Does your business model work? In the boom time of the late 90’s the number one driver for business was customer numbers. Profitability, costs and customer service quality didn’t really matter.Well the telco providers and those in financial services, have finally realised that their models don’t work anymore.
The Shifting Balance of Power – Getting Results in a Customer Managed World
By David Naylor of Budd
Unfortunately, the emphasis for most is now cost cutting, driven by the overall economic downturn, falling product margins and increasing competition. But there are some clever ones who are thinking about how to get the balance right for the long term. How do you generate growing revenues and manage costs while delivering the brilliant experiences that
customers now expect?
These clever businesses are thinking about the Customer Managed Relationship – CMR. They are moving their mindset
away from the belief that ‘mother knows best’ to the mentality that the customer knows what they want and you need to supply it on their terms.
It’s not about whether you have a relationship, it about whether you are generating repeat, profitable business.
Customer Management or Managed?
So we know the CRM model hasn’t worked. Why? Because customers don’t want to be managed. Customers want to manage themselves – be in control of when and where and how they do business with you. There is no value in the one sided relationship and that is what businesses have created and why the return on investment hasn’t materialised.
CRM initiatives have shown a recurrent failure to address three key aspects of the customer behaviour.
- The customer views their interactions with you from their side of the fence. Their interactions must feel part of a logical process and deliver an end to end experience. Businesses rarely take this ‘outside in’ view.
- The more you know about a customer, the more they expect you to ‘get it right’. Businesses have been extremely poor at leveraging the customer data to improve their overall performance whether in product development, process improvement, sales targeting or the operational management. Excellent analytics have to be core to the business.
- Technology has been deployed to cut costs and targeted at low value customer segments. Technology is an enabler to offer self service, and put the customer in control, for all customer types. The critical aspect is using it to make the services accessible to customers when they need them. Otherwise it’s simple, they won’t use them.
To address these aspects of the customer behaviour you need to think in terms of a customer focused approach, hence CMR. When you combine the three angles as shown in the figure, there is also a definite focus to each one – creating a great customer experience by taking the customer view of the interaction, generating revenue by leveraging information and people through great analytics and managing costs through technology enablers.
The critical aspect is building the best set of initiatives in all three areas to suit where you need to be – a sustainable economic model that has the right balance between revenue, costs and customer experience.
So CMR is much more than just creating self service applications on the web. It’s more than good process design. It’s more than successful campaign management. Let’s look at the three angles of CMR and see what you need to be doing in respect of each.
Looking outside in
If you take the customer view you must do business with them on their terms. All too often though the customer is blamed’ for not following the process or for example, not using the frequently asked questions section on the website before calling. The problem is that many businesses try to fix the symptoms like delays in responding to emails or long call queue times rather than addressing the root causes.
Amazon have proven that you can build a successful business online. It still maintains 93% of contact with customer through the web and email rather than via the phone. Ryanair, the low cost airline, manages to achieve similar levels. Amazon calls it ‘contact elimination’. Investigating why customers are contact them via the telephone and eliminating the need.
More often than not it’s the clarity of the process or instructions on the web or similar issues that can be addressed relatively easily.
Amazon has been obsessive about the analytics and the need to eliminate these problems. It has gathered the right information, done the analysis and fixed the root cause quickly. We’ll discuss the analytics issues more shortly.
The customer also needs to feel in control from two perspectives. In control of their data is one. Control of the process is the other. The long distance freight companies were the first to give the customer control of both. Vodaphone has now done the same for corporate customers. These customers are now able to manage the activation of and updates to all their corporate mobile accounts themselves through a single view. Vodaphone has cut down massively on administration and the customers have the control and efficiency they need.
But businesses also need to realise that they cannot give with one hand and take away with the other. Offering a great experience in one area does not give the excuse for failing in another. Automating core processes like Vodaphone has done is the foundation, but when problems do arise, it is even more important to see things from the customer’s perspective. Providing issue tracking numbers is one approach that has been adopted by many companies. But this often breaks down when exception handling processes are unclear, departments don’t communicate and visibility of ownership and responsibility is poor. The customer still feels frustrated about the lack of control. A CMR approach links all the stakeholders together across the process and allow true collaborate to resolve the issues. This may even mean involving the customer in the discussions and decisions where appropriate. This not only saves time since an agreeable outcome is reached first time but the transparency of the activity will result in mutual appreciation and great trust from the customer.
