past editorials, I have discussed the vitally
important role of generating new sales leads from
which new customers result. I have stated that between
50 to 70 percent of customers are lost for a variety
of reasons, including natural attrition, the state of
the economy, poor management, technological
obsolescence, etc. I indicated that procuring new
business is the lifeblood of any enterprise wishing to
survive, especially in difficult economic conditions.
I also said that, ironically, many managers do not
realize that new business or new customers are vital
to the survival of any business. By cutting
advertising, marketing, promotions and trade show
participation, they end up cutting the source of new
customers, which is equivalent to shutting off the
oxygen line to a patient. Believe it or not, as
foolish as the above scenario may sound, there are
many companies that have stopped all expenditures and
promotional activities to generate new business and
new customers. Having said that, it becomes obvious
that customers are exclusively the source of business
survival. In past editorials going back even to 1982,
when this publication in a pioneering effort laid the
foundation for what is now customer interaction,
contact center and call center industries, I have
repeatedly said, "Businesses live or die from repeat
business." Today, nothing holds true more than the
above fact. In other words, here we are 20 years later
and the customer is still the king. I am reminded of a
great French philosopher who said, "The more things
change, the more they stay the same"!
The Foundation For True CRM
In one of my Publisher's Outlooks entitled, "CRM
Cannot Exist Without ERM And VRM," I mentioned
that without effective employee relationship
management and vendor relationship management, CRM is
little more than wishful thinking. That fact was true
then, it is true today and will be true forever. The
ironic thing is that while so many talk about customer
service, customer relationship management, etc., etc.,
no one seems to talk about employee relationship
management (ERM) or vendor relationship management (VRM).
Make no mistake about it, there is no room for
shortcuts or tolerance in this basic fact of business
life in the new millennium.
A Few Great Examples
A. Henry Ford's mistake -- We all know that Henry Ford
was an automobile pioneer and number one in his field.
Yet, when the mighty Henry Ford chose to ignore the
wishes of his customers, his empire took a huge step
back from the number one to the number two position!
When his customers asked for automobiles in colors
other than black, Henry Ford's answer was, "The
customers can have any color they want, as long as it
is black!" Well, the customers answered, "We'll look
elsewhere." In came General Motors, which was more
friendly and responded to the input of the customers.
GM provided what customers wanted and not what Henry
Ford wanted. Henry Ford had yet another problem: He
did not believe in advertising, marketing or
promotion. As a result, Ford lost the number one
position, GM rose to the number one position and Ford
became number two: the perennial bridesmaid but never
B. The recent demise of a great many dot com
companies came as a result of extremely poor customer
service, poor fulfillment and total disregard for the
wishes of the customer. And we all know what happened.
Indeed, many of the dot com companies vanished because
they chose to ignore the customer either by ignoring
the input of customers or offering products no one
needed or delivering products too late.
The message is loud and clear. Cherish the
customer, listen to the customer, pay attention to his
or her needs or vanish.
The Mass Confusion Over The Definition Of CRM
In the history of the call center industry, going back
to 1982 when we launched Telemarketing
magazine (the original name for this publication),
there has never been greater confusion on the "raison
d'tre" and the definition of CRM and the expected
results of CRM in the final analysis. Our editors,
backed by 87 years of related experience, on the staff
of this publication (I am very proud to say) have
often provided outstanding definitions of what CRM
should be all about. I urge you to consult with them
and consult our Web
site for such articles.
In my humble opinion, the greatest mission of CRM
is to provide customer loyalty and retention. In the
first part of this editorial, I stated that the
customer is precious, the customer is the king and the
smartest thing any business can do is to open the
channels of communication with customers and thereby
provide the kind of services customers need or can
use. If I were to describe the final results or
definition of CRM, I would have to say CRM refers to
any and all activities that promote customer care,
loyalty and retention. When such a condition exists,
there will be repeat business, which provides credence
to the mantra: "Businesses live or die from repeat
Being #1 Is Everything, Except...
As I have always maintained, in any business, it is
vitally important for any innovative company with
savvy management to be number one in their line of
business. This fact of life can be proven very simply
Case #1 -- What was the name of the man who
first flew over the Atlantic? The answer, of course,
is Charles Lindbergh, but if you ask any one who the
second man was to fly over the Atlantic, no one
remembers and no one cares for number two!
Case #2 -- What was the name of the horse
that won the Triple Crown in 1973 while breaking all
speed records? The answer, of course, is Secretariat.
If you ask the name of the horse that was always
number two directly behind Secretariat, no one
remembers the name of that horse because no one cares
for number two. (In case you are interested which
horse finished number two to Secretariat in every
Triple Crown race, its name was Sham).
Case #3 -- Who was the first man to step
foot on the moon? The answer, of course, is Neil
Armstrong. Now if you ask who was the second person
who landed on the moon, many are hard-pressed to
Putting The Above In Perspective
Obviously, it takes an exceptionally high level of
creativity and innovation and business development
savvy to take a concept and develop it into a number
one position in the industry. However, if you choose
to ignore the wishes of the customer, you can fall
from number one to number two.
How About A New Department Called CRL?
In the mid '80s, awareness led many companies to
provide better and better customer service. While
customer service, per say, should be the only
sustainable competitive advantage, today, it has
evolved into customer loyalty, customer retention and
overall customer satisfaction. In plain English, no
company, regardless of how great their products and
services may be, can survive in today's business by
ignoring the principles of customer care, customer
retention and customer loyalty. So why not establish a
new department in your company called the Customer
Relationship and Loyalty department or CRL for short?
Then assign a top executive in the company called
Chief Loyalty Officer or CLO for short. You may think
this is really a far-fetched idea, but if you think
about it and if you are really serious about providing
outstanding CRL or customer relationship loyalty
services, there is really no shortcut to success.
