A New Customer Relationship Management Framework: Twenty-first Century Necessity, or Blowin' in the Wind?
Written By: Paul Greenberg
Published On: September 21 2006
What do you think about when you think customer relationship management (CRM)?
My bet is that you'll think that it's marketing, sales, and support functions, or a strategy that is designed to garner customer commitments of some sort, or an outlook and set of practices that will drive customer behaviors when it comes to product or services sales—and the words up-sell and cross-sell will be prominent in your musings. But that is oh-so-either-twentieth-century or so-five-minutes-ago that it just doesn't make it.
Simply put, the business ecosystem changed dramatically and for good about three years ago (five minutes in fashionista time). It shifted focus from corporate to customer, and the location of value changed with it. Where value had historically been located in the products and services produced by companies, it is now located in the value produced by the customer. The driver's seat is now occupied by that customer, whether the service is business-to-business or business-to-consumer or government-to-citizen. Ultimately, value now lies in the hands of the individual customer, and it is up to the company to both come to terms with that as the way the economy now runs, and to find ways of receiving that value from the customers through the provision of value to the customer.
Think I'm wrong? Look around you at what's successful these days. You hear tell of The Long Tail—niche markets that are successful over time by capturing the volume of individual responses through the creation of a highly specific market built around a personal desire of one sort or another. It's why you see a proliferation of successful mini-Starbucksian types of businesses. Some of the more colorful examples:
- There are dessert-only restaurants in New York (US) and Barcelona (Spain), among other places, that have high-end desserts only on the menus.
- There is a concept of fractional super car ownership that allows you, for some yearly sum at different levels, to use Porsches, or Bentleys, or Ferraris for weeks at a time, depending on what level you purchase for the year. It's the ultimate chichi car ownership model.
- According to the author of The Long Tail, Wired's Chris Anderson, 25 percent of purchases at Amazon are from non-traditional booksellers who would otherwise have no chance of selling their books.
We can go on, but this is merely one representation of the transformation of the desires of the customer.
Peppers & Rogers have a different take on customer value. They call it "return on customer," which they see as a metric and set of performance indicators that are a true measure of a successful business. Their recent hit book Return on Customer makes it quite clear that whether or not you agree with their specific metrics, we now live in an age where the customer, not the company, determines the value.
What Is that Value?
The irony is that in the "old days" of CRM, you'd think that the value was determined purely financially. Bottom- and top-line stuff. Revenue, sales volume increases, margin and profit increases, number of products from your company owned by the customer, and so on. This is not the case in the age of the new customer. The customer's idea of what is valuable and the company's may be quite different.
What customers are looking for is "meaningful value." In other words, something that they think is worth it. Worth what? Something for which it's worth being advocates for your company. But we'll get into that in a short while. Customers are looking for a great experience with your company—an experience that is owned by them. They are looking to your company, not just as a manufacturer of products and services, but as an aggregator of experiences that they both drive themselves and co-own with you. This means they expect a certain level of transparency—also known as honesty—from you.
Don't underestimate this, because your underestimation of "truth, but not advertising" can be the deal-breaker that drives your customer from you. It is the reason that three years ago, no discernable percentage of companies were running business blogs, and that now 8 percent are, with 55 percent intending to, according to multiple studies recently released. Because honesty no longer lies (double entendre there) with the marketing department. Honesty is a corporate effort at conversation with a customer from all employees. Marketing in the way that we knew it is not as useful as it once was, which means that traditional CRM ways of looking at marketing (campaign management and the like) need some rethinking around the use of the new means of communication that customers are demanding, and around the new approaches to marketing taken by some of the big players like Procter and Gamble (P&G).
What do they do? They understand the value of intimacy with the customer—truth, and then some. For example, P&G has a network of 600,000 members they call Vocalpoint. Know what it consists of? Mothers. Yes, mamas, but with a unique twist. Each of the mommies has a social network of at least twenty-five other moms. Multiply that, readers, and what do you get? A minimum of fifteen million reachable targets that are living within trusted networks. So if Prime Momma in Network #33 says to Mommy #52 that they should take a look at this P&G product sample which Prime Momma thinks is really cool, Mommy #52 does and tells #53 about it too. Why shouldn't she? Prime Momma is a trusted friend.
