How often do we pause and ponder about industry issues that have a bearing beyond just our rigmaroles? Share insights that can further the common understanding? Or, at the very least, point at things that need to be set right. View Point - an exchange4media platform, will fill this void and become a source of understanding, action and perhaps some inspiration.
It’s about time we took the customer seriously, and started treating him like he mattered
Justin Rabindra, Regional Knowledge Manager, Asia Pacific,OgilvyOne Worldwide
I’ve reached that stage in life where I want to just simplify my life.
And it’s affected everything, from the food I eat (almost vegetarian), to the things I do (fewer parties and definitely no hard drinking), to the number of credit cards I carry in my wallet (three, and working towards two).
Which brings me to my point. I’ve been trying to get rid of a particular credit card for the last six months from when it was due for renewal. I cut it into two halves and sent it to the bank with a letter explaining that I do not wish to have the card anymore and to please find enclosed a cheque towards full and final payment.
If only life were that easy! For the last six months I’ve been getting bills for the annual fee, and interest on it has been compounding monthly. Calls to the helpline confirm that they have received my instructions to cancel the card but “you understand sir, the bill is system-generated”, like the system had a life of its own!
The last bill took the cake; it said “your account status continues to remain irregular. If you do not take immediate corrective action, you will be listed in the industrywide defaulters list”.
We’re talking of a very respected multinational bank here. Funnily, I still respect the brand and all it stands for, it’s just the people who work there, their attitude and treatment of customers that gets to me. (They need to be listed in the industrywide list of people who have defaulted in handling customers.) Before long the brand will take a beating as well, at least in my mind.
With few exceptions, most Indian companies display exactly the same behaviour. Think about when you were last handled well as a customer.
Can you name one company that consistently recognizes you and treats you well. According to Fred Reichheld, the ultimate test of loyalty is when a customer is willing to recommend you to a friend. Which company or service would you recommend to a friend?
Do we need the shock and awe of an economic downturn to realize the importance of customer relationships? Do we always have to be reactive, apologizing for unkept promises, for shoddy treatment, and for ignoring signals until it is too late and the customer has long gone.
Compared to a lot of economies, we’ve had it mostly good in the last few years; new product launches are doing well, except for the odd dud; company growth targets continue to be met organically. Of course, it does not hurt that we’ve been blessed (?) with a record-breaking population and a healthy market base for virtually any product or service.
The growing size of the consumer market means that customer acquisition, i.e., winning new customers, and not retention, has been the primary goal of any business. With a growing market new customers continually replace those who defect or move on. And margins are almost guaranteed by increasingly efficient production at a time of rising end-user prices.
We need to look at the basis of our customer relationships
Marketing managers have been taught in management school that the most important way to grow is through acquisition. Sell, sell, sell at any cost is the mantra for everyone from the CEO to the doorman. Arriving at that ‘winning strategy’ that cuts through the clutter and generates demand for your product is the key to getting that promotion and annual bonus. Advertising agencies supported this view too by focusing on mass media communications that treated customers like fish to be trawled from the deep seas.
This cannot last forever.
The truth is out there
During the downturn of 1990-92, marketers in the West were driven to desperation and were forced to look for innovative solutions to grow their businesses using scarce resources. And they made a fascinating discovery. They found that there was a goldmine under their very noses. Customers they were already in touch with and doing business with actually held more value than their prospect pool. These were people they had been taking for granted for so long.
There was also a second, equally important discovery. That cross-selling and up-selling to existing customers was more cost effective than selling to new customers.
According to Philip Kotler, the cost of making a sale to a new customer is 5 to 7 times that of selling to an existing customer. This is because with a new customer you need to get her attention, create awareness about your product, tell her why you are better than the competitor, create the desire to purchase, and place in front of her all the information and channels to close the transaction. Not so with existing customers - they’re already aware about the company and how to buy. In other words, you already have a relationship with them. By introducing them to new products and services, less sales and marketing costs are incurred.
The bottom line benefits of treating existing customers in this way can be substantial. According to Fred Reichheld, increasing customer retention by just 5 per cent can increase revenues by between 25 to 100 per cent, depending on the industry sector. This happens because you are, in effect, maintaining a longer relationship with the customer at a lower cost while increasing the number, range and value of products and services they purchase.
You can’t build a relationship with loyalty programmes
The first and most obvious route to build customer relationship for many companies has been Loyalty Programmes. “Earn points when you buy, redeem them for gifts!” While effective for a while, this really amounts to bribing a customer into staying loyal (if it can be called that) and works as long as a rival offering an equally acceptable product does not come up with a similar scheme.
There’s more to customer relationship than loyalty programmes.
You cannot ignore the Internet anymore
The Internet has put a new spin on the whole dynamics of customer management. From a supply perspective, web-enabled technology has allowed low cost management and processing of both information and transactions. For example, the cost of making a transaction over the web in banking is a small fraction of the same transaction across the bank counter.
On the demand side the Net has empowered customers with wider and quicker access to information about products and services: greater flexibility about when and where to purchase; and shorter cycle time from need identification to action. Customer expectations for enhanced choice, in products and services, channels of delivery and even modes of payment have accelerated.
The major effect that the Internet has had is in the impact that customers now have over companies, compared to any time in the past. This is especially true in B2B businesses where large manufacturers have insisted on web enabled supply chain management initiatives from their key suppliers.
Any company entering the customer relationship space cannot do it in isolation of the Internet. You need to re-look at the way you had always conducted business because traditional ideas of brands, advertising and distribution are being challenged by new concepts of value. Especially in India, where the population is getting younger and the youth are clearly saying that the Internet and mobile are an intrinsic part of their real world. Are marketers logged in and listening?
The need for relationships to create value
While the Internet opens up opportunities to service customers on a scale and at a price unheard of before, there are issues of customer retention that the Internet uniquely creates. The “weightless economy” of e-business is based on frictionless relationships where customers may never interact with a company other than through the company website. Going high-tech for many companies has meant losing the high-touch that they had with customers earlier. And as they say in e-commerce, the competition is only a click away.
Customer Management – easier said than done
Customer Management is emerging as a business philosophy that can leverage new channels and put in place tools to embed long-term relationships. Effectively, it can deliver greater shareholder value through lower costs and higher profitability.
As demonstrated by dozens of companies, the biggest obstacle to implementing CM is the problem associated with existing processes for managing customer relationships. It has to be recognized early on that CM is about re-engineering business processes rather than introducing new technology.
The CM mantra – retain that customer!
By increasing the life, breadth and depth of customer relationships it is possible to substantially increase the value of each relationship. Simultaneously, low value customers can be identified and the relationships terminated, or re-directed to low cost channels. The genuinely ‘growable’ customers need to be focused upon for nurturing, and the most valuable customers retained.
It’s useful to remember that CM does not work on some hugely intellectual construct, as some people would like you believe. The basis for CM is the simple ‘touch and feel’ of human relationships. Which is why the much-quoted ‘Mom and Pop’ corner shop anecdote and its human style nicely capture the spirit of CM.
The time to act is now. The acronym is unimportant – CRM yesterday is CM today and may be something else tomorrow. But there is no getting away from the principle of it.
Like David Maister said, “The customer does not care how much you know until he knows how much you care”.
Maybe some day soon my credit card bills will stop. Come to think of it, I never asked for the card in the first place. But that was years before I was declared an industry-wide defaulter.