In  a downturn will good customer relationship management prove to be the asset we have always believed it to be?  Or will companies abandon the principal and go back to ‘the old ways’ they know best in the scramble to keep ‘heads above water’

The quick answer, is that across the globe customer relationships (we will call it CRM but mean the strategy not just technology) are the axis on which 2009 ‘battle plans’ will spin.  A view backed by an Economist Intelligence Unit global survey of 300 executives, which emphasised their belief that customers’ impact on growth will double over the next five years.  However, the world is unlikely to emerge from recession, as it went in.  The nature of CRM will have mutated, and the tectonic plates of competitive advantage will have pushed further towards Asia (and maybe Australasia) and away from Europe.

The strategy for 2009 will be a quest; to find customer segments with immediate value potential, and engage them with ‘new and improved’ value propositions.  Insight will be at a premium.  Current customers will be priority, but fluctuating export markets will kick off a worldwide hunt for opportunity.

Costs will be pared down, but it will be on extras and unproductive activity eg avoidable contact, rather than the ‘slash and burn’ of previous recessions.  Fewer twiddles and more good value basics will align price with consumer spending.  Opinion is that Europe stands in the greatest danger of ‘unfocussed’ price reductions, driven by a heavier regulation and compliance burden.

Customer Insight managers would like a new job - internal customer consultants, called in to give ‘insightful’ advice whenever action is needed.  Being a trusted advisor starts with knowing that insight is more than a report of the latest sales figures.

“A moment’s insight is sometimes worth life’s experience” said American poet Oliver Wendell Holmes.  When we think of insight we think of it as rare and valuable, discerning and perceptive;  a knowledge that transcends the superficial and gets to the heart of the matter, to find its inner character:  a character hidden to the less discerning.

Insight in the world of customers can be either ‘flashes of inspiration, or penetrating discoveries that can lead to specific opportunities’ like mining for diamonds.  Or, more usually, a deep understanding of the customer in the context of the market.  Insight is the ability to get into the customers head in a way that is valuable to the business.  The insight that customers think blue washing powder gives a cleaner wash than white, even though the chemicals are the same, is not that useful to a telecoms company, but key to a detergent manufacturer.

Insight unlocks the ‘secrets’ of the market underlining threats and pointing to opportunities.   Which indicates it has several other characteristics:-

• It should be useful, and actionable
• It needs to be ‘of its time’ and can include both hindsight (perception gained analysing the past, and foresight (perception gained from modelling the future).
• It is not obvious to others or easily found

In the 2005 drive for e-government efficiency, scant attention was paid to service quality, by public organizations with little innate marketing knowledge. Only when the deadline passed was the searchlight turned on the customer’ and employee inventiveness set loose with CRM techniques borrowed from the private sector.

“We have to accept that having ALL government services online by 2005 is not as good as having BETTER services online.  The only reason we should be doing any of this is if we can deliver better services.“ - Dr Ian Kearns, Head of the Digital Society Programme at the Institute for Public Policy Research (2002)

From Gershon to Varney

In 2005 a report I wrote on the public sector and concluded that

” despite assurances that the modernisation drive, currently focused through the Gershon Report, was to reallocate resources from back-office to front-office for service improvement, customers still seem to have a back seat - somewhere behind the back office”.

The advice to public sector then was to make eGovernment more effective by adopting new customer centric marketing techniques - rather than old mass market ones.  Looking at customer relationship management activity in the public sector this year, I believe things have indeed moved that way and changed for the better.

The focus for Government CRM initiatives is now the 2006 Varney report on service transformation.  But the real drive for improvement seems to be coming bottom up and particularly from non-central Government organizations like local authorities and the police.  At a recent conference the ‘man from the ministry’, sent to outline the plan, seemed distinctly behind the game.

” A target culture without a citizen’s perspective is intellectually and morally bankrupt.  Excellence in public services cannot be achieved by centrally driven targets and national league tables alone.” Julie Spence, Chief Constable of Cambridgeshire

Companies are not fair to us – that’s the view of almost half the UK adult population. In 1980 only 14% thought this way; now 44% do according to nVision from Future Foundation. Nearly two decades after loyalty theories radically changed the business world, average loyalty has declined, whilst consumers have strengthened their recommendation and switching muscles. That’s a dangerous situation for companies to be in.

“Companies that want to improve their service quality should take a cue from manufacturing and focus on their own kind of scrap heap: customers who won’t come back.” So begins the seminal article on customer loyalty, ‘Zero Defections: Quality Comes to Services’ by Fred Reichheld and Earl Sassar in Harvard Business Review 1990

If customers today think that companies are more unfair to them than in the past then companies must accept they are not delivering value for money, that customers to not trust them to be ‘on their side’, and that their brand values need to be inspiring – not internal.

As the original loyalty theory by Reichheld said, feedback is the guiding voice for a systematic approach to building human assets. Loyalty is more relevant today than ever, 80% of customers will continue with a company to whom they feel loyal, especially the over 40’s and more educated, but understanding the ‘best customers’ to invest in is still the key. No one will ever achieve 100% loyalty, and not every customer is capable of it.

Back in the ‘way back when’, there used to be a little mantra about building loyalty, it still applies as a good engagement process, but we now have more tools to achieve it.

• Recognise me (but don’t force me to remember complex passwords!)
• Know me (but don’t be too familiar until I deem it OK)
• Act accordingly (by making life easier and solving my problems)
• Communicate (and listen)
• Respect and involve me (but don’t waste my time, understand my goals)
• Anticipate my needs (because you know things I don’t, that’s your value )
• Show you care (about me, and about society)
• Appreciate me (thank me for my business and involvement)