This all works because P&G gets what the new customer demands and what this customer and potential advocate sees as value. Thus, they understand what the new CRM is. Read these quotes from P&G chief executive officer (CEO) A.G. Lafley real close, because they are an exact representation as to why we need a new framework for CRM going forward:
"We have to create a great experience every time you touch the brand, and the design is a really big part of creating the experience and the emotion. We try to make a customer's experience better, but better in her terms."
"I think it's value that rules the world. There's an awful lot of evidence across an awful lot of categories that consumers will pay more for better design, better performance, better quality, better value, and better experiences."
This latter comment was a direct counter to Wal-Mart's philosophy that "price rules the world."
Ultimately, what I'm saying here is that there is a new breed of customers in town who are both undeniable in their formidable presence, and who have demands that are non-negotiable. They are social customers who are as likely to trash your company as to be advocates for you. They are customers who are part of what Springwise likes to call "generation C"—creative, connected, and content-driven—regardless of which actual generation they belong to. It is the Blackberry users who use the device for personal stuff too and take it home at night. It is the kids who text message their buds, instant message (IM) them, or even call them. It is the people who look at what you do and think cool. But it is also the people who use the Internet to get the word out about what bad service a company provides. They get that "diss" to absolute strangers who automatically trust the bad comments and spread it to others—even though the only thing that you know about the person sending is that their e-mail handle is email@example.com. To both counter the latter, and encourage the "cool" response and create an advocate, what you have to provide as a business is an experience with you, your products, and your services that distinguishes you from your competitors who can provide similar products and services as cheaply and as easily as you—something that your customer is fully aware of, by the way. Think about it. You're a customer too. Don't you know that? Don't you think—I loved that hotel? or I hated that hotel?—and that can color your perception of an entire vacation. Imagine that thinking going on about all products, services, and companies these days.
That means that you have to differentiate yourself by providing customers with a personalized experience that they can find some meaningful value in. And that meaningful value could just be the satisfaction of outright "coolness."
Think that's an overstatement? After all, it's not easily metrically determinable. Well, think of this. A study that was commissioned in a joint effort by Intel and Toray Ultrasuede found that 76 percent of the survey respondents not only looked at someone's technology, but at the style of it—and that style was a critical factor in technology choice. Now, while this study indicates something about the new customer, Intel and Toray Ultrasuede's answer to the results indicates something about uncreative thinking—an ultrasuede-covered laptop. Sigh and Ugh.
But the underlying research is both sound and important. What is meaningful value to a customer can be emotional. What these customers want are the tools to fashion and sculpt their own experiences with you.
Disney Destinations Marketing, the vacation arm of Disney, made what they call a small change in their CRM acronym a few months ago. They started calling it CMR—"customer-managed relationships." They made what that meant clear when their spokesperson said, "CMR is our version of CRM—just a slight nuance regarding our philosophy that our guests invite us into their lives and ultimately manage our presence/relationship with them." While I think that's a lot more than a slight nuance, it indicates that there are a number of companies that know the new business models and especially the customer strategies, and thus, the processes that are determinate in the execution of those strategies now have to be built around features and functions that have some engaged customer value embedded—whether the feature or function is internal or external.
So a new framework for CRM has to be built. One that says, "we recognize that customer demands are different than they were; that customers want to be more engaged in the creation of personalized experiences with the companies they choose to collaborate with." In order for the company to get value from the customer, they need to both create an advocate and not create a verbal terrorist. The company has to be both a manufacturer of goods and services, and an aggregator of experiences that provides the tools and environment for the customer they need to make those experiences excellent and "cool." That means that blogs and social networks and user communities and cell phones and mobile device platforms and podcasts and you-name-it are all part of the customer strategy that wins during this part of the twenty-first century. The new framework for this now needs to be created. If it's not time, it's too late.
About the Author
Paul Greenberg is president of The 56Group, LLC, and chief customer officer of BPT Partners. He is an internationally renowned expert on CRM, and one of CRM's most influential authors. His best-selling book CRM at the Speed of Light: Essential Customer Strategies for the 21st Century is now in eight languages, and is used as a textbook in over sixty countries and universities across multiple continents. It was named "the number 1 CRM book" by SearchCRM.com. Greenberg is the co-chairman of Rutgers University's CRM Research Center, and executive vice president of the CRM Association. His blog, PGreenblog, won SearchCRM's First Annual "CRM Blog of the Year" in 2005. He can be reached at firstname.lastname@example.org.