Are you prepared to move CMR to the center of your corporate strategy? Everything we see suggests that most companies want this to happen. The Gartner study, mentioned in Chapter 1, showed 52 percent of surveyed companies rated customer relations their highest priority. But that study was asking about CRM initiatives—there are no statistics developed yet to measure commitment to CMR. Empowering customers is a great dream, but be realistic.
Will CMR fit with your business strategy and serve your company’s financial and business goals? If your business strategy dedicates your firm to be the low-price leader (period!), there is not much chance that CMR is important or even right for your company. That is not to say a low-price leader shouldn’t or can’t find ways to empower its customers. Wal-Mart, as a low-price leader, has never taken the position that they are a “low-price leader, period!” In loyalty.com I quoted Paul Higham, then senior vice president, marketing and customer communications of Wal-Mart. His comments are particularly appropriate for this discussion:
If there ever was a retailer who had built their reputation on the attribute of low pricing, it certainly is Wal-Mart. But, how well we know that low prices are only half the process. Only when it is counterbalanced by a commitment to the lives, needs and wants of customers does it all make sense. Price deals with the fact of the matter. But the human factor, like customer care and service, leads us to another thing, every bit as important—the heart of the matter.
The question of whether or not CMR will fit with your business strategy has little to do with your pricing policy and everything to do with your people policy—how much you care about the human factor and how much you are willing to empower your customer. If you can commit to the lives, needs, and wants of customers you can find the way to make CMR serve your financial and business goals.
A good starting point in deciding if CMR is right for your business is asking if you’re up for the challenge of getting everyone in your company to agree on a common definition of what CMR is. This should be addressed with the understanding that there are different levels of CMR, and that the right level for each business is based on the long-term economic model of that company. Defining these key concepts is not something that should be left to the marketing department, the IT team, or the bean counters. Your definition should be carefully crafted by an interdisciplinary team: marketing, operations, product specialists, IT, financial, associates on the firing line, and senior management.
Only after you have reached agreement on your definition can you address the next questions: Are you willing to give away power to your customers and does the way you manage the business support this change?
In making this decision it is time to explore the opportunity cost of not deploying some degree of CMR—not an easy calculation. Referring to earlier CRM implementations, Dennis Pombriant, research director at the Aberdeen Group, made this observation, “Opportunity cost is hard to measure because you are measuring something that is not there. Some would say the opportunity cost the company is missing is the equivalent to the return on investment (ROI) that they would have gotten post implementation. However, looking at the loss of ROI can be too simplistic. Opportunity cost affects a company’s growth and development far out into the future, and because of that, it is so hard to measure.”
The fact is that the customer does have new power. If a company is not prepared to recognize that element of the business equation, then, sooner or later, that company will be losing customers and revenues, and few companies can afford to see their customer base diminished today.
Louis Columbus, senior analyst at AMR Research, says, “In the present economic environment, many companies are surviving only because they are holding onto their current customers. We still aren’t into positive economic growth yet. Given the fact that so many companies are relying on their customers for sustaining revenue streams, they can’t afford not to have information captured. Simply put, with as much as 75 percent of a typical company’s revenue coming from current customers, the opportunity cost of not deploying CRM is lost sales.”
How can your competitors put you at a disadvantage if they empower their customers before you do? In their dealings with companies of all kinds, across all industries, customers are seeking empowerment. If they don’t find it in their relationship with one firm they will be quick to look for it with another. It’s a strong bet that some of your competitors will understand and act.
CMR will require you to have a 360-degree view of your customer across all channels, and this integration will have a cost. It has been reported that General Motors invested $20 million to put its CRM project in place. Many smaller companies have accomplished data integration with five-figure budgets. The good out-of-the-box solutions available today mean you don’t have to be the size of GM to get into the game. But you will need good tools, so the investment in these assets will have to be factored into your decision.
Working with client companies, I have found the simple technology solutions are often the best. Big dollars don’t always buy big wins. There are other costs of course: people to manage and maintain the database, analysts to turn the data into information, and supportive hardware costs.
The greater question is whether or not you can count on solid support from your IT team to make your customer knowledge available, in real time, enterprise-wide. You will need their buy-in from day one because, in the end, they are the ones who must supply the customer data that will drive the CMR engine.
Can you identify a return on your CMR investment? This gets us back to the discussion of the cost of not deploying CMR. There are metrics that can be applied. Starting with benchmarks of share-of-wallet and customer retention, it is a simple matter of calculating the profit potential of a set amount of improvement for a defined segment of the customer base. This becomes your goal for the program. Those incremental profit dollars, less the cost of your implementation, begin to define the potential ROI. This is discussed further in Chapter 17.
We have talked before about identifying the customers who are right and most profitable for your business. Now you have to decide if your best customers will want to be empowered and to what degree. Chances are you will find that empowerment adds great value to some but not all of your customers. That presents no problem, since you can’t start by providing a total CMR experience for all of your customers. We have found that word spreads swiftly. You may find that as some of your more reluctant customers begin to see the results your CMR initiatives are delivering for others, they will ask to join the program.
Sometimes it’s difficult to predict whether or not it will be worth it for a company to empower its customers. You might never expect CMR could have value for a baker of cheesecakes. Yet Chicago-based Eli’s Cheesecake has proved the value of empowering its customers. Since giving customers the option of custom designing their purchases, the firm has experienced a big payoff in sales and repeat business. After the addition of the customization feature, sales increased 65 percent. A spokesperson says, “We’re driving more repeat business from existing customers because they like the fact they can create their own message and medium.” This is more than just offering a new service; it empowers customers by letting them design their own customized product.
You can deliver customer empowerment only if everyone in the firm can contribute. Of course that starts with all customer-facing personnel, but it goes far beyond to include back-office systems associates and even those responsible for the product. At the end of the line, the value of the customer experience depends on the delivery of the right product at the time the customer needs it. If you can’t deliver on the promise, don’t get in the game. When Kmart began fighting for its life, having filed for Chapter 11 bankruptcy protection in January 2002, one of their immediate challenges was to build relationships with best customers to try to keep them loyal to the firm. The biggest problem in doing that, they told me, was that they couldn’t be certain they would have the merchandise the customer wanted on the shelves. They were afraid to promise something they couldn’t deliver.
The question of total commitment from most senior management should really have been first on the list. Without that backing, your plan will have no chance of success. And, that commitment must carry with it the understanding that the process of customer empowerment is not just another short-term campaign, but the life blood of the company’s growth and development far out into the future.
Frederick Newell, loyalty.com—Customer Relationship Management in the New Era of Internet Marketing (New York: McGraw-Hill, 2000), p. 300.
Erica Morphy, “The Cost of Not Deploying CRM,” ecommercetimes.com, March 26, 2002, pp. 1–2.
Ibid., p. 2.
Matt Hines, SearchCRM, March 21, 2002.
Don Peppers, “Customer Relationship Management: Delivering the Benefits, INSIDE 1to1, August 13, 2001.