Monday, September 06, 2004

What if CRM actually worked to serve customers?

see edited version at
Media Guardian, Sept 6th, 2004

There are some businesses that offer you such an excellent service that you couldn’t ever imagine going anywhere else. By focusing on understanding and supporting the critical aspects of your key interactions like opening an account or choosing a complex new product, businesses like First Direct, made into a pleasure what in the past had been chores. First Direct has been the UK’s most recommended bank for the last 12 years and writing as someone who finally took the plunge last year and converted to their black and white world after twenty years of banking inertia, I now know exactly why and have happily told anyone prepared to listen to me on the subject.

Great customer experiences promote positive recommendations, which are not only the most valuable form of marketing but also of course are by far the cheapest. We are compulsive sharers of both our best and worst customer experiences and now that we’ve developed a very sophisticated sense of what is possible when it comes to customer service and that choice is a click away, we have become very demanding in thinking about how we should be rewarded for our investment of time, energy and money in a business.

In the past ten years, customer relationship management, or CRM as it is known to its acolytes, has attained near mythical status within organizations. Some of the most successful organizations in the world, including Dell and First Direct have built their operations around the notion that an ability to truly understand and deal directly with their customers helps to not only reduce costs and improve sales, but most importantly in an age of radical competition, actually increase loyalty and profitability by providing a more personalized and responsive service.

The model on which this virtuous circle relies is the notion that every transaction with an organization should improve your next experience. The world’s greatest retailers like Tesco and Amazon, view every shopping basket as not just a sale but as another opportunity to understand. These companies religiously study every interaction in the service of delivering better specification to their supplier and improved value to their customers.

This is not an easy job; in fact applying this model of continuous improvement to an organization is fiendishly difficult and relies not just on a complete devotion to the principle of putting the customer at the centre of how your organization thinks, but most importantly it stands and falls on the follow-through of the policies, processes and technologies used to support this vision.

Every self-respecting business today will at least pay lip service to the customer. In fact the notion of customer focus has so permeated organizational culture that even the public sector, which has little or no incentive to compete in the delivery of services, has embraced the concept that one size does not necessarily fit all. This wasn’t always the case, in fact it wasn’t more than ten years ago that databases were still a novel part of most organizations. So the idea of pulling together a single real-time view of a customer’s history from information gleaned from both within (and sometimes beyond) their organization was still in the realm of science fiction.

The nirvana, which the CRM travelers seek, is an organization where the extremities are perfectly attuned to the needs and realities of the customer. This is the world where all of an organization’s customer-facing employees have all the information they need at their fingertips, so when they interact with you they can appear as if they’ve known you forever, understand your issues and suggest solutions that at best will make you spend more and at worst will make sure you don’t defect to the competition.

Chasing nirvana has always been a frustrating and an expensive business. IDC predicts that $11.4bn will be spent worldwide on
CRM applications alone by 2008. But the bills don’t stop with the software. In fact technology is a drop in the CRM ocean, the real money is being made by businesses like Accenture and IBM in services like CRM training and outsourcing which collectively are expected to be worth $93bn by IDC in 2005.

You’d think for all this expenditure and opportunity, we’d be stamping out more perfectly formed organizations totally attuned to their customers. But the history of most CRM implementations has been nothing short of disastrous, both from a cost and a customer satisfaction perspective. Gartner reports that most businesses underestimate costs by as much as 75%. Large businesses will typically spend anything between $30m and $90m over a three year period in technology, staff, consulting services and training related to CRM but the bad news is that Gartner suggests that over 50% of these implementations are considered a failure by the most important constituency of all – the customers.

One of the great opportunities for ground-breaking CRM is surely in telecommunications where the choice of providers and packages has become bewildering and with services like Skype and TalkTalk, competition can be both global and intense. You would think with the intimate knowledge that phone companies have about our calling habits, coupled with the huge investments they have all made in CRM systems, service and staff would have generated some world-leaders. But today’s operators have typically chosen a policy of sales over service when they look at customer information. The operator who analyzes calling habits for the purpose of letting its customers know not just that they could buy additional services, but that by changing packages they could save money would win my loyalty for life and like First Direct, I’d tell anyone prepared to listen.