Many companies who have embarked on, or are embarking on, eCRM programs have fallen into the trap of implementing ‘Customer Management’ programs rather than ‘Customer Relationship Management’ programs.
A quick test to ascertain where your organisation is at, is to see which question most accurately reflects your organisation:
Question A: “Does your organisation segment its customer base from the perspective of the organisation e.g. ‘A’, ‘B’ or ‘C’ customer, high net worth, medium net worth, low net worth, geographical location, etc.?” or Question B: “Does your organisation segment its customers from the perspective of how customers see themselves through their own eyes/needs, e.g. I am looking to grow my wealth, I need security, speed of service is of critical importance to me, price is important but it isn’t everything”.
Many companies when implementing eCRM, segment their customers according to ‘Question A'” and thus, in reality, develop a very internally focused Customer Management system whilst paying little or no attention to putting in place an appropriate and complementary Relationship Management program. This is why over 70 per cent of eCRM programs fail to achieve their objectives. In practice, what they implement are little more than Customer Management programs (CM) and only slightly better than the old Customer Information Systems (CIS).
Why put a Relationship Management Program in place?
Why should organisations put the ‘relationship’ component back into CRM? Because it is the relationship management program that drives the much promised CRM payoff catch cry, i.e.:
– Increased likelihood that a customer will continue to be a customer
– Increasing the length of time the customer is likely to remain a customer
– Increased percentage of customer’s business will be given to the organisation
– Greater likelihood that the customer will recommend the organisation.
A Customer Management program tends to rely exclusively on hard data such as current spend, transactional analysis, geographical information, etc. A true eCRM program however will take this critical hard data and overlay it with soft customer relationship preferences to obtain a 1+1=3 outcome-for both the customer and the organisation.
The Missing Link
The missing link is to define ‘relationship’ from the perspective of the customer and then to complement it with the organisation’s definition of ‘Relationship’.
A relationship is a multi-dimensional, psychological concept which needs to be broken down into a series of dimensions including attributes such as responsiveness, respect, reliability, trust, emotional connection, communication, etc. By contrast organisations tend to define relationships in terms of contact with organisations, exposure to advertising and promotional messages, share of wallet, repeat purchases, ability to upsell and cross sell, customer satisfaction, etc. Unfortunately this view of the relationship is inadequate to measure the health of the customer relationship because it pays virtually no attention to the extremely important emotional side of the relationship and the way that the customers view the relationship.
For example, in the pharmaceutical industry in Australia there are approximately 30,000 General Practitioners (GPs). The pharmaceutical companies tend to categorise these GPs as ‘As, Bs or Cs’ and the extent of ‘customising the relationship’ is to develop three different messages-one targeted to the ‘A’ doctors, one targeted to the ‘B’ doctors, and one targeted to the ‘C’ doctors. However, all of the ‘A’ doctors (approximately 3000 GPs) receive the same message because there is no micro-segmentation of issues / attributes from the GPs’ perspective based on, ‘personal / social / emotional’ aspects e.g.:
– type of practice
– focus for practice growth
– type of doctor in a practice, e.g. owner or practitioner
– key concerns, e.g. professional indemnity, time management
changes in the industry practice, etc.
By profiling doctors on the way they see themselves, and the issues that are important to them (versus what is important to the company), pharmaceutical organisations can have a very different engagement model/relationship program. It would be one based on mass customisation of messages to the 3000 ‘A’ doctors according to their profile of interests, issues and concerns. This is much more likely to result in a ‘connectedness’ with the pharmaceutical company rather than merely a consistent ‘product push’ message.
The same type of issue is pertinent to most industries and organisations implementing eCRM programs.
The Role of the Internet in Relationship Management Programs
The role of the Internet as a means of engaging in a two-way dialogue with customers and channel partners substantially changes the engagement model.
For example, provided customers’ privacy and security issues are addressed and provided customers feel that they are getting something in return, experience has shown that customers are comfortable to provide profiling information on themselves, their preferences and the way they view themselves. This is irrespective of whether the information is provided in a paper-based format or in a more dynamic Internet communication where profiling attributes can be tailored depending on answers to previous questions.
In return for a customer undertaking this type of profiling over the Internet, they expect and demand a much more personalised and customised relationship experience, not only through the Internet channel but across all the interaction/ communication channels whether that be face to face, through call centres, through channel partners, etc. This is because, in their eyes, they have taken the time to provide the information to support a closer and more intimate relationship.
The Payoff of Relationship Management Programs
Managing the ‘closeness’ component of relationship programs can have significant payoff. For example, in the banking business:
– Those customers who feel very close to the bank give that organisation 94 per cent of their banking business whilst those who feel less close give only 88 per cent.
– Of the bank customers who do not feel particularly close to their bank, only 64 per cent are confident that they will still be customers in two years compared with 94 per cent who feel very close.
– 83 per cent of those who feel very close to the bank are very likely to recommend the bank to friends and family members compared with only 36 per cent of those who do not feel particularly close.
Clearly, managing the relationship according to the customers’ perspective as well as the organisation’s perspective provides a basis for a much better financial payoff than merely undertaking a customer management program based exclusively on the organisation’s perspective.
One word of caution is that the degree of closeness a customer may, or may not want, should be ascertained because not every customer wants the more intimate relationship and organisations can inadvertently overstep the mark unwittingly with the unintended consequences of driving customers to other suppliers.
What to do about it?
Developing a relationship management program is much more than running a few focus groups, gathering a few ideas from the customers, and adding a few new fields to the profiling record contained in the eCRM system.
It involves defining the dimensions of a relationship from the customer’s perspective and taking into account issues such as quality of life, self concept, relationship propositions, etc. In addition, because it is very closely associated with brand attributes and related customer experiences, it needs to be specific to each organisation and cannot be merely hijacked from other organisations.
By measuring the dimensions of ‘customer relationship’, organisations are able to have a much better understanding of customers and a much greater ability to predict customer behaviour. However in order to be able to do this, organisations have to develop Relationship Management programs which can be mass customised to much finer micro-customer segments.
By tracking and measuring the dimensions of the relationship, organisations can identify their strengths and weaknesses in the relationship management program and continually fine-tune it based on ongoing feedback from customers.
In summary any eCRM program should first and foremost be built upon a solid Relationship Management program in order to deliver the business and financial returns so often promised by eCRM, yet so rarely delivered to date.