Creating and Utilizing Customer Value

(1)

Bochmann Consulting AG | © Prof. Klaus W. Bochmann, March 2015 Page 1

Creating and Utilizing Customer

Value

or: How CEM and CRM can become friends with one

another

Part 4: Reaching the Full Potential of CEM with CRM

A sound CEM system will raise customer loyalty.

However, such a system does not contribute to attracting new customers. Prospective consumers are by definition excluded from the positive experiences created by CEM.

Likewise, CEM alone fails to raise the value of core customers. Both of these aims require an addition to CEM. That addition is a sound CRM system that will work together with the existing CEM framework.

1. Classic CRM

The classic model of CRM relies on letter and email campaigns that are directed at select target groups of consumers. These groups are selected using sets of criteria pulled from data banks. Data mining practices are employed to make sure that the likely revenue generated from a given target group will exceed the cost of a campaign.

Customer data, transaction data, and campaign data are stored in CRM databases. CRM software functions to plan and carry out the various campaigns based on those data.

The classic form of a CRM letter or email is designed in order to substitute an in-person visit or conversation. The message aims to ‘silently’ answer questions from the target group member, for instance, "who is this letter from?" and "why are they writing to me?"

This silent dialogue can either have one phase or multiple phases. In the latter case, the phases build on one other based on the responses provided in previous interactions. However, a dialogue more substantial than a written response to a previous phase is generally not possible. Hence, with classic CRM, the customer dialogue remains a silent one.

(2)

2. An "Updated" CRM

Communication has drastically changed with the advent of the Internet. Changes have occurred on both sides of the customer-provider relationship:

1 – Customers are now more active and post questions online to which they expect rapid and

personalized responses.

2 – Customers very often choose to use more than 1 channel – phone, website, email, and

in-person.

3 – Customers now appear via these diverse communication channels – and all too often

disappear.

4 – And providers must now effectively respond to each one of these varied means of

communication.

So, the classic silent CRM dialogue is no longer relevant. First of all, the customer is now seen as an individual consumer as opposed to a member of a target group. Each individual asks questions, selects a communication channel, and desires a tailored response. Secondly, this new customer dialogue is loud and personalized.

Modern CRM systems integrate the Internet, identify customers, obtain opt-ins when necessary, and work 1 : 1 with customers via post, email, chat, phone or in co-browsing sessions. Ideally the system will capture the entire customer journey. In other words, the company agent will always be aware of a customer’s location on their individual journey, as well as the results of each completed stage.

Such information is often difficult to integrate into a classic CRM system. Thus, additional knowledge databases and problem solving frameworks are incorporated into customer journey optimization strategies complementing the CRM databases.

What is still lacking, however, is a holistic view of each customer that includes customer desires, preferences, and the current ‘CEM state of mind’ – the customer sentiment – that has

resulted from the various customer journeys that a customer has experienced during her or his provider-customer relationship. This knowledge is the key to realizing customer value.

(3)

3. A New Model: CEM + CRM

Customer value is generated for a company as long as the customer-provider relationship persists. Value generation begins with the first purchase, and ends with the termination of the business relationship – regardless of the reason. The longer it lasts, the more valuable a customer relationship. There are two reasons for this: first, a longer relationship means a longer value stream from the customer to the firm and second, the company avoids the expenses associated with replacing a lost customer.

The better CEM works, the less reason a customer has to depart. And if CRM is used in conjunction with CEM, a company can take full advantage of the potential for up selling and cross selling to satisfied customers, as well as the benefits of word-of-mouth recommendations. In the end, this works to achieve what mom-and-pop shops managed to do before the grocery industry shifted to a self-service model. It is helpful to briefly recall how things looked back then in order to transfer this concept to modern times:

The Classic Mom-and-Pop Shop:

The classic mom-and-pop shop managed both CEM and CRM with ease. Not only were customers each known by name – a necessary piece of basic knowledge, but customer preferences were also well known.

Few words were necessary to select desired products, although a chat was obviously welcome if the customer was up for it. Such dialogue was perhaps the most important way to secure the business relationship, though not the only way. The customer's son or daughter was gladly gifted treats or sweets, new products were mentioned and samples given, and home delivery was offered if purchases were too heavy to carry.

