Michael Lowenstein
Managing Director
Customer Retention Associates
lowen1@directvinternet.com
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Q: With CRM, Don't Forget the Foundation
The best, most innovative CRM programs and processes will fall short of objectives without making certain that the basics - what we can call the architecture and engineering of CRM - are in place.
Virtually everything a company does, but especially its strategy, structure, managerial style, and capabilities, plus buy-in and loyalty of employees at all levels will impact customers. Further, CRM programs, indeed all customer-related processes, need to embrace and include both internal customers (staff) and external customers (end customers, former customers, potential customers, suppliers, the financial community, etc.) at planning and implementation stages.
Creating customer loyalty requires both a corporate and individual mindset on behalf of customers. The mindset must be both proactive and commitment-based. It is people and processes that make CRM effective, or ineffective, not merely the application of technology, service, or any other individual component
of CRM.
Marketing theorist Theodore Levitt has said: "The purpose of business is to get and keep customers". That's an easy to understand way of postulating that, next to having a customer retention culture and infrastructure, everything else a company does is secondary. Leading-edge customer research organizations have determined that the most successful companies have a focused and well-integrated approach to customers. They have also found that companies consider having such a single, integrated approach a key priority; however, very few companies have been able to fully achieve this.
We have identified a model that companies can use to optimize any and all CRM efforts. In the late 1970's, when management experts Tom Peters and Robert Waterman were still employed by McKinsey & Company, they developed a management model they defined as the Seven S Framework. First presented in a book about the successes achieved by Japanese businesses, The Art of
Japanese Management, in 1981, and later repeated in their groundbreaking book, In Search of Excellence, the following year, the Seven S Framework consists of seven groups of characteristics, or factors, which when appropriately developed, aligned, and executed would result in superior performance.
A company's creativity and resiliency, strength of culture, and effectiveness of proaction can be assessed through the manner in which these characteristics are focused on optimizing customer loyalty and value. The Seven S Framework is a robust, extraordinarily dynamic, and yet simple and orderly way of understanding how far a company has progressed along this path and how much distance is still to be traveled.
The Seven S's in the Framework are:
- Strategy - the plan of action, the manner in which scarce resources (time, money,
staff, facilities, and technology) are allocated on a corporate, business, and functional level
- Structure
- the manner in which the company's architecture, its organization chart,
is defined. This also includes methods of operation governing jobs and authority,
span of control, and operating parameters for staff.
- Systems - company processes and reporting mechanisms, particularly information
flow (inside and outside of the company)
- Style - the culture, or 'feel' of the organization, what those inside and outside the
organization experience of it on a day-to day basis. This includes how management relates to subordinates, staff and customers, and how well key staff members lead.
- Staff - the identification, or categorization, of job 'demographics' (titles, descriptions, and levels of training), and their ability to contribute to company goals and objectives
- Skills - the special capabilities of the organization (innovative, high-tech, proactive,
etc.) and/or key staff
- Shared Values/Superordinate Goals
- the company's set of guiding meanings,
directions, and concepts - as understood by the organization, its customers and suppliers. It can also be the basis for the corporate mission or vision.
There is a direct alignment, or interdependency, among the Seven S's. So, for a company like Ritz-Carlton, for instance, to prioritize customer loyalty and CRM, they have a strategic goal of value optimization, including a management goal of providing an empowered environment for staff, and a business goal that emphasizes personalized customer service. Their systems have been carefully designed to yield a culture that supports this. Participatory management is the style supported by company leaders. Staff are selected and trained to be creative and proactive, and service is a shared value within the company. Skills are evident in Ritz-Carlton's capacity to create high customer value. Structure, with respect to providing value for customers and staff, emphasizes cross-functionalism
and teamwork.
A lot of what goes on at successful, customer-focused companies like Ritz-Carlton, doesn't appear, at first look, to be CRM-related. If CRM were thought of only in terms of technological, marketing, or service aspects, that would be true. However, as stated, we see CRM as holistic, embracing every process.
New approaches to customers and frequency marketing programs will only be part of what creates true customer loyalty and advocacy for leading-edge companies. These companies are committed to customers. Their cultures are totally customer-focused. Customer information is both extensive and continually updated, and systems are designed for their staffs to readily share and apply knowledge. Their leaders live the organization's mission. In the United States, such companies as MBNA, State Farm Insurance, Federal Express, Saturn Corporation, Dell, Wegman's Markets, Southwest
Airlines, Rosenbluth International, Servicemaster, and Ritz-Carlton Hotels, to cite just a few, exemplify this commitment. Everything they do is completely customer-centric.
We believe there are twelve common attributes of commitment-based companies:
Culture
- Total company involvement in customer retention and loyalty
- Active internal communication, cross-functionalism, and cross-training
- Staff proaction and continuous learning
- Visible and involved senior management
Information
- Customer data mining, one-to-one understanding and insight
- Hands-on research, communication skills training
- Regular direct customer contact by all staff levels
- Customer partnership and sharing of information
- Formal, and frequent, customer research
- Full inventory complaint gathering, evaluation, and response
Action
- Customer and competitive data used
as a foundation for improvement
- Internal and external customer teams
Several years ago, the CREDO Special Issue of Customer Loyalty Today led with an article saying that many companies were finding barriers to the full implementation of customer relationship management: culture, time, senior management commitment, integration issues, and technology. Most of the delegates were challenged to prove that customer loyalty would lead to increased profitability, puzzling because the proof for this has been general knowledge for over a decade. Perhaps the explanation is that, given a choice of relationship-building devices to implement immediately, the most frequently selected first choice by CREDO delegates was a customer loyalty program. This is the type of fuzzy, convoluted, tactical thinking which can undermine even the most resilient of companies.
In a recent study by the Chartered
Institute of Marketing (C.I.M.) in the U.K., results among 1,000 adults showed that only eight percent believed that regular contact with suppliers is more beneficial to themselves, while fifty percent thought that such ongoing relationship benefited the suppliers. Worse, only nine percent of these respondents felt wanted that contact to be driven by the supplier. These are alarming numbers, and they strongly suggest that consumers are rejecting common customer relationship practices.
To succeed at customer relationship management, the cold reality is that frequency programs are not enough. Great product is not enough. Exceptional service and customer-sensitive staff are not enough. Use of new communication technologies, sophisticated software, and multiple contact channels is not enough. Tight, efficient operational processes, though essential to sustaining customer loyalty are, also, not enough. What works is the company-wide commitment to customers, the ongoing
creation of customer-perceived value and 'barriers to exit' which leads to loyalty and advocacy.
Success will be defined by three outcomes: the highest share of customer possible, optimal lifetime customer value generation, and the lowest voluntary churn (among both customers and staff). This requires both discipline and commitment. It's not easy, and nobody promises it will be; but, like Levitt's definition of the purpose of business, it is elegantly simple.
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