CRM Plays Different Roles for Different Companies
We're often asked: What's the most effective form of Customer Relationship Management for my company? For my industry? How different should my company be in terms of how we apply one to one? Before we answer, we need to know: Are you more interested in implementation and tactics, or are you looking for strategic inspiration?
For tactical choices, companies need to start by determining which elements of CRM should be implemented first, or emphasized most, in any given situation. The types of tactics that are appropriate will depend on the different characteristics of a company's customer base. And the degree to which your customers differ by value and needs populates a customer-differentiation matrix, which in turn helps you establish appropriate tactics.
Strategic issues would include such questions as: Are there certain aspects of my industry or my company that indicate one fundamental approach over another? Are there any characteristics of our business that can help us build the most effective core CRM strategy? As a starting point, consider the three types of companies posited in Treacy and Wiersema's landmark work, The Discipline of Market Leaders. (Others have relied on this thinking as well as have contributed to it, such as Hagel and Armstrong in their book, Net.Gain.) Treacy and Wiersema maintain that truly successful companies tend to operate from one of three business approaches: by focusing on costs and efficient operations; products and innovations; or customer intimacy. Elements of all three are evident at most companies. But the point is, the foundations of the most successful organizations -- with few exceptions -- are built primarily on one of these three core competencies or disciplines.
Foresee, Align, Entangle
Contingent on your company's winning discipline, your primary CRM strategy choices can be summarized in three words: foresee, align, or entangle. Are you a product-focused company? Then the thrust of CRM will be to improve your group's ability to foresee and address customer needs. Are you operationally driven? Then your CRM strategies should focus on helping you to more effectively and profitably align with your customers, perhaps by encouraging them to change their own processes. Are you primarily customer-focused? Then CRM's principal role for your company is to entangle customers in deeper, more meaningful relationships designed to solve broad problems.
Foresee. Product-focused companies succeed by innovating constantly with newer and better products, and to some extent, services. Many companies selling technology, pharmaceuticals, durables and consumer goods fall into this category. Product-oriented companies can use CRM as a tool to refine their product-development efforts, and to anticipate their customers' needs. Here, a powerful strategic role for CRM is to improve those processes that contribute both to knowledge of end- and intermediate-user needs and the acceleration of product enhancement and innovation. In other words, CRM strategies at a product-focused company should not only help the company build a better mousetrap, but also ensure that each mousetrap meets the specific needs of target customers, and that all of these mousetraps reach the marketplace well ahead of the competition. Better, more functional products, faster. Foresee product needs, then address them.
Effective CRM at a product-focused company helps the entity organize around customer needs. Start with CRM 101: Who are your most valued customers? From there, develop feedback mechanisms that can rapidly draw insights regarding customer needs, and feed this knowledge quickly back to the product-design teams. A good example is a major European financial-services company that develops customized core financial products for other organizations to market to end users and consumers. Some of these products are sold by brokers and financial advisers; others are sold by retail banks.
Accordingly, the company uses CRM strategies to continually analyze the needs of its resellers and in turn their customers. The metrics? They're product oriented, including an ongoing analysis of product life-cycle profitability and maximization of profitability across touchpoints. But simultaneous goals of the company's CRM efforts include improving the effectiveness of both products and channels. For example, the company develops strategies to expand its penetration among various intermediaries, increasing its share of their total business. It also continually analyzes its customer base both for opportunities to cross-sell and up-sell, and to identify relationships in danger of defection in time to turn things around. Ask the company what it is doing, and they'll say they're organizing around customer needs and value. They're improving their ability to both foresee and address needs.
Align. Operations-oriented firms rely on the scale or efficiency of their organizations to achieve positions as low-cost producers. Their primary competitive strategy is to put pressure on their competitors' margins by constantly improving their own production and delivery processes to maintain market dominance. Companies in this category would include firms based on networks, infrastructure, or market power. Telephone companies and package-delivery firms would be good examples.
An operations-oriented company can use a CRM strategy to encourage customers to align their own behaviors with the company's own processes, further streamlining operations and reducing costs. Again, the most effective approach begins with an evaluation of your customer base: Which customers are the most valuable? Which are the most growable? From there, differentiate your service offerings, developing a "threshold of quality." In other words, align your offerings so that you provide the highest level of service to your best customers, your next highest level of service to the next most valuable sets, and so on. Now your organization is focusing on growing its high-value customers while reducing the costs of interacting with customers of lower value.
Following an evaluation of customer value, the U.S. Postal Service developed a comprehensive touchmap -- a diagram of all the ways the company and customer touch and the paths those touches take -- of all its interaction points with corporate customers. This exercise identified redundant operations, data silos and gaps, as well as any form of awkward "handoffs" between operating units. With a closer understanding of how it touches Most Valuable Customers, the Postal Service will soon be able to offer the most appropriate levels of more effectively delivered services. Consequently, the group will increasingly provide superior service to its best and most growable customers while reducing the costs of servicing less valuable customers.
Entangle. A company relying on customer intimacy for its competitive success will be focused on satisfying a greater and greater share of its clients' needs, providing services that go along with its products to solve customer problems. The competitive strength of such a firm is its client or customer list, and the relationships its salespeople have built up with these customers. Companies primarily in the distribution business are more than likely relying on customer intimacy as a primary competitive strategy. Stockbrokers, sales-driven companies, and many business and consumer service firms fall into this category. The objective: Don't worry so much about specific products; rather, zero in on the needs and lifetime value of specific customers. Then, layer services and processes that bring your organization still closer to these customers. Help them learn to rely on you -- entangle them so that, for them, it becomes a source of anguish to even consider working with another organization.
Boise Cascade Office Products (BCOP) recently underwent a significant CRM-focused strategic overhaul. A major thrust of its initiative is to develop a comprehensive and powerful set of services that enable customers to more effectively track and control product purchases. A stated goal of BCOP's CRM program? Don't lose a single MVC-defined as any of the group's top 100 customers -- and to-date the company is succeeding in this specific strategic objective as well as in many closely related operational objectives. Your CRM strategy will be driven by your existing core discipline. There are no hard and fast rules, and hybrid strategies can be effective, provided they aren't an excuse for lack of focus. CRM adds value to any type of organization -- and if you're looking for the best place to begin your strategic analysis-think foresee, align, entangle.
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