Customer acquisition is fast becoming a distant second to customer retention, and with good reason. The bottom is dropping out of the economy, and once customers defect in a downturn it's increasingly difficult to win them back with the same services they previously purchased.
What can go wrong? Plenty. Take, for example, a customer-interface rep who is not given clear guidelines for decision making. A customer approaches the rep with an urgent need for your product. Sure, delivery time is under your normal minimum, but the customer is one of your premier accounts. Should your rep throw money to the wind and airfreight the package to the customer? What's the cost of accommodating -- and not accommodating -- the customer? Trade-offs are tricky business, especially in the absence of clear decision-making criteria. And what about guidelines covering the issues of empowerment and decision authority? Or take this example: Customer D needs a product quickly, but you don't have it in stock. Customer D is a non-priority customer who orders four times per year. Unfortunately, the rep doesn't have frequency of order information. The rep discovers that the production schedule runs in two-week cycles -- not good enough for the customer. The rep springs into action and calls the production manager to discuss the situation. Both agree to revise the production schedule to accommodate the customer and both expect kudos for meeting a customer's needs. Ah, chances are you'll not be handing out brownie points for this performance. The cost of moving production schedules is often considerable. Typically, neither the customer interface representative nor the production manager has a clear understanding of the relevance of overall company profitability, much less the relative importance of Customer D to other customers whose orders were delayed because of the schedule change.
The cumulative cost impact in both examples is usually hidden from sight because there are no measurements in place to identify the change in execution. If the organization had a measure for schedule stability and conformance to schedule, such incidents would surface in a routine review that can be addressed by production, scheduling, marketing, and anyone else who may be involved.
Beyond shipping and production scheduling changes, look to service defaults as a contributor to cost excess. For example:
- Every customer receives the same service: time, speed, availability
- Little to no differentiation between customers
- Little to no differentiation between products and services
- Budget for customer interface and relationship management exceeds industry averages
- Fuzzy service offerings
- Unkept customer promises
- Inconsistent service
- Poor or inefficient communications across functions
- Few or no customer feedback loops
- No links between customer satisfaction and strategic measurements
Building a CRM or an Account Management scorecard provides a powerful tool for managing customer value. Every organization should have a customer strategy map that visually depicts the key components necessary for your CRM strategic model to succeed, and provides a basic framework for measuring and managing CRM.
An effective CRM scorecard includes both results and driver measures. Results measures relate to financial performance and customer outcomes such as customer retention, buying volume, or market share. Driver measures relate to CRM operational performance, employee attitude and competencies, and other organizational factors that directly or indirectly affect the results measures.
- CRM Financial Performance
- Customer Lifetime Value
- Customer Profitability
- Customer Revenue
- Customer Retention
- Market Penetration
- Customer Win Backs
- Customer Acquisition
- Customer Satisfaction / Loyalty
- Sales Productivity
- Marketing Effectiveness
- Service Quality
- CRM Employee Retention
- Service Employee Competencies
- CRM Employee Satisfaction / Loyalty
- Decision Making Information
- Supplier Retention
- Supplier Performance
- Supplier Quality
Feedback loops are an important element of a comprehensive Customer Relationship Strategy. By hearing the voice of the customer frequently, organizations can more quickly redirect actions to fit the needs of the marketplace. Operations, services, and support areas can then use customer feedback to provide guidelines about how to respond more effectively to customers, how to effectively balance cost and service, how to zero in on the drivers that are most important to improve, how to determine which strategies are working well or poorly, which processes need improvement, and which skills need to be enhanced. For many senior executives, there is only one imperative: "I don't want to hear about customer problems - just fix it!" The message is simple: make the customer happy! But at what cost? When there is a clear strategy, the organization can differentiate its services, knowing what service to provide which customer at what cost.
There are five pivotal factors associated with developing a balanced scorecard that will drive a Customer Relationship Strategy:
Focus - Clear product and service offerings and targeted customer groups bounded by core competencies.
Alignment - Groups that interface with the customer directly and indirectly must be aligned to the market. That is, customer needs and product/service solutions must be clearly tied together in the eyes of the customer.
Accountability - High performing organizations ensure that anyone who "touches" the customer has a high degree of self-accountability for customer satisfaction, retention and profitability.
Knowledge - Customer interface groups require training in relationship management, group dynamics, sales methods and techniques, and technical training. They must be provided with the tools and management support to manage customer relationships, such as dealing with difficult or demanding buyers, without spiking up costs.
Empowerment - Allow service reps to make decisions consistent with the cost-service of quality trade-offs described earlier.
- Improve desired service by linking service representative performance to specific customers and service targets. Supervisory and management measures are also linked to customer drivers and results.
- Lowered costs through development of a comprehensive service matrix that outlines specifically defined product and service offerings by customer group, and rank-ordered services options based upon contribution to profit.
- Increased productivity by shortening performance cycles so customer results are achieved with fewer resources.
- Repeat product purchases occur when customers are certain they can count on consistent, reliable service. By aligning service personnel with specific customer groups and making them accountable for customer experiences, good metrics focus representatives to ensure that needs are met and satisfaction remains high.
Let Metrus Group support your customer strategies with:
The following articles are available at our Recommended Reading page:
- Dealer Quality at Chrysler: New Ways of Assessing and Increasing Service, by David Zatz, Quality Digest
- Internal Service Quality: Winning from the Inside Out by Mary Azzolini and James, Quality Progress
- Internal Service Performance by Mary Cronin Azzolini and John H. Lingle, Quality Progress
- Creating the Measurement-Managed Organization by William A. Schiemann; from the 2002 Handbook of Business Strategy
We also recommend:
- Becoming Measurement-Managed: Strategic Focus and Business Metrics at Monsanto’s IFS, by Richard B. Clark and Brian S. Morgan, Strategy & Leadership
- How is your Work Life/Personal Life Balance?, by Richard B. Clark and Brian S. Morgan, Strategy & Leadership
- Design of CRM scorecards and measurement systems
- Deployment of CRM scorecards and measurement systems with your sales, service, product, and customer interface employees