Mom and Pop noticed if a customer hadn’t stopped in for a while. The shop owners met their customers on other occasions and would inquire about such absences, or other customers could reach out and pass on personal messages to missing customers.

Today’s Mom-and-Pop:

The shop itself is no longer the sole site of interaction and Mom and Pop are no longer the central figures. Modern customers rely on various communication channels to contact their providers, these include the Internet, email, phone, and face-to-face. This often means that they employ multiple contact channels. Moreover, customers use social media and oftentimes enter business discussions better informed, get to the point more quickly, and converse with multiple vendors.

This complicates things for the provider. It is now more difficult to manage the various channels and varying points of contact, as well as to meet the expectations of rapid response.

(4)

Despite these changes, the customer with his or her preferences and the desire to be handled as an individual, remains a constant. The first purchase is still an important milestone – the beginning of a customer journey. Was this a positive first experience? What took place afterwards? Is the customer abandoned after he signs the dotted line? Does he land in customer hotline nirvana? Or, does he get the signal of a positive service experience post-purchase, with rapid assistance to queries about product use, personalized offers and attention, or if necessary, speaking with an actual service representative?

The development of an integrated CRM and CEM system poses a challenge that will impact every portion of the customer lifecycle. This challenge differs by sector and business because customer lifecycle patterns differ between industries and company goals vary.

4. Integrating CRM and CEM

Every customer lifecycle is comprised of a series of customer journeys – beginning with the start of the customer relationship and ending with its termination. Each journey is triggered by either a transaction or an intervention. Transactions are customer initiated, e.g. a visit to the dentist. The provider, on the other hand, initiates interventions, e.g. making a customer aware of a special offer.

It is the mix of the two constructs which counts: it forms the customer lifecycle and makes it interesting for the customer and the provider. A lack of recent transactions, or a dissatisfactory past transaction, may signal the need for an intervention. The CRM system is responsible to trigger and guide this intervention.

(5)

The following diagram illustrates this process. It displays the various transactions (green) and interventions (grey) that take place during a vehicle's lifecycle in a car dealership. Once such cycle encompasses the time in which a customer drives the car that was purchased at the dealership. If the customer remains loyal to the dealer and decides to repurchase a new vehicle, his or her customer lifecycle is extended.

Legend:

CEM and CRM can successfully work together in a single customer lifecycle if certain principles are kept in mind:

Principle 1: The customer must be identified and provide an opt-in.

A customer must be identified at each transaction and intervention to ensure personalized service. Furthermore, his or her opt-in should be permanently secured.

Identification + Opt-in Repurchase Maturity Check Won-Sale- Feedback Delivery- Feedback Service Offers/ Customer Club Service- Feedback Service-Recovery Honeymoon-Check Customer Lifecycle Vehicle Lifecycle Intervention Transaction Lost-Sale- Feedback Configuration - Test Drive - Offer

(6)

Principle 2: Every customer journey must be included in the database.

Metadata and the results of each customer journey must be entered into a database. This includes core customer data, needs and preferences, transaction data, and data regarding customer experience and customer sentiment. Classic CRM databases often need to be supplemented with knowledge bases and problem-solving frameworks to capture this additional information and aid in the optimization of customer journeys.

Consistently storing each customer interaction is the only way to ensure the provision of personalized service going forward, and the only way to stabilize customer sentiment throughout the lifecycle.

Principle 3: Transactions must fulfill customer demands and match individual preferences.

Transactions are customer journeys that are initiated by the consumer. The mission of the provider is to achieve what Mom and Pop managed with ease – organizing the customer journey to meet customer needs, match their preferences, and create an overall positive experience.

Our sample auto dealership selected 3 transactions where they wish to excel:

1 – The Offer (for prospective and current customers)

2 – The Delivery

3 – Maintenance Service

Every transaction is custom-designed to meet the needs of the individual customer.

Furthermore, each transaction is followed by a feedback survey. This survey has two primary objectives. First, to gauge and secure customer sentiment, for instance rapidly resolving any complaints that were voiced.

And second, to utilize the data provided to continuously improve the CEM quality of customer journeys and thus uphold the value