And trust is a key factor in creating customer lock-in – getting the customer to invest their personal data in you so that they remain long term, help you to get a clear picture of their needs through the analytics, and enable you to target them with more appropriate services and products.
A simple example is the service offered by Carphone Warehouse that allows you to store all your phone numbers securely on their database.
First you need to trust the business of course. Then the chance of repeat purchase is increased because of the ease of transferring all your telephone book. A simple strategy but a powerful one.
But lock-in is not about capitalising on customer apathy as the banks have done. Collecting sufficient data about customer activity and importantly, changes in their activity over time is critical. Using this data to do things that will ‘wow’ the customer is the aim.
The final factor to consider when taking the customer’s view is the human factor. This combines many of the thoughts above such as putting the customer in control or considering the customer’s view of the end to end process. The human factor needs to address the way customers think and most importantly, the way customers buy.
If I want to go on holiday I may know very clearly where I prefer, when I can go and how much I want to spend. That’s how most web sites that help you select a holiday are set up. If I was to say I like sunny holidays with lots of adventure activities but don’t like travelling more then 4 hours by plane, and so on, I would end up back at the travel agents shop or sticking a pin in a map! So the first part of the process I need to go through is much less about how many tickets I need and more about the psychology of choosing a holiday.
Another human factor example is the old favourite of IVR systems. Numerous attempts have been made to create automated arrival and departure information for airlines, none of them able to support the process as the customer sees it. “I want to know if the 5pm arrival at Heathrow from Vienna is on time”. As the British Airways system now demonstrates, advances in speech recognition technology mean that the ‘conversation flow’ is far more natural and menus are eliminated.
Considering the human factor and all the angles of the customer view is therefore simply a case of putting yourself in the customer’s shoes. It is critical to view every interaction as part of an end to end customer experience. From a process perspective, the customers believe they behave logically and so the business needs to ensure the processes can withstand the ‘outside in’ test.
CRM has given businesses the ability to capture immense amounts of information. Few do it and of those that do, many either do it poorly or simply don’t make use of it. Companies cannot tell you who their most profitable customers are, or if they can, cannot tell you why.
Make no mistake, CMR doesn’t solve this problem but it emphasises the importance of great analytics and so challenges businesses to demonstrate their competence in this area. In fact, as the ‘low cost’ tag is removed from self service applications and businesses start to see the mainstream possibilities (and necessity in many cases), the amount of data is simply going to increase.
Good analytical capabilities can drive performance in two main areas:
- Revenue growth by the faster identification of better qualified opportunities.
- Improved operational performance through effective resource utilisation.
Many missed revenue opportunities can be avoided. These occur because of poor targeting in campaigns, poor processes that allow ‘leakage’ at critical points and critically an obtuse relationship between sales and service. On top of this, there is a failure to do anything about it.
What CMR drives toward is not only the more effective use of analytics but also the closing of the loop, so that the learning goes back into the business very rapidly and fixes the root causes. In the earlier Amazon example, revenue leakage from poor processes was as much a priority as eliminating the need for customers to contact. A major car rental business has done a similar exercise. It examined the percentage of prospects that drop out of the sales process at different points to determine if it is related to product/purchase decisions, process problems or both. Once you’ve done this targeted type of analysis you can get improvements faster.
So how do you improve the analytics and drive change rapidly back into the business? The best businesses have a central analytics function that is dedicated to the task of extracting the knowledge from the data. Starting from a hypothesis – a belief that has be proven or rejected – knowledge is developed through experimentation, in the form of pilot programmes in the live environment. Because of this focused approach, over a short period of time the root cause activities that impact cost, revenue and the customer experience can be identified and actions for change driven through. The key to creating a rapid analysis and action loop is an integrated marketing and operations function. Traditionally, this has been the point at which communication and process flows have broken down and overcoming this is essential.
