In 1999, e-tailer Buy.com had been gripped in a downward spiral of unprofitability.
The company’s original strategy—sell products under cost and generate revenues through advertising—had proven, like it had for many a dot-com e-tailer, to be untenable. While Buy.com’s low prices were attractive, the company was notorious for its almost nonexistent service and support, which resulted in a poor track record of customer loyalty. In an effort to reverse this perception company management embarked on a multifront strategy that included implementing new technology tools, building a dedicated call-center, increasing information availability at cus-tomer contact points, and initiating various cost-cutting programs. The results were dramatic. By 2001 order processing cost had dramatically declined, service had skyrocketed (both Forrester Research and Gomez.com ranked Buy.com No. 1 for quality of support), its margins had risen to the point that it was ranked the second largest multicategory Internet retailer in the industry, and its CRM technologies had dramatically increased the quality of the experience customers enjoyed when they visited Buy.com’s Web site. “The key to our success,” recalled Tom Silvell, vice president of customer support,
is that we built our programs and technologies around what custom-ers wanted and needed instead of letting our programs and technologies drive their behavior. This tactic helped transition us from a price-sensitive shop to one focused on the customer experience, on offering value to cli-ents, and on providing quality merchandise at reasonable prices [12].
At the beginning of 2010, Buy.com could boast a strong international presence,
“The Lowest Prices on Earth,” over 12 million customers, and awarded one of the top 100 best retail Web sites of 2009 by Internet Retailer [13].
The dramatic change in Buy.com’s fortunes has been the direct result of the implementation of an effective CRM strategy dedicated to the creation of a customer-centric organization. Achieving such a level of customer focus is not easy.
According to Michael Maoz from Gartner Group, only 5% of companies today can say that they have implemented similar levels of customer service. Creating a customer-centric company capable of consistently delivering customer value while building customer loyalty is a multiphased process that involves reshaping the infrastructures of both individual organizations and accompanying supply chains as much as it does implementing computerized CRM functions. The following steps should be considered in architecting such individual companies and supply chains systems.
1. Establish a Customer-Centric Organization. Migrating the enterprise from a product- to a customer-centric focus will require changes in the way companies have managed everything from customer service to product design. Literally every customer touch point needs to be oriented around how each business function can continuously foster customer service. An emerging management position organizations have been establishing to achieve customer-centric organizations is the chief customer officer (CCO). Basically, this position acts as a liaison between customers and the firm. Requiring strong operational, marketing, and financial skills, the CCO, according to Manring [14], will identify customer touch points, define and enforce service standards, assist customers to navigate the organization, and search for methods to enrich the customer experience. Strategically, the CCO will be responsible for “integrat-ing and leverag“integrat-ing customer information across the organization or own“integrat-ing and managing customer segments as units of optimization.”
2. Determine Existing Customer Positioning. Understanding the customer is fun-damental to a customer-centric focus. The goal is to unearth what each cus-tomer values and from these metrics to design the products, services, and communication infrastructure that will drive increasing customer loyalty.
The process should begin by measuring the customer landscape. This can be accomplished by identifying the best customers with the greatest LTV.
Their buying values should be detailed and contrasted with low LTV or lost customers. Next, qualitative research through surveys, face-to-face interviews, and other techniques should be conducted with each customer segment iden-tified. The goal is to learn first hand how customers view their relationship with your company and with the competition. Finally, quantitative research tools should be applied to reveal concrete metrics associated with the notions of needs, behaviors, motivations, and attitudes identified in the qualitative review. A critical problem is knowing what to do with this data. In this area
a CCO could spearhead the analysis and devise action plans to turn the feed-back into results or utilize it for strategic planning or resource allocation.
3. Devise a Map of Customer Segments. The qualitative and analytical data aris-ing from the above step should provide a clear geography of the customer base and illuminate key drivers, such as convenience, price, reliability, and so on, of loyalty, value, and satisfaction. The goal is to focus company service efforts around processes that support and encourage the buying behavior of the firm’s top customers and how they can be applied to less profitable marketplace segments. By pinpointing what provides true customer differentiation, com-petitive advantage factors can be leveraged to consistently enhance customer value at every touch point across the internal and supply chain organization.
In addition the map should also reveal the effectiveness of current company product and service strategies and the core competencies of the organization.
Businesses should be diligent in assuring there is not a mismatch between their offerings and what the customer base truly values.
4. Develop and Implement the Solution. An effective CRM program should be tireless in searching for opportunities for enhancing customer experiences.
Transforming these programs into meaningful marketplace initiatives, pro-motions, and points of customer contact that improve company visibility, confirm customer value expectations, and cement loyalties is the next step in the process of generating a customer-centric organization. Unfortunately, there is no boilerplate methodology that companies can easily snap into place.
Each company must painstakingly investigate its own customer-centricity strengths and weaknesses. In structuring these programs companies must be careful to ensure financial profitability by matching sound business scenarios with measurements such as ROI and net present value (NPV). Once these CRM initiatives have been verified, marketers can then begin the process of utilizing the CRM customer data warehouse to begin mining the data in an effort to locate the company’s best customers and how retention and new customer acquisition programs can be best applied.
5. Monitor, Measure, and Refine. The elements of the previous step need to be performed iteratively. The driver of CRM project review is obviously the metrics arising out of the record of customer contact and exchange. Without such processes in place the quest will ultimately fail. Marketers must be careful to continuously research and document what is working and what is not by utilizing the analytical tools available within most CRM applica-tions. These tools should provide ongoing quantitative tracking of buying patterns, customer attitudes, and degrees of satisfaction for all market seg-ments and points of contact. One analyst recommends conducting focus groups at least once a year with the best and the worst customers, as well as the internal service staff [15]. Such a procedure will enable effective monitor-ing of the qualitative input to assist in massagmonitor-ing the quantitative results of performance metrics.
The successful implementation of a customer-centric organization requires that everyone in the business be aware and prepared to execute the enterprise’s CRM strategy. Driving the CRM strategy requires, in turn, the firm support and active participation of senior management who needs to provide the vision and to focus the energies of the organization on communicating the CRM initiative to cus-tomers and partners as well as to the internal staff. Without such direction and sponsorship, most CRM programs will quickly decay and revert to previous “silo”
operating methods.