Create a customer centric organization, performance through CRM

By 25 March 2012

Customer Centricity Report
In an increasingly competitive environment, companies must be customer oriented (Kotler 1997). After all, the underpinning of the marketing concept is that identification and satisfaction of customer needs and leads to improved customer retention. It is thus not surprising that companies spend substantial resources to measure and manage customer satisfaction (Day 1994).

Customer satisfaction has been related to perceived performance and expectations. If performance matches expectations or exceeds them, the customer is satisfied or highly satisfied respectively. If performance falls short of expectations, the customer is dissatisfied (Stefanou, Sarmaniotis et al. 2003).

Listening to the customer enables an in-depth understanding of what the customer wants and using root cause analysis techniques enables solutions to be found and implemented to avoid reoccurrence. The improvements arising require monitoring in terms of both their efficiency and ability to meet customer requirements (see Figure 2).

Figure 2 Customer satisfaction continuous improvements
Customer satisfaction continuous improvements
Source (Zairi 2000)

But satisfaction is not enough to ensure the future success of a company. For example, many companies (e.g. Whirlpool) that score well on customer satisfaction have done poorly financially (Grant 1998). Recently, (Coles and Gokey 2002) have argued that it is not enough to manage customer defection alone. They suggest that it makes better sense to monitor customer buying behaviour, and to identify customers who have reduced their spending. This is often a signal that defection may be about to happen.

In the end, we believe that as we move into the twenty-first century, there will be three distinct areas that businesses should focus on to satisfy customer needs and wants. They are customisation; personal relationships; and after-sale service/support (Galbreath and Rogers 1999) see figure 3. High satisfaction does not necessarily predict retention. The reason is that satisfaction has mainly to do with meeting customers’ minimum requirements and, in many industries, that is simply not enough (Crosby 2002). Thus, satisfaction is not enough; you have to make your customer a loyal to ensure the future success. This goes with (Storbacka, Strandvik et al. 1994) research which found that that between 65 per cent and 85 per cent of customers who defect say they were satisfied or very satisfied with their former supplier.

Figure 3: three distinct areas of focus for customer satisfaction
focus for customer satisfaction
Source: (Galbreath and Rogers 1999)

Customer Centricity Report

How to drive superior performance through CRM
In recent years, many organisations have identified the need to become more customers facing with increased global competition. Therefore, customer relationship management (CRM) has emerged to the agenda of many organisational strategies.

CRM is a highly fragmented environment and has come to mean different things to different people; it is rarely to see a unified perspective for the CRM. Every one has his/her own definition. CRM systems can be viewed as information systems aimed at enabling organisations to realise a customer focus (Bull 2003).

The foremost goal of CRM is to build a long-term relationship with customers to enhance value shares for both partiers (Krueger 2000). Organisations that adopt CRM may do so for a variety of reasons, mostly improving customer retention and customer satisfaction, a published research found that lifting customer retention rates by 5% of customers could increase company profit by 25% to 95%. This is due to the high cost of acquisition, plus the fact that in the early years, customers are often unprofitable (Reichheld and Teal 2001) see figure 4.

Figure 4: Customer profit contribution over time
 Customer profit contribution over time
Source: (Duffin 1997)

However, the key driver is to find out more about customers and the way they interact with the organisation. This relationship can then be exploited by cross selling (of products or services that the customer has not yet bought from the organisation), by extension selling (of products or services that relate to those already bought) or by some other transaction offering additional revenue to the organisation.(Bolton 2004).

CRM is adding value to the company by enhancing the customer experience of the service and product offering, and improving profit, and managing relationships across all channels, and getting to one to one marketing.

(Ang and Buttle 2002) have presented one prominent case of Royal Bank of Canada (RBC), which won the first international award for CRM excellence in large corporations. RBC started their CRM initiative in 1995. To date they have invested over $100 million. Today the Vice President for CRM claims, “we no longer view CRM as a program. It is our core strategy”. Revenue growth is running at 10-15% p.a., and profit growth at 25%. He went on to say, “We absolutely conclude the CRM is paying us back in spades. It enabled us to grow both top of the house revenue line and at the same time achieve huge cost savings”. RBC’s retention of customers is exceptionally high in an industry where some 22% of commercial customers change banks every five years

Thus, CRM is a business philosophy that lets the organisations understand its customers’ needs and requirements based on their histories and preferences which in turn helps the organisations to predict and anticipate their future actions. Today more than before, the success in this digital era will be relied on those organisations that adopt the CRM strategy efficiently and effectively.

Customer Centricity Report
How to create a customer centric organisation

The relative and marked emergence of CRM as a business strategy has radically transformed the way organisations operates. Consequently, there has been a shift in business focus from transactional to relationship marketing where the customer is at the centre of all business activity with organisations now desperately trying to restructure their processes around the needs of their strategically significant customers.

Being customer focused nowadays has to be accepted as a bare necessity to conduct business and as some would say, it is the “license to practice” only. Organisations need to indicate that they are truly focused on their customers through deeds and actions. What this really means is that (Zairi 2000):

Customer focus is not necessarily statements on papers.  These statements will have to be examined in terms of their appropriateness and the degree of seriousness and discipline from senior managers to instigate a culture of customer focus. Customer focus is a statement of intent. It signals that the organisation is willing to challenge status quo and embrace new concepts and management disciplines. Adopted by world-class organisations. It also means creating new systems, procedures and guidelines and adhering to the theme of servicing customers to people’s best ability, by doing the right things right first time and on time. Customer focus is an evolutionary rather than revolutionary process. It is painstaking and would require patient and great perseverance. Finally, customer focus is really a state of mind rather than an absolute concept, which indicates optimised performance and reaching the pinnacle of success.

One of the most basic questions that are rarely asked is who is the customer? Or, even more embarrassingly, what is a customer? Customers are the purpose of what we do and rather than them depending on us, we very much depend on them. The customer is not the source of a problem, we shouldn’t perhaps make a wish that customers “shoul away” because our future and our job security will be put in jeopardy. Mr Leon Bean, the founder of US Mail Order Company L.L. Bean, defines a customer as: Someone who has needs and it is important for us to meet his needs profitably both for him and ourselves.

Many organisations go to great lengths to ensure that they are reminding all of their employees of the importance of customers. This can be achieved with statements such as the importance of delighting the customer as a necessity to maintain and ensure business survival, to honouring all of the pledges made, and, as in the case of Ritz Carlton Hotel, be determined not to lose one single customer.

Every organisation has to ensure that the process of identifying all of its customers is well disciplined and very much adhered to. We often forget, for instance, the importance of internal customers and how much they impact on the quality of service finally offered to the customer. Yes, of course focusing on the external customer is the right thing to do and ultimately it is external customers who pay for our goods and services. Internal customers are also real, they represent the value chain and through the levels of synergy generated from involving each of our employees, we will then be in a position to impact on the internal customer with the desired effect. As the saying goes, “you are only as good as your weakest link in the chain”. Furthermore, and as far as external customers are concerned, they need to be closely studied and their needs closely identified and translated. Segmentation is the right thing to do and will ensure that every organisation is certainly delivering high volumes through the principle of mass customisation (Zairi 2000)

Customer Centricity Report
Customer centric
How to create a customer CARING CULTURE
How to create a customer centric organisation
How to drive superior performance through CRM

  1. Create a customer centric organization, performance through CRM
  2. Customer Centricity Report – Customer caring culture

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