What is the customer life cycle, and why is it important?
What does my organization gain by implementing a customer-centric business model, and how is it done?
How do I avoid making other people’s mistakes, and what are common pitfalls in building lasting, loyal relationships in the Internet era?
Every organization needs to address several strategies to manage their customer relationships as they take their businesses online.
Move … quickly. To paraphrase a recent industry study on e-business technology platforms, “If you are not in a hurry to implement this stuff, you don’t get it.”
This might sound dramatic, but it conveys the mounting sense of urgency around enabling your enterprise for e-business and focusing on customer interactions.
Increased and unconventional competition, globalization, deregulation, mergers and acquisitions, combined with the explosive growth of the Internet, have created an era where the customer has unprecedented access to information and competing choices. Customers see lower barriers to switching suppliers and have increasing expectations of responsiveness and accessibility.
Long-term customer relationships are now viewed as the foundation to sustainable success and profitability. According to a recent study by GartnerGroup Inc., Stamford, CT, it costs four to six times more to acquire a new customer than to service an existing one. Profitable growth is driven by long-term customer relationships through increased purchases, reduced operating and interaction costs, referrals and, in some cases, accumulated price premiums. Acquiring and losing a customer within 24 months is at best a break-even proposition, according to a study published in the Harvard Business Review.
With the dramatic growth in the number of customer interactions through the Internet, Web- and e-mail-based interactions are expected to support a growing proportion of customer contacts. GartnerGroup has projected that 25 percent of all customer interactions will take place over the Internet by 2001. For some companies, this means thousands, if not hundreds of thousands, of customer interactions to manage relationships through the electronic channel. This is more than offering customers the ability to execute e-commerce transactions – the customer relationship spans the life cycle of identifying, selecting, acquiring, developing, servicing, supporting and retaining the customer. The efficiency and effectiveness of customer interactions become critical.
Each interaction with your customers, across functional areas of your enterprise and through various contact points, will contribute to or erode your “customer equity.” Having a 360-degree view of your customer relationships and interactions, through an integrated customer-facing platform, is a critical element.
This means having access to information about your customer interactions, both inbound and outbound, across the marketing, sales and service functions in real time. It also means being able to leverage service interactions to up-sell or cross-sell new products with higher functions, upgrades and options, or extended service programs. Being able to automatically manage and escalate customer satisfaction issues, identify and react to potential customer defections with win-back offers or respond to an abandoned electronic shopping cart in real time with a special buying incentive are part of leveraging the 360-degree customer view.
Your enterprise’s processes, systems and applications must be aligned to support these business objectives – particularly through the Internet, where your customers’ experience is directly linked to the platform you have implemented to drive customer interactions. Existing back office, front office and legacy systems are an investment that you can’t afford to ignore or discard, since they contain a vast amount of customer information that needs to be leveraged and extended beyond the four walls of the enterprise.
The benefits of doing this right are numerous:
• Increased customer loyalty and retention over time.
• Higher market share and “wallet share” (share of customer spending).
• Lower cost of customer acquisition, sales, service and support.
• Sustainable competitive advantage, driving bottom-line profitability.
The causes of customer defection. Unmanaged customer defection is one of the most damaging elements affecting a company’s performance. However, while most companies boast of having a customer acquisition strategy, few are prepared to successfully execute customer retention strategies. Many don’t even have mechanisms to identify, measure and manage customer retention issues in a structured way.
In “Beyond Customer Satisfaction to Customer Loyalty” by Keki Bhote, it was found that more than two-thirds of customers typically defect because of service-related issues, as opposed to only 9 percent reporting pricing-related reasons. Simply providing adequate service, or mollifying customers, does not prevent defection. You place your customers in the “zone of indifference,” where the likelihood of defection is as high as 50 percent if further difficulties arise.
A wide cross-section of industry research on customer relationships has revealed fundamental factors that drive customers to defect. Quite often, part of the solution is to identify these factors and remove those reasons.
Are your customers being affected by any of these symptoms for defection?
Intimacy and personalization:
• Forcing customers to repeat the same information to your company multiple times.
• Appearing not to know the customer relationship, history, context, status.
• Treating all customers the same, regardless of their value to you.
Accessibility:
• Cannot reach you in a convenient, easy, timely way.
• Unreasonable delays, waiting, frustration in reaching you.
• Not offering alternative channels of contact suited to customer preferences.
Responsiveness:
• Slow, delayed, inappropriate or erratic follow-up and response.
• Lack of response to customer inquiries or issues.
Follow-through on commitments:
• Inaccurate or only partial resolution to customer situations.
• Not doing what you say you will do, when you say you will do it.
• Not communicating effectively on actions taken, expectations set and met.
Policies:
• Inflexible, inappropriate or rigid policies that do not fit customer situations.
• Lack of authority on the front lines to make decisions and solve customer problems.
• Lowest-paid, least-skilled personnel interacting with your customers most often.
Narrow relationship:
• Customer only has one product or service with you (no cross-sell/up-sell) making it easier for them to switch suppliers.
• “Transaction-based” instead of “relationship-based” customer focus and culture.
