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Publisher's Outlook
October 2001

Nadji Tehrani

Before We Go Out Of Business, Maybe We Should Think About CRL!


[ Go Right To: The Business Process Of Customer Retention And Loyalty ]

In 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 a bride.

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 business."

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 as follows:

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 answer.

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.


Nadji Tehrani
Executive Group Publisher

[ Return To October 2001 Table Of Contents ]

The Business Process Of Customer Retention And Loyalty


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?

Incomplete Data
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 Process
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 firm, TARP/eSatisfy.

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.

[ Return To October 2001 Table Of Contents ]

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