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Opinion: Losing customers with CRM

16th Aug 2006
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Strip-mining is simple. You find a patch of earth and dig until you’ve used up what's there. Then you hope you can find somewhere else to dig.

Traditional CRM platforms encourage this same approach to customer, argues RightNow Technologies CEO Greg Gianforte. They're designed to help companies squeeze as much revenue out of their customers as possible. These platforms simply accelerate the process by which companies strip-mine and then lose their customers – forcing them to constantly find new victims.

In fact, while 76% of firms polled by a leading analyst firm indicate they have some type of CRM, 80% of customers stop doing business with companies because of a bad experience. So there are obviously lots of companies that have deployed traditional CRM and still treat customers badly enough to lose them.

The flaw in the strip-mining CRM mentality is obvious. 'Old Order' CRM vendors want you to believe that, with the right data and analytics, you can more effectively manage, control and sell to your customers. But customers don’t want to be managed, controlled or sold to. They want to be understood, have their needs met, and receive value. The back-office, sales-driven CRM platforms of the past don’t do that – because they’re designed for strip-mining customers, rather than pleasing them.

Strip-mining CRM may have worked in the last century, when markets were local and e-commerce was not yet pervasive. But it won’t work in today’s hyper-connected "flat earth" market as described by Thomas Friedman, where customers can take their business elsewhere with almost no effort. The balance of power has shifted from the company to the customer. The future therefore belongs to companies that can deliver a consistently pleasing customer experience – rather than those that continue to view their customers as commodities to be exploited to the maximum.

In other words, CRM is no longer about strip-mining. It’s about treating customers like the renewable resources they actually are.

The truth is that traditional CRM can’t meet the new challenges posed by today’s highly competitive global markets. In these markets, you have to make sure that every customer experience is a positive one. This kind of exceptional customer experience requires greater intelligence across the frontlines of your business – including service, marketing and sales. It requires the ability to respond in real time to your customers’ explicit requests and implicit behaviours. And it requires technology that empowers customers as much as it empowers back-office tacticians.

Experience-enhancing, relationship-sustaining technology isn’t something you can get from Old Order CRM vendors, because their goal is to sell you a big database and a lot of software. Instead, the industry is shifting to a new generation of vendors that enable a competitively differentiated customer experience and are actually accountable for delivering the business results they promise.

Ironically, Old Order CRM vendors have succumbed to their own flawed approach. Companies like Oracle and SAP have become notorious for strip-mining their corporate clients. So how can they possibly help any company build great long-term customer relationships?

That's why you should ask yourself one simple question before making a strategic CRM decision: "Do I want to strip-mine my customers, or do I want to foster loyal, long-term relationships?" If you want to do the former, then go ahead and buy software from an Old World CRM vendor whose business model is itself based on strip-mining. If you want to do the latter, look for a vendor that consistently fosters loyal, long-term customer relationships. There’s little chance you’ll buy anything from Oracle or SAP.

About the author

Greg Gianforte has led RightNow from its founding in 1997 to 34 consecutive quarters of revenue growth, 17 consecutive quarters of cash-flow positive performance and a successful IPO. Ernst & Young awarded Greg the Pacific Northwest 2003 Entrepreneur of the Year for the software category. Greg is also the author of Bootstrapping Your Business: Start And Grow a Successful Company With Almost No Money. Greg holds a BE in electrical engineering and an MS in computer science from Stevens Institute of Technology.


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By Jeremy Cox
16th Aug 2006 12:09

Greg, I like your strip-mining analogy.

One thing that has become very clear to me, in my recent interviews - especially the one with Lyell Strambi of Virgin Atlantic this week and Peter Simpson ex First Direct in June, is that the attitudes to customers makes the biggest difference, and that is led and encouraged from the top. If the 'top' has a strip-mining mentality, than even modern technology won't be of much use, other than to annoy customers more efficiently than before.



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