Capital One is a business that has demonstrated the power of the analytics in this way. Like Amazon, thee company focuses on precise matching of customers to offers. Get this right and the channel over which the communication is made is less important than the actual message or offer. As Amazon has shown, up selling additional service and products is perfect feasible without live contact, so long as you interact with customers in a natural, logical way and you leverage all the knowledge you have to match the offer to their needs.
The second aspect is the leverage of the skilled resources to improve operational performance. A business that understands the customer behaviour drivers through the analytics is more able to predict demands on operational resources. With a greater degree of customer self management in CMR, resources can be freed up and service levels improved. This ultimately means that the brilliant experience delivered in the self service channels can be replicated in the live interactions, creating consistency in process, knowledge and brand.
In the telecommunications sector where new data services have been driven by technical capabilities rather than customer demand this is particularly key. Services are launched on an almost weekly basis with limited planning or training for front line teams. The result is that service levels suffer and service quality deteriorates. New research by Netonomy and Fujitsu has shown that around 40% of users prefer to manage the activation of these services on line. The pressure can be taken off front line staff by ensuring the operations and marketing loop is closed, the analytical tools can predict more accurately the expected demand for the services and the contact can be driven to the self service channels.
Earlier I mentioned the obtuse relationship between sales and service. By this I mean the view the service teams service and don’t sell, and vice versa. Generation of sales leads by service teams is one of the biggest lost revenue opportunities in most business. Likewise, failure to recognise service needs or outstanding issues when in a sales contact can be most damaging to the success of the sales opportunity and future revenue. Lead spotting and the taking of rapid follow up action is critical in a customer managed world. This demonstrates the responsiveness and attentiveness of the business to the customer’s needs. Similarly, recognising and responding to service issues during a sales contact is certainly heading into customer wow’ territory. So in a CMR approach we apply the concept of the ‘next best action’ to every interaction.
Whether it is sales or service related, there is always a next step planned with a customer. The front line agent must get that information and it must also be delivered in the self service environment. Yet again, we see great analytics and rapid feedback loops (between sales, marketing and service teams this time) driving the appropriateness and timeliness of the action from the customer’s viewpoint.
Enabling CMR or cutting cost?
The tradition of deploying technology to reduce the cost of servicing low value customers or high volume, low complexity processes is only completing half the picture.
The Netonomy and Fujitsu study has shown, high spending mobile phone customers are one of the groups that see great value in self service. And why not? These are ‘time-poor’ people who also prefer to deal with their service provider at evenings and weekends. If the traditional approach is followed and the best resources are made available on the phones at these times, the economics of servicing just don’t stack up, even for higher value customers.
So the mental model of ‘automation equals low cost service’ needs to be changed. Lower cost is still a driver for technology but to support more complex processes and customer needs. The return on technology investment has to equally consider the benefits it brings in terms of revenue and customer experience in the CMR model. Technology is absolutely necessary to give the customer control.
So what are the specific aspects of technology that are important to CMR? A primary concept is creation of a single view. This is not just the CRM angle which focused on providing an agent with access to all customer databases. In CMR we are talking about a single view across employees, partners, retailers, suppliers and customers of processes, data, events and knowledge. Let’s explore this a bit further.
If we take the customer view of the world again, the end to end process is important. All stakeholders in the process must be enabled to complete their stage effectively and consistently, particularly for core processes. Mobistar, the Belgium Telecommunications carrier implemented a solution that combined self service customer care and e-commerce for subscribers and also a point of sale application for dealers. It was a single system that all subscribers, dealers and employees accessed. One objective was of course to reduce acquisition and servicing costs but the primary driver was churn reduction by increased satisfaction and the ability to get to market quicker with new services.
On the whole, businesses have started to get their heads around the benefits of a single view for at least key resources involved in core processes. But when the process is complicated or breaks down because of unique customer circumstances, the customer usually has no visibility of whom, if anybody, owns the actions to resolve their request and what has been done. Let me give you an example. I recently returned from working abroad and brought my car back with me. When I received a manufacturer’s recall notice through the foreign dealer I knew I was in for a rough ride to get the problem resolved. I required the cooperation of the car company abroad, the UK head office and the UK dealership. Basically, there was no process for handling this. Who would pay? Who would supply the parts? Who would manage the process of getting the parts from abroad (despite the same recall being issued here in the UK)? I invented and drove the process to get the car fixed.
