; ;

CRM for customer service - The source of real value?

We've discussed the issues of return on investment previously,but there's more to it than that.

A lot of focus has been thrown on the need to service your customer base and create organic growth rather than continuous acquisition, particularly by work like Don Peppers and Martha Rogers' "Return on Customer". The essential tenet of the book will not be a surprise to most people involved in or considering CRM - essentially that your customer base is valuable and it costs more to recruit new customers than look after existing ones. However Peppers and Rogers go further, arguing that the loss of a customer causes an immediate loss in the value of an organisation, albeit one not identified by short term financial measures and ignored by many companies at present.

So the thesis of this work is that a Return on Customer (ROC) measure is needed by businesses to reflect their long term growth and to provide a sensible valuation for the effects of customer management. The ROC measure will not replace ROI (Return on Investment) in the business but provides an additional view, avoiding the short term thinking found in so many ROI driven companies, particularly those with stock market expectations to maintain.

The overall view of how to develop ROC is through developing a trust relationship, where neither party is unduly greedy, the organisation not bombarding the customer with inappropriate offers and the customer accepting the need to share data to develop the relationship. To achieve this it is necessary to earn the trust of customers by encouraging employees to communicate fairly and openly with all customers at all times. Indeed encouraging the employees to use CRM processes requires development of a separate trust relationship, particularly in areas like the sales force where staff can usually do their initial job just as well without the system

Whilst this approach has impacts across the whole of an organisation, the focus for CRM is clear - look after the customers you have because losing them destroys value. In turn this provides direction for the application of CRM technologies, to concentrate on providing what the customer expects and needs rather than gathering data in order to exploit the existing customers and play on their inertia to change.

Now that's a simple statement but it doesn't negate the need for any particular type of functionality. Sales force automation may not instantly appear to be what the customer wants - but if implemented as a system to make sure that all leads and enquiries are fulfilled and that all customers receive regular and appropriate contact then it can be a major contribution to an effective relationship. In this context it's the account management aspects which matter more than the instant increase in sales which has so often been used as the justification.

Similarly analytics functionality can be used to identify detailed customer propensities and focus on maximising short term profitability. If a customer is unlikely to defect then don't give them access to any special deals and in the extreme don't even contact them in case it causes them to wonder why they have a contract in place. This approach fits well with ROI calculations - you are spending nothing and losing nothing at least in the short term. But in ROC terms it's very negative, the organisation is proving to the customer that they are untrustworthy and giving them ever reason to defect as and when the time comes for a review of the situation.

On the other hand, analytics capabilities can be used to create targeted messages for particular customers highlighting opportunities for them and discounting inappropriate ones. These can be available for delivery as part of a customer initiated contact just as much as through outbound campaigns - and the success rate of delivery through customer initiated contacts is much higher than outbound marketing. Because you've used real information on the customer's position the proposals are much less likely to sour the relationship than conventional push campaigns asking if the customer is interested in the latest flavour of the month. Which means you're providing a real service and creating real customer value even if they don't buy this time?

It's possible to look at all areas of CRM technology in these terms - each can be implemented to support the customer relationship and ROC or to focus on short term ROI. So in each implementation it's necessary to create a view for the organisation and work out the balance between the measures which is appropriate at this time. The big hurdle for most companies is in recognising this balance and deciding where their focus should lie. Once that's understood it's then necessary to develop the strategy to deliver the mix of ROI and ROC which is required using the appropriate tools for different elements.

CRM tools focussed at providing service can create real value but it may not be the sort of value an organisation currently measures and it may be spread across ROI and ROC measures as well as other measures such as process quality and organisational development.