So before we go out of business, maybe we should
think about CRL!
As always, I appreciate your comments.
Executive Group Publisher
To October 2001 Table Of Contents ]
Business Process Of Customer Retention And Loyalty
BY RICHARD MORRISON
Today, it is imperative that customers' needs drive
the direction of a company's business to achieve
customer retention and loyalty. To compete, companies
need to become purely market-driven. In its purest
form, customer loyalty is the consistent delivery of
products and services that are valued by your
customers. Capturing, analyzing and using all the
customer data available to the organization, and
extending customer ownership beyond the customer
service environment, determines that value.
Smart companies with market-share savvy are moving
to establish a pervasive customer retention and
loyalty business process across the enterprise.
Building customer loyalty becomes an ongoing process
of measuring the organization's performance against
customers' expectations. The organization can then
continually improve upon and adapt their processes,
products and service(s) offerings to better meet and
exceed those expectations.
The Reason For Change
In a variable economy, businesses tend to shift focus
from customer acquisition to customer retention and
loyalty. The days of freewheeling venture capital and
unabashedly spending five to ten times more to acquire
new customers are gone. The focus is now on customer
retention and loyalty. The challenge? Ask 50 companies
how to define customer loyalty and what they are doing
to achieve it, and undoubtedly, just as many responses
will be given.
Many attempts are being made to establish customer
loyalty with price incentives, product discounts,
loyalty card programs, highly targeted marketing
campaigns and investments in customer service and CRM
technologies. Yet companies continue to struggle with
how to better satisfy their customers to retain true,
long-lasting customer loyalty. Knowledge leaders know
it is a struggle well worth making to attain
bottom-line benefits on business performance.
"Disloyalty at current rates stunt corporate
performance by 25 to 50 percent, sometimes more,"
according to loyalty industry guru Frederick Reichheld
in The Loyalty Effect: The Hidden Force Behind
Growth, Profits and Lasting Value. It's a fact:
high service companies gain six percent market share
per year, and low service companies lose two percent
market share per year (Reichheld).
Making The Change
The way in which organizations ensure loyalty is a
statement of how the company values its customers.
Simply handling occasional customer complaints doesn't
ensure repeat business anymore. Collecting
sales-related data and using it to better segment and
market to customers has little proven effect on
loyalty. Today's customers are looking for more than a
good price or better offer. Customers demand that
companies consistently meet their needs or will jump
to the competition.
Companies must ask themselves:
- What data do we have to help measure whether or
not our customers' needs are being met?
- What processes do we have in place to ensure all
sources of customer data are being captured?
- How do we use this data most effectively to
ensure we continue to meet customers' needs?
Quantitative, sales-related data help companies get a
better view of the customer. This data helps
organizations improve sales processes, better acquire
new customers and cross- and upsell current lines to
existing customers. But this data is incomplete. To
accurately gauge performance against customers'
expectations, organizations also need to collect and
utilize the qualitative, experiential data customers
provide. Customers interact with companies every day
in many different ways, from a telephone call to the
receptionist to a billing inquiry to golf course
conversations with senior management. Each time this
happens, valuable customer feedback is accumulated.
This is the key experiential data that must be
captured, analyzed and applied against customer
expectations to help shape the company's future and
keep customers coming back for more.
Adopting A Customer Retention And Loyalty
Who "owns the customer" in most organizations?
Predominantly, it is the customer service or consumer
relations department. But other departments also
interact with customers and receive vital feedback
data the organization needs to improve customers'
experiences. Organizations must expand their view of
customer ownership and their process for collecting
customer qualitative data enterprisewide, to everyone
who interacts with the customer. If a company doesn't
change, it loses focus on customer retention and
loyalty and, hence, profits. Sixty-eight percent of
customers abandon a business because of poor service,
and fourteen percent defect for product reasons,
according to a leading customer retention and loyalty
When an organization's entire enterprise focuses on
customer loyalty, a pervasive loyalty business
process, the business becomes centered on meeting and
exceeding customers' expectations. The result?
Customers see results from feedback they've provided,
feel more valued, are highly satisfied, make repeat
purchases and refer the company to others.
Once in possession of all the data available, both
qualitative and quantitative, organizations must take
the (often not taken) next step -- using the data to
better understand customer expectations and applying
the data to improve the way they do business, to
deliver better products and service(s). With a "bank"
of customer feedback collected at all enterprise touch
points, coupled with the quantitative, sales-related
data, a company establishes the ultimate database of
customer information. It can be continuously searched
and analyzed to a depth that is simply untouchable by "paid
for" market-research studies. The database becomes a
strategic tool to improve business and better satisfy
customers' needs. And that means more business.
Customer retention and loyalty are the result of
continual process measurement and improvement of an
organization's performance against customers'
expectations. The process for this is capturing,
analyzing and applying both quantitative and
qualitative customer data to give customers the
products and services they are demanding. By
consistently responding to and acting on their
feedback, true value is created in the eyes of
customers, resulting in very satisfied and truly loyal
customers who repeat business with the organization
and refer others with passion. Reporting isn't
improving; acting upon the information customers
provide is the key to better understanding their needs
and demonstrating a commitment to better meeting their
needs. Furthermore, when the loyalty process extends
across the enterprise -- to every customer touch
point, from the reception desk to senior-level
executives -- companies glean more insight into what
customers value and how the company can better meet
their needs -- for life.
Richard Morrison is president, U.S. Operations,
of Respond, Inc.,
a provider of software and services that help
companies build better business through customer
feedback. Morrison joined Respond in July 2001 to lead
strategic growth and market penetration in the U.S.
To October 2001 Table Of Contents ]