All information between the dealership and country offices passed through me. I suppose you could say I owned the process but I felt far from being in control. It took around 4 months to get resolved and you can imagine how my experience left me feeling.
Technology to enable this collaborative way of working is now available. The key point is that it is not about massive system integration projects. It’s about creating visibility of ownership, responsibilities, actions and progress – a tracking system across functional or corporate boundaries where processes are unclear or simply don’t exist. In a simple way, the systems even allow end to end performance levels to be monitored. The various stakeholders don’t need to see everything, just enough to keep them informed and aware of demands on them. The customer is a key participant, tracking progress and getting involved to answer queries and speed thing along if necessary. Clearly a customer managed, high satisfaction approach.
CMR is also enabled by innovative and converging technologies. We’ve already mentioned the advanced speech recognition technology deployed by British Airways. As well as making this type of automation more accessible, a CMR approach should allow customers great choice on how they blend their use of different channels to suit their situation, location or preferences. Again taking an end to end process perspective, receiving a text message on your mobile to tell you that the stockmarket has crashed is almost useless if you can’t do something about it. At that point you’d be tempted to sell your Enron or Marconi shares. If you’re sat on a train, you want to be able to either send a reply text to instruct the sale, access the speech recognition system or make a follow up call to the contact centre to get more detailed information on your particular stocks before making the decision. Back to the single view, the centre agent should be aware already that you’ve received the text message and so know your call reason. In this example the consequences of an action on one channel have been considered so that the customer can manage the next action their chosen way to a satisfactory outcome.
The access to a live agent in the example above is important. Just like the rule with traditional IVR menu design, there should always be an ‘escape’ route. But also important in a CMR world is the use of intelligent automated agents. This leading technology can support the customer in their self managed world by managing alerts (such as stockmarket crashes), filtering information and marketing communications, etc. Once preferences and needs are set, the benefit of an intelligent agent is its ability to learn. Learning about how your usage patterns change, what you really find useful and what your buying behaviour is actually like. Just as this is invaluable support for the customer it is also critical for the business to enable communications and actions to be tailored – assuming the analytical capabilities are in place.
Simple applications of this technology may be identifying and alerting the customer to unusual credit card activity or telephone account charges. If a preference, it can also alert the provider simultaneously and block further transactions until investigated and authorised. The next step in a CMR approach is to allow the customer to delete the charge themselves (up to an agreed limit) without even contacting the provider. This not only puts the customer in control and builds their trust in you, but also saves you the cost of investigating the charge and then still removing it out of ‘goodwill’ to a valuable customer.
Heard it all before?
Swap the letters round and do you just get another unrealisable dream? Many of the ideas we have discussed here are not new. What is different about CMR is that it realigns these ideas together behind clear business objectives – reducing cost, growing revenues and a brilliant customer experience – and demonstrates that you can succeed in all three by following basic principles:
- Drive the business processes from the customer’s perspective and apply the customer’s logic to their design.
- ‘Closed loop’, centrally managed analytics is the basis for meeting customer needs and identifying sales opportunities. The closed loop view is essential for driving change rapidly back into the operation.
- Technology enables lower cost self service but is also an essential element of growing revenue and creating the wow factor for the customer.
The corporate mindset has been shifted away from trying to manage customer relationships – the failures have shown that customers do not want to be managed. Stuck in the middle with a clear approach, most business have not realised that the solution is simply to let the customer manage themselves. This requires a further shift as it changes the position of power and means the business must think, do, analyse and review things differently and faster. We argue that the same pitfalls that befell CRM initiatives can also occur in a CMR business because they are symptoms of the way you do it not what you do. That’s a lessonstill being learnt by businesses the world over.
Budd’s expertise is in delivering sustainable business benefits from customer strategies, including CMR. Budd is a founding partner in the Limebridge Global Alliance.