Processes and systems:
• Various systems and databases do not share and integrate customer information.
• Lack of information and processes available to address and manage customer issues.
• Customer is forced into multiple contacts and/or points of contact to get closure.
This list shows that customer defection often results from problems that are simply related to access to information, process design and communication with the customer.
The Internet customer contact channel presents new opportunities to alleviate these problems and remove sources of customer defection by creating an integrated system that not only captures customer information in one place, but is also process-driven, business rules-based, personalized, customized and automated.
By leveraging a powerful e-business platform to interact with customers through the entire life cycle, companies can avoid many of the key reasons that push customers to consider defection. Proactive, timely and relevant communication and interactions help foster customer intimacy and build the bridge to long-term customer loyalty and, ultimately, higher profitability.
Doing it right. Let’s now examine the criteria to consider for a technology platform that will allow you to create a truly integrated, customer-facing e-business strategy.
Where do you start? Often companies get paralyzed with cross-functional task forces, extended and expensive consulting and process re-engineering engagements, or delay action altogether because they are not sure how to begin tackling the issue. Meanwhile, more aggressive competitors are moving ahead with customer-centric e-business initiatives, creating a lead that will make it increasingly expensive and difficult to catch up for the second or third mover in a given industry.
The technology platform you select to support and drive customer interactions is one of the most strategic choices your enterprise will make. First, what does a cutting-edge e-business platform deliver to build and enhance customer relationships?
Outbound communications. In the marketing cycle, driving campaigns to generate purchase, cross-sell, up-sell and repurchase is clearly part of the program. The best way to ensure effectiveness is to respect customer opt-in preferences for this type of communication. However, outbound communications do not stop here.
How do you solicit feedback from your customers directly through the electronic channel? One effective way is to automatically drive out easy-to-access surveys that capture everything from online buying experiences to satisfaction with service interactions. Many online businesses suffer from deficient customer service infrastructures, compounded by a lack of insight into the online customer experience. Automated surveys can provide real-time, personalized feedback on your operations as well as give you a chance to respond quickly to dissatisfied customers and prevent defection.
Another outbound communication vehicle is the electronic newsletter. Recognizing the relationship value of maintaining a continual dialogue with your customers, automated, personalized newsletters can provide a cross-section of relevant, valuable information on announcements, events, news, industry information or special programs to which customers may respond. The newsletter also is a means to proactively extend your reach out to customers through e-mail and give them a reason to come back to your Web site (most Web sites sit passively, waiting for you to revisit).
Inbound communications. We all have probably heard horror stories, referring to the high percentages of e-mail or Web-based customer inquiries that go unanswered, or answered very slowly. Many studies, such as the report by Jupiter Communications, New York, “Online Customer Service Strategies for Improving Satisfaction and Retention,” show that up to one-third of all inbound e-mail messages go into the e-mail “black hole.”
One Internet-based retailer recently had a backlog of 6,000 electronic customer service inquiries. The strange thing is that most companies could not imagine 6,000 customers lined up waiting at their customer service desk or on hold at their call center. Companies are beginning to recognize that the damage to customer relationships through an unmanaged or unresponsive e-channel can truly jeopardize business, particularly when alternatives are only a click away.
Automated response management is a solution to this problem. With the same disciplines and structure of a sophisticated call center, response management, combined with the artificial intelligence of a knowledge base, can automatically read, categorize, route and manage the end-to-end response cycle to inbound customer communications. This not only ensures that the customer is serviced quickly, but also provides a consistent, complete and accurate response each time. Knowledge bases provide the power of auto-suggest and auto-response building, allowing even lesser skilled personnel to quickly answer customer inquiries efficiently and effectively.
Inbound customer communications also can include responses to marketing campaigns. Some companies are driving out 250,000 Internet messages a week to customers and prospects. When a customer responds to a campaign or wants a live person on the other end, how is a company’s system to categorize, route and manage those interactions? Response management can make sure the impact of your Internet marketing campaigns feed into a structured lead management process to close more business.
Bringing it together. Taking a step back, we can list a number of critical considerations that will influence how well your eCRM strategy is executed. Ultimately, this will impact both your bottom-line profitability and your corporate success. Here are some questions to consider:
• Do you have a system that integrates processes across multiple operational areas that touch the customer through the Internet channel?
• Does the solution integrate inbound and outbound customer interactions?
• Do you have a platform with the ability to flexibly expand and extend to include new customer-facing core processes?
• Will the business users in your organization be able to manage and execute your customer-facing e-business applications, as opposed to relying on your IT shop for this?
• Will you be able to get up and run quickly in order to gain a “first-mover” advantage and avoid expensive, lengthy, complex implementation projects?
Even though you might see an immediate need to automate a certain process or function today through the Internet, inevitably your company will find itself leveraging the Internet in some way for basically all customer-touching processes. Probably sooner rather than later.
The first movers in your industry gain not only the pre-emptive advantage to entrench online customer relationships and interactions, but also the valuable knowledge, know-how and experience in leveraging e-business within their enterprise. Investing in a strategic e-business platform to better manage your customer interactions is something to consider early on in your company’s eCRM planning.
