The customer isn't always right

This article first appeared in Silicon.com. The writer, Clive Longbottom, is part of analyst house, Quocirca, known for its focus on the 'big picture'.

Effective CRM isn't just about great customer service. It's about knowing who to treat better than others at any given time. Quocirca service director Clive Longbottom explains...

Although the heat has gone out of the CRM engine market with companies such as Onyx, Pivotal, Siebel and the like feeling the squeeze, Quocirca still finds itself in discussions with end user organisations which are trying their best to get some real, demonstrable value out of their CRM solutions.

In many cases, there is a feeling that they have been let down by the capabilities of the vendor's software (OK, let's face it - many may be right), in others that the implementation just didn't meet expectations - expectations that were incorrectly set by the vendors and the systems integrators.

However, in many cases Quocirca still finds that it has been down to an attitude of 'technology before process' – a way of looking at a business issue and believing that the problem can be solved by continuously throwing technology at it, rather than trying to address the root cause problem with the business process.

Let's look at where we see many of the biggest problems in the area of CRM coming up – the 'R'. The whole idea is that it is a relationship – not a fawning, obsessive, obsequious relationship with the vendor doing all the work while the prospect just lazes back and sees what happens. It requires work from both sides.

A quick search through quotations to do with customers shows that the perceived wisdom is that you have to do everything you possibly can for the customer – after all, 'the customer is always right'. Try telling this to estate agents – they know that the customer is generally wrong and that the little 3-bedroom semi in suburbia that they have set their hearts upon is actually a 4-bedroom detached in a village somewhere and that they will have to settle for a 2-up, 2-down in an urban area anyhow.

It's ever so easy to provide excellent customer service – just spend more on them than they spend on you. Free offers, gifts, a newsletter that addresses their needs every now and then, prize draws, cheap prices, guaranteed next-day delivery. You'll go broke quickly but my, won't those ex-customers have been happy during the time you dealt with them. They'll be distinctly unhappy that you are no longer there for them and will struggle to come down to earth with the customer service offered by the rest but that's no longer your problem.

Let's take a look at many of the utility companies we deal with. We are all their customers, it's a highly competitive market, we demand minimum standards, so we must be getting excellent service. Yes? You must be joking. It's these guys who really demonstrate the real approach to dealing with customers - even if they have happened upon it, rather than planned for it. The customer is a resource, that resource must be optimised and that involves doing as little as is possible in order to keep that customer as a customer – not (necessarily) keeping them happy.

So where do we start? We do not start with the customer – we start with our competition. What are they doing and what makes any one of them 'better' than us? Do we have one specific competitor who is way out front and, if so, is this because their customer services are bankrupting them? If so, then don't even try and beat them on customer service – their customers will soon be available on the open market, anyway.

However, if you are losing customers to them just because they offer something that doesn't cost them a lot to do but is attractive to the customer then you need to respond.

The target for the business remains the same - to be a profitable, sustainable entity. CRM does not change this – it provides a means of describing a corporate ethos for dealing with customers – in a contextually aware manner.

What does Quocirca mean by being contextually aware? Another analogy: Mercedes' customer service is somewhat different to that of Skoda. Mercedes doesn't have to worry about how Skoda goes about its business – it is not going for the same market. Mercedes does have to worry about Audi, BMW, Jaguar, Lexus and so on. Look at how they compete for the customer – comfy armchairs all over the place, subsidised trips to the factory to pick up the vehicle, free squirts of leather aroma into the car before you get it.

Skoda? Well, it's changed its tactics over the last few years. It now realises that it has to compete against the lower-end Fords, GM Vauxhalls, Nissans, Renault, Toyotas – not just Ladas. It has had to up its game – but not to the level of Mercedes. What we are looking at is: what is the minimum expense we have to suffer to be at least as good as our major competitors?

To fund our response, we need to be able to cut costs from some areas – and this is where we have to be hard with the customer. Let's split them up into three simple groups. Our 'bronze' customers make us little money in their activities and make us a loss when they get in touch with us.

Our 'silver' customers make us little money on their existing activities but are targets for up-selling.

Our 'gold' customers make us the majority of our profits – they tend to have larger transactions or ongoing volumes of deals with us.

The gold customers get the cream here – we deal with them as they want us to – the customer is always right, we cannot afford to lose them. We still have to ensure that we do make a profit on our major transactions with them but the occasional loss-leader to keep them interested is not out of the question.

The silver customers get a level of preferential treatment – but only because we want to capture their eyes, ears and bottom-of-contract signature at every opportunity. We want to get these people as rapidly as possible into the gold category – our shareholders' and investors' darlings.

The bronze customers get hit with automated responses and automated routing. The use of IVR, web FAQs and automated responses drive down the costs of dealing with them on a day-to-day basis. This is not denigrating these technologies. Companies such as Interactive Concerto, eGain, Intelligence, Transversal and Witness offer superb solutions here that can be used throughout the whole range of our customers to provide better speed and accuracy of response.

What we are trying to do is to help in turning loss-making bronze customers into profit-generating bronze or even silver customers. We do not use these tools to drive the customer away - this is a different problem where many vendors can identify a large proportion of their customer base that will never make any profit for them.

The aim is to keep them suitably happy at a price point that makes economic sense to the vendor. We need to automate processes wherever we can, removing the high-cost option of the human intervention, streamlining the experience for many day-to-day issues that these customer come up against. By minimising this high-touch, high-cost option from our loss-leading bronze customers, we can lavish more on our silver and gold profit-makers – and so up our standing against our competition.

So, once we have met the minimum requirements to be at the leading edge of our markets we can then look at how we move ourselves ahead of the pack – becoming the company that attracts and retains customers better than anyone else.

How to do this? Ah, well, that's a different story...