The nature of CRM is changing. Every ongoing relationship exhibits a dynamic that directs the nature of its priorities and expectations, as well as the roles played by the respective parties. Interactions between the parties will ebb and flow with shifts in this power dynamic. The power is clearly shifting to the customer.
Customers have unprecedented access to information and choice today, which provides them with a great deal of leverage in the relationship. Choices exist among a variety of sales and distribution channels, fixed and variable pricing scenarios, specialty and commodity product classes, new and pre-owned, with or without bundled services, domestic or international sourcing, online exchanges, barter, salvage and more. And this applies to virtually any product or service, at any level of the business-to-business or business-to-consumer demand chain. With choice comes power. Even in the most subtle negotiation, having options translates into the ability to gain leverage; in the give and take of customer relationships, negotiation is constant.
So, the customer drives the demand chain. Forward-thinking organizations that creatively adapt to this reality will enjoy the greatest success. And yet, with some notable exceptions, too few organizations have driven appropriate emphasis on the customer into their operational DNA, and customer intelligence is still not a generally recognized application niche. Have the technology and application vendors failed to deliver a core capability? Have end-user organizations failed to sufficiently define the need? Is there a shortage of supply or too little demand? The Research believes that a new revolution bringing performance management principles to customer intelligence is brewing. There are significant issues and business forces at play within the most customer-aware organizations, which suggest a coming paradigm shift.
There is ample evidence of the business value derived from paying closer attention to an organizations existing customer base. Studies have repeatedly shown that, when compared to acquiring new customers, cost of sales is lower, revenue per transaction tends to be higher, and profitability is greater with sales to existing customers. This is true whether an organization is engaged in B2B or B2C commerce. The demand chain leverage that can be delivered through the creative application of customer intelligence is indisputable.
Integrated Customer Information Management
Many organizations have neglected to address integrated information management with respect to the customer. Doing so requires solving many challenges, beginning with reaching agreement on what or who qualifies as a uniquely defined “customer” and how to go about arbitrating disagreements within the enterprise. There are notable exceptions, typically within certain industry verticals, such as the consumer financial services industry and with direct marketing organizations. Still, in contrast to the typical information management priorities with respect to transactions, capital assets, supply chain movement, and financials, customer information most often is treated as the redheaded stepchild. Typically, even office supply inventory is managed more carefully than customer information.
In this context, data stewardship is an important new role definition with respect to the customer. Under the auspices of the single accountable party described below, customer data quality is an important responsibility .Many organizations are creating the steward role to take on the task of sorting out systems across the enterprise with inconsistently defined customer identification strategies, schema and performance metrics. The steward is empowered to drive collaboration and compromise in order to untangle confused cross-functional customer intelligence vehicles, poorly defined customer profitability and lifetime value metrics, and suboptimal customer interaction performance management initiatives.
Accountability To The Customer
Today’s business climate has an audible undertone of accountability. Legislative and regulatory scrutiny has gotten the attention of the business community. Compliance urgency is couched in many well-turned phrases: process visibility, documentation requirements, senior management attestation, financial transparency and others. The emphasis is always placed on complying with and answering to regulatory bodies. The Research believes these priorities are badly misplaced. Accountability only to “the man” directs the energies of the organization toward developing proficiencies that apply nowhere else. This is like training a Salesforce to sell against a single competitor. Energies are better spent on building organizational accountability to the customer, addressing repeatable customer focused issues that not only ensure compliance but further translate into competitive advantage.
Accountability to the customer suggests that the issue of ownership must first be addressed. Who “owns” the customer and sets the customer centric strategic agenda? Who holds budget accountability and has ultimate ROI responsibility? Marketing, sales and service are most often fingered for isolated failures and successes, but none functions alone. Each of these functional groups is an intended beneficiary of component operational CRM technology, and all of them are customer-facing and responsible for influencing and responding to links in the demand chain. Still, in the face of this, it is rare to find a single, named responsible party “ a chief CRM officer”, if you will let alone a clear set of objectives aimed at accountability to and for the customer across these business functions. Market leaders are addressing this today.
Assessing Customer Value
Commitment and accountability to the customer has a very important dimension that leading customer centric organizations have long since addressed, and that is the measurement of customer value and profitability. This conceptually straightforward metric is often, in practice, insurmountably difficult to calculate. As outlined above, the first hurdle is reaching agreement on precisely who the customer is and accounting for that across various enterprise systems. That nontrivial matter aside, allocation of relevant financial information can be a daunting task, but not an impossible one. Fully allocated financials at the individual customer level are not the norm. It is most common in an industrial products or B2B setting. Regardless of the business model, though, an important feature of initiating this kind of customer-level financial evaluation is that statutory profit and loss precision is not the goal customer value assessment is. As part of a customer accountability initiative, it’s more important to establish a process and instill an urgency in the organization. Precision will come over time.
Direct marketers certainly understand this. The most basic of predictive segmentation models are those that measure and differentiate on the basis of the FM (frequency and monetary) value of each customer. Organizations deploy such models with a variety of metrics fulfilling the monetary metric, including spending in the last transaction, total spending within a given historical time frame, or net present value of predicted lifetime spending. The models will function in any case. The important thing is that metrics are applied consistently and fairly.
Call to Action
It is clearly impossible to address the customer accountability issue without proper information management. At the same time, business issues are what drive the information requirements of a performance improvement strategy, reflecting the priorities of the organization. Every organization must therefore challenge itself to critically evaluate its commitment to its customers and establish more customer centric strategic priorities. A solid performance management platform for customer intelligence will drive the organization toward new, actionable business insight, will enhance its customers experiences, and will inevitably keep the regulatory hounds at bay.