The South American Indians used the poison curare for hunting whilst some doctors use it as a muscle relaxant. Death from curare is caused by asphyxia, because the skeletal muscles become relaxed and then paralysed. The horror of curare is that the victim is very much awake and aware of what is happening until ...
Does the application of CRM sometimes feels like this?
In a business environment there are a number of actions you can take to survive. Most revolve around income and costs. In times of recession there are numerous stories of cost cutting and sweating assets for higher return. There are few stories about to how to increase income. The customer knowledge infrastructure (CKI) is very much about improving both the income side of the equation and the cost side. The idea of CURARE was handed to me in a slightly different and shorter form (CURA) by a colleague called Peter Saarloos - a great advocate of CRM and a superb consultative salesperson. The idea is not new but it simply points out that organisations can more easily effect changes to the income side in the short, medium and long term. All methods of cost reduction alter the balance of knowledge in the organisation and its ability to respond to positive changes in the business environment.
OK so what is CURARE? It relates to the basics of CRM and that is: Cross-sell, Up-sell, Retention, Acquisition, Reactivation and Experience.
Much has been written on one-to-one marketing, the multiple definitions of CRM, the technologies that make it all happen and so on. The fact of CRM and the CKI is simple: the organisation must get its act together! You may have as much data/information as you need to make it all work, but if the company is not connected up and doesn't have a CRM philosophy no amount of technology will be enough. No matter how good the call/contact centre is, if you don't have the right information to support the operation you will never satisfy even the limited needs the centre is designed to satisfy.
To read the press, anyone who installs some piece of software that is remotely related to marketing or supporting customer interactions is said to be doing CRM. I protest! Those organisations are not doing CRM, they are merely throwing technology at a perceived problem area. Perception may be reality, but it can come back and bite you. If you implement technologies based on perceptions, rather than on a real shift to a CRM strategy encompassing as much of the organisation as possible, you will waste your money.
CURARE is the basis of nearly all CRM work and the real need for a CKI.
Although we have put the letters for this acronym in the form of a deadly poison or a benign muscle relaxant it makes for good press, is fun to talk through at presentations and ideal to support our consulting work. So in no order of preference we start with the concepts of cross-sell.
The desire is to sell more products/services to existing customers. Over the last few years many mergers and acquisitions have been founded on the concept of cross-sell. A fine example of this has been the banks around the world, and in some very successful cases the marriages to create one-stop financial services shops (e.g LloydsTSB and Citigroup). Of course, merely saying you will cross-sell does not make this happen, and for many the promise never lived up to the hype. However it has been an extremely successful technique for many others to grow their business.
If we look at Centrica - once a humble supplier of gas - we can see how a well thought-out CKI plus a focus on serving the customer has paid off. Through acquisition Centrica has created a portfolio offering to serve its selected market and has become a customer hub that offers a range of services for the home and roadside. They offer Gas, Electricity, roadside help (AA), car and home insurance, a credit card (Goldfish) and are now offering telephony services. They base their cross-selling on an extensive CKI that has records of over 19,000,000 customers. They have found significant cost savings in their use of customer data. They have reduced their cost of sale and their cost of customer acquisition.
The idea is to help your existing customers perceive the worth (sell) of a higher value product/service than the one they currently have. A very simple example is moving someone from a standard credit card to a gold. Moving your customers up through your range of services with different margins and bundles can benefit both parties. Over the lifetime of a customer, (s)he may move from one income bracket to another and his/her needs, desires and ability to pay changes. The fact you can predict through the use of customer data/knowledge and human interaction is a means of improving the bottom line. Removing customer knowledge in the form of human beings can rarely be justified if there is no means of replacing that valuable knowledge. To be successful requires the organisation to focus on customer behaviours and life-cycle patterns. Most successful up-sell models are based on providing real value to the customers and also form part of any organisation's retention strategy. That is if they have embraced that CRM is a strategic imperative for the whole organisational eco-system.
Too many articles have been written about the benefits of customer retention. Most salespeople always knew it was easier and cheaper to sell to your existing customers than to continually look for new ones. Yet the real take-off in this area seems to have taken place after Frederick F. Reichheld (Bain & Co) wrote the Loyalty Effect (HBS Press 1996). Then loyalty become the buzzword and retention its handmaiden.
Customer retention is one of the best ways of ensuring the survival of an organisation. However, hand-in-hand with the recognition of the need for customer retention is the need for customer analytics. What does the customer value about the way you treat them or supply the service? Therein lies that differentiator called value for money. A CKI must be built to identify the customers you actually have and the customers you want to retain, and what they actually value. If the 80/20 rules apply - and many say they do - then retaining the wrong customers will help destroy a company's profit very quickly. The top 5% to 15% of U.S. long-distance callers make 55% to 60% of all long-distance calls. In the car rental industry the top 0.5% of customers rent some 25% of cars. One study showed that 15% of a bank's customers generated over 85% of its profits.
Now if retention is important and identifying the right customers is one of the most important things a company can do, why is it that not all companies are doing this? Well without a CKI it may be almost impossible to identify your customers in any unique fashion, let alone calculate some metric regarding their short or long term value. This may be one of the reasons companies have been pouring money into call centres as a means of servicing their customers and 'doing CRM', rather than the really tough alternative of actually addressing their real need for a corporate CRM policy and CKI.
The CKI should be connected to sensible feeds from the extranets and the intranets the company may have built. Corporate customers, and to a lesser extent consumers, are very interested in managing their own relationships with organisations. This has led to another acronym, CMR (Customer Managed Relationships) coming onto the scene.
For many of the older CRMers out there you could see this as an outgrowth of the old EDI idea of moving information with payments. Organisations that demanded this and made it happen were initially the automotive industry who 'helped' their suppliers (including banks) down this route. Much of the BPR movement (don't automate, obliterate - and they did) came out their pioneering work. When this was new (EDI plus payment/delivery/purchase information) and proprietary systems were in, the idea was for the receiver/payer to be able not only to automatically pay/receive his/her funds but also to automatically update his/her accounting systems and any other system in the value chain that needed the data. There were systems in place to take care of discrepancies on delivery and we could view this whole process as the precursor to the CMR systems sustained by non-proprietary web-based solutions today. However a question remains to be answered whether the supply chain systems today and the variety of CMR systems coming onto the market really are open, or whether we are into yet another age of smoke and mirrors?
Next week - Acquisition, Reactivation and Experience.
As always, we like feedback to these editorials. You can post comments directly to this editorial by using the 'add a comment' link below, or email me directly at: firstname.lastname@example.org.
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