Monday, October 6, 2008

Principles For Profitable Customer Relationships

If you’re still trying to sort out what customer relationship management (CMR) really is, you're not alone baby. The term has been bantered around and used so widely and in so many ways that its definition is getting lost.

Yet it’s important to remember that building profitable customer relationships will never go out of style. That is not greed it is a business fact. From the corner store to running international companies, the following 12 principles will remain the bedrock of building a successful business. Each one works on its own as an individual platform on its own yet when intertwined with the others, who look out baby your on your way! The whole is indeed much much greater than its parts in CRM..

1. Continuously Learn About Your Customers. This is the first principle of managing any customer relationships because it is the most fundamental. You don’t know them and understand them you can’t sell to their needs. When you know your customers, you can make sound business decisions about how to develop your relationships with them. Collect and analyze information about your customers to get to know them better than they know themselves. I’ll have to tell you all a story about a Motorola supplier I know some day. He was the embodiment of this idea. Maintain your knowledge in customer profiles that are available to all who need them in your company. Don’t let your managers be little fiefdoms of information (see earlier blog on this topic of sharing information) but don’t stop there. Apply everything you know to building a customer valuation model. Knowing the value of customer relationships is essential for managing them wisely.

2. Handle Different Customers Differently. Duh! This idea has been repeated so many times that it’s practically taken for granted now. But people and companies still try to treat everyone the same or try to have the customer fit their mold and not vice versa. The power of this principle lies in finding the greater value in each customer relationship through differential unique treatment. Based on customer segmentation, call centers can provide user-appropriate Web and interactive voice response (IVR) interfaces, routing routines, service levels and content. It is important not to differentiate simply because the technology exists to do so. Segment your customers sensibly and with their needs in mind not yours. There are hidden costs to differentiation that must be weighed against the increased value that personalization can be expected to produce. Effective strategy ultimately seeks to optimize the value and possible profit in each customer segment.

3. Anticipate Customer Needs. Another no-brainer. Building strong customer relationships positively can change the selling process in many ways. Knowledge of your customers presents new opportunities for making the right offer to the right person at the right time. Analysis of customer profiles, especially using powerful analytics tools, can provide insight about who buys what from you when. Contact management systems can detect cross-selling and upselling opportunities and when acted upon you can make good buying suggestions to your clients during your calls, responding to customer input or even automatically presenting customized offers in advance to their asking.

4. Interact with Customers with knowledge. Desirable relationships are not a one-way street. It needs to be a back and forth, give and take relationship. Relationships result from interaction, yours, and theirs. Knowing your customers is just the first step. Use that knowledge to deepen relationships with customers whenever you interact with them. No matter how sophisticated the technology that organizations and customers use to communicate, your customers are people and people appreciate being recognized, listened to and understood. Letting your customers know that you care enough about them to get to know them is an important part of managing the customer relationship.

5. Focus on Revenue and Retention. Unlike many other management initiatives, building strong customer relationships is not about cost savings. Instead, the emphasis is to increase the revenue received from current customers and heighten the retention rate of your valuable customers. Remember it is far more costly to replace a customer than to keep one. A focus on customer relationships can require so many organization changes that operational cost savings may be realized as well but that is not the primary focus. Time on customer calls may increase as you make the most of each opportunity — it takes time to service customers well, to listen to them, to collect information about them and to upsell and cross-sell to them. But these steps can pay off 10 fold. The return on investment for building customer relationships should not be expected short term but must be taken of as a whole.

6. Increase Value for Your Customers and your Organization. The bottom-line reason for building customer relationships is to increase value both for customers and their organization. There are many ways to deliver increased value, including being “easy to do business with,” creating operational efficiencies for your customers and making timely offers of products or services that perceptively address customer needs. Giving them Just In Time delivery of goods and services. When done right, building customer relationships is a “win-win” for everyone.

7. Present a Single Face. One of the ways to create value for your customers is to simplify the ways that they deal with your company. Take a holistic view of your customers and consolidate information from across the company, regardless of geography, department, function or product line. No information fiefdoms can be allowed to happen. When you and everyone in your company have a complete picture of each customer’s relationship, you can design customer interaction processes from the customer’s perspective, thus increasing value and letting customers know that you know and care about them.

8. Enable Information Sharing and Interaction Across the Organization. (see above) Building customer relationships requires all parts of an organization, not just the marketing department (person), not just the sales department (person) not just the customer service department (person) but everyone. It must be both a requirement and a benefit that organizations improve their internal communication processes. The only way to develop a comprehensive view of each customer’s relationship with the organization is with the full participation in every part of the organization and have them cross platform customer information. This requires strong support from top management and all the way down to the janitor.

9. Create Business Rules to Drive Decisions. Business rules can codify and automate processes, specifying what should happen in specific situations, thus enabling both differentiated customer treatment and automation. Rules don’t have to handcuff the information and creative process some areas, like sales, need. Developing organization wide business rules is a huge task, and how well it is done directly affects your success in building customer relationships. Business rules define the ways that the strategy is executed or if done poorly strangles a good company in its customer approach.

10. Empower Employees with Information and Training. Capable desktop tools may be the most visible technological feature of customer relationship applications. Just as the cockpit of an airplane displays all the information a pilot needs to fly in any condition, the contact management screen should pull together cleanly and clearly all that any person needs to know about the current relationship with that customer. The screen should change so that the screen supports and guides anyone during any customer touch point. Empowerment is the key principle, however, because no set of rules can or should fully anticipate every situation your people need training, information and support so that they can make good decisions that are consistent with your company’s strategy.

11. Keep the Right Customers. One of the truisms associated with customer relationship management is that it is cheaper to retain a customer than to acquire a new one, but that idea can be taken a step further. In order to maximize this value, companies should focus on retaining valuable customers, not necessarily all customers. Be warned, however, that misapplication of this principle can be dangerous. Mistreating “low value” customers, even if you are losing money on them, is hard to justify in the court of public opinion (which is where your future high-value customers are sitting). Even worse if you are in the same social networking group or ning group word can travel through the group very fast. i.e. I am in and I have 3 companies in there which are in for collections.

12. Remember That Cultivating Customer Relationships is a Way of Doing Business. These efforts go beyond tools, techniques or programs. Building customer relationships is about the way you do business not what programs you might use or rules you put in place. It must permeate your entire corporate culture. It requires participation and hard work by everyone throughout the organization, the suits and the grunts, and if done right, the work never ends. Results from these efforts need to be continually fed back into the process to keep the marketing efforts and information systems up to date and accurate. This is an ongoing never ending process.

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