t those two customers have very different problems to solve? Aren’t there very different strategies to adopt to support the customer best, and maximize the value to the white-goods shop if we understand the customer’s problem, and not just his request to purchase?
  • A man phones his insurance company to say he’s just been fined for speeding and will it affect his insurance premium. The CSA, in the course of the conversation, asks why he was speeding and discovers that he was rushing to see his son who had been taken into hospital in an emergency. The CSA finds out the hospital where the son has been taken, and sends him a replica of the insurance company’s mascot – a British bulldog with a get-well card. Can you imagine the impact on the customer’s loyalty to that company? Incidentally this is a real-life example quoted by Charles Breslin of Churchill’s at a recent conference, and he went on to say that the man involved insisted on coming round to the call-centre to thank the CSA personally.

What I hope these examples show is that we need to really focus on what the buyer’s problems are, and how we can help solve them if we want to build relationships with our customers. This requires a complete inversion of how we typically think about customers and organisations. The normal view is expressed in the term Customer Relationship Management. Companies sit in the center and ‘manage’ their relationships with their customers. It is really helpful sometimes to take the opposite view, and think of buyers / individuals in the center, with all their problems, and using multiple suppliers to provide a part of the solution to those problems. This is what we mean by ‘buyer-centricity’ (see Buyer-centric commerce forum - resources for more on buyer-centricity).

How do we understand the buyer’s view in a systematic way? Well, one approach is to undertake a value gap analysis. Typically, companies think that they provide value from their operations (service or product production). However, from a buyer’s perspective, (s)he wants more value. In addition to the value from your operations (s)he is interested in: transactions costs; solution assembly costs; personalisation and customisation to meet their specific needs; personal asset maximization; and even authentic emotions and community, amongst others. Understanding the additional value that the individuals / buyers who may become your customers want, is key to providing added–value services which can transform the competitive edge you can offer.

What I’ve tried to outline in this article is why and how you can incorporate the customers’ needs into your CRM programme. If you do that you are likely to deliver the value from CRM that successful adopters of CRM are already achieving. You need to understand your customers’ perceptions of your core products and services, and make sure you are delivering market-leading customer service. You also need to make sure that your customers’ requirements are built into the front-end services they use, but most importantly of all, you need to build a buyer-centric view of the problems they are trying to solve with your products and services to see how you can deliver the most value to them, and hence maximize the value you obtain from them.

As always we’d like to hear your comments now. Make them below or email me at mailto:[email protected]. However, we’d like to go further. We’ve tried to outline a number of practical steps you can take to improve your CRM programme. These have included value / needs based segmentation; propensity modeling; customer mapping; personal scenario analysis; and perhaps most importantly, value gap analysis. If you think it might be worthwhile exploring any of these steps for your CRM programme, but are not sure how to proceed, we can help you. With the latest upgrade to the CRM-Forum site and services, we can now support you by email or by phone. If you want that help, email me at mailto:[email protected] with a brief description of your issue, and how you’d like me to respond – either by email (£75 + VAT) or phone discussion (£150 + VAT) and I’ll respond if I can help, or try and find someone else who can deal with your query.

Best wishes,

Richard Forsyth

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21st May 2003 12:30

Jeremy,

Loved your comments, luvvy ;-)

Of course the statement 'Marketing doesn't work any more' is an over-statement, but I do believe it highlights some real issues.

Where is the statement an overstatement?
Firstly, the elements of marketing that don't seem to be working any more are mostly in the communications area, so I'd agree that the strategic marketing elements are likely to continue.

Secondly, even in the communications area (advertising, marketing comms., and sales promotion), it's not that there won't be such communications in the future, but that the methods of communication have to change.

Where I think the statement has some worth is in helping marketers to realise that there is a fundemental change in marketing going on driven by a number of factors:

Increased competition and more flexible prodcution systems are driving new products and services more quickly to becoming commodities.

Government pressures for simpler, more comparable products, and Internet access to market information, are providing customers with more knowledge of the market, so redressing the balance between buyers and sellers.

The impact of these changes is to start a process of moving marketing and sales from push to pull. People use internet sites to buy things, not to be sold to, and we need to learn how to react to customer need, rather than to try and push products and services at them.

Secondly, in commodity markets, the only real differentiator is service.

Thirdly, just as the B-B market has moved to buying 'solutions' I believe consumers in the B-C world are also looking for solutions to their problems rather than buying products and services. That leads to a need for suppliers to federate to provide the solution.

These three factors, and others, are leading to a fundamental change in the way marketing works: i.e. old marketing doesn't work, new marketing does.

I'm not alone in having these thoughts. To hide behind a few of the big boys, see:
Right-side up, Marketing in the age of the organised consumer, Alan Mitchell
The Support Economy, Zuboff and Maxmin
Kellogg on Marketing, Chapter 17, Marketing in the age of Information Democracy, Sawhney & Kotler
Profit or Pain, from your user experience, Hewson Group

One strong area of agreement is that 'luvvy-duvvy CRM' needs the dustbin treatment. We have not reached the age of the loving and caring bank.

Best wishes,

Richard F.

Thanks (0)
avatar
20th May 2003 16:42

I am sure there are people who are at least intrigued by Mr. Cox's comment. Perhaps he may be willing to offer more detailed views on the relative roles of Strategic Market Management and CRM?

Thanks (0)
avatar
21st May 2003 08:08

Thanks Marcus I should be glad to
I beleive strategic market management must work hand-in-hand with CRM. The former provides a longer range view of potential realities. A simple example to illustrate the need for both is the case of a small dyeing company in the UK. Ten years ago despite excellent service to customers, it risked losing its business as existing customers found much cheaper alternatives abroad. The dying firm however could provide computer controlled and aboslutely accurate colour matching. This appealed to a new set of customers - airlines which needed certainty on colour matching for their airline seat covers/corporate colours. The dying firm saw the writing on the wall and avoided death by thinking again about its customers, markets and how to adapt to the new challenges. CRM alone might have led them to try harder with existing customers but to no avail. Both disciplines are required in B2B environments. They are not alternatives.

Thanks (0)
avatar
21st May 2003 14:57

Jeremy,

I'm relieved to find we're not a million miles apart.

I don't think anyone is saying that strategic marketing is a waste of time. Any serious thinking about what is going on between individuals and the companies that serve them has to be a good thing.

Also very pleased to see you use the word buyer-centricity, even if you don't take it as far as I and others would.

Unfortunately, there are a lot of marketers who aren't doing much thinking. They seem to think their role is to talk 'at' people, and when people don't pay attention, they tend to talk louder. That's not very intelligent, and we're trying to persuade them of that.

Best wishes,

Richard F.

Thanks (0)
avatar
21st May 2003 14:11

If the heavy weights are saying that good strategic marketing no longer works than they are also wrong. If on the other hand we are saying that what often purports to be marketing - untargeted product push communications, doesn't work I agree 100%

Good strategic marketing management - is far more buyer centric than perhaps is generally realised. As it anticipates the real benefits the customer is seeking - consciously or otherwise. Executed intelligently, it creates market pull and is very buyer centric, taking into account as it does, buyer behaviours and how value is migrating. From what I've read on 'buyer centricity' it strikes me that we are just putting new labels on the old discipline of strategic marketing, or as I prefer to call it - strategic market management.

Just as good CRM is as rare as hen's teeth, so to is good marketing. I maintain my stance -one without the other is myopic.

Yours apparently controversially

Jeremy

Thanks (0)
avatar
21st May 2003 12:30

Jeremy,

Loved your comments, luvvy ;-)

Of course the statement 'Marketing doesn't work any more' is an over-statement, but I do believe it highlights some real issues.

Where is the statement an overstatement?
Firstly, the elements of marketing that don't seem to be working any more are mostly in the communications area, so I'd agree that the strategic marketing elements are likely to continue.

Secondly, even in the communications area (advertising, marketing comms., and sales promotion), it's not that there won't be such communications in the future, but that the methods of communication have to change.

Where I think the statement has some worth is in helping marketers to realise that there is a fundemental change in marketing going on driven by a number of factors:

Increased competition and more flexible prodcution systems are driving new products and services more quickly to becoming commodities.

Government pressures for simpler, more comparable products, and Internet access to market information, are providing customers with more knowledge of the market, so redressing the balance between buyers and sellers.

The impact of these changes is to start a process of moving marketing and sales from push to pull. People use internet sites to buy things, not to be sold to, and we need to learn how to react to customer need, rather than to try and push products and services at them.

Secondly, in commodity markets, the only real differentiator is service.

Thirdly, just as the B-B market has moved to buying 'solutions' I believe consumers in the B-C world are also looking for solutions to their problems rather than buying products and services. That leads to a need for suppliers to federate to provide the solution.

These three factors, and others, are leading to a fundamental change in the way marketing works: i.e. old marketing doesn't work, new marketing does.

I'm not alone in having these thoughts. To hide behind a few of the big boys, see:
Right-side up, Marketing in the age of the organised consumer, Alan Mitchell
The Support Economy, Zuboff and Maxmin
Kellogg on Marketing, Chapter 17, Marketing in the age of Information Democracy, Sawhney & Kotler
Profit or Pain, from your user experience, Hewson Group

One strong area of agreement is that 'luvvy-duvvy CRM' needs the dustbin treatment. We have not reached the age of the loving and caring bank.

Best wishes,

Richard F.

Thanks (0)
avatar
19th May 2003 18:34

I find it annoying when people are so ready to accept that marketing doesn't work anymore. It shows a complete misunderstanding of its purpose and use.

Nearly every pundit on CRM seems to have relegated marketing to yesterday's dustbin, yet firms that do understand it and embrace the strategic discipline of strategic market management, thrive even when times are tough.
IBM is no longer a basket case because it has learned to anticipate and adapt to change. I know because along with former colleagues at IBM, we had to learn how to market properly, which had very little to do with the narrow and erroneous view of marketing as 'prmoition'.A firm that does not have sensitivity to the things that shape customers wants and needs, is unlikely to move off the back foot.Luvvy-duvvy CRM needs the dustbin treatment, not proper marketing.

Thanks (0)
avatar
21st May 2003 08:08

Thanks Marcus I should be glad to
I beleive strategic market management must work hand-in-hand with CRM. The former provides a longer range view of potential realities. A simple example to illustrate the need for both is the case of a small dyeing company in the UK. Ten years ago despite excellent service to customers, it risked losing its business as existing customers found much cheaper alternatives abroad. The dying firm however could provide computer controlled and aboslutely accurate colour matching. This appealed to a new set of customers - airlines which needed certainty on colour matching for their airline seat covers/corporate colours. The dying firm saw the writing on the wall and avoided death by thinking again about its customers, markets and how to adapt to the new challenges. CRM alone might have led them to try harder with existing customers but to no avail. Both disciplines are required in B2B environments. They are not alternatives.

Thanks (0)
avatar
19th May 2003 18:34

I find it annoying when people are so ready to accept that marketing doesn't work anymore. It shows a complete misunderstanding of its purpose and use.

Nearly every pundit on CRM seems to have relegated marketing to yesterday's dustbin, yet firms that do understand it and embrace the strategic discipline of strategic market management, thrive even when times are tough.
IBM is no longer a basket case because it has learned to anticipate and adapt to change. I know because along with former colleagues at IBM, we had to learn how to market properly, which had very little to do with the narrow and erroneous view of marketing as 'prmoition'.A firm that does not have sensitivity to the things that shape customers wants and needs, is unlikely to move off the back foot.Luvvy-duvvy CRM needs the dustbin treatment, not proper marketing.

Thanks (0)
avatar
21st May 2003 14:11

If the heavy weights are saying that good strategic marketing no longer works than they are also wrong. If on the other hand we are saying that what often purports to be marketing - untargeted product push communications, doesn't work I agree 100%

Good strategic marketing management - is far more buyer centric than perhaps is generally realised. As it anticipates the real benefits the customer is seeking - consciously or otherwise. Executed intelligently, it creates market pull and is very buyer centric, taking into account as it does, buyer behaviours and how value is migrating. From what I've read on 'buyer centricity' it strikes me that we are just putting new labels on the old discipline of strategic marketing, or as I prefer to call it - strategic market management.

Just as good CRM is as rare as hen's teeth, so to is good marketing. I maintain my stance -one without the other is myopic.

Yours apparently controversially

Jeremy

Thanks (0)
avatar
21st May 2003 14:57

Jeremy,

I'm relieved to find we're not a million miles apart.

I don't think anyone is saying that strategic marketing is a waste of time. Any serious thinking about what is going on between individuals and the companies that serve them has to be a good thing.

Also very pleased to see you use the word buyer-centricity, even if you don't take it as far as I and others would.

Unfortunately, there are a lot of marketers who aren't doing much thinking. They seem to think their role is to talk 'at' people, and when people don't pay attention, they tend to talk louder. That's not very intelligent, and we're trying to persuade them of that.

Best wishes,

Richard F.

Thanks (0)
avatar
20th May 2003 16:42

I am sure there are people who are at least intrigued by Mr. Cox's comment. Perhaps he may be willing to offer more detailed views on the relative roles of Strategic Market Management and CRM?

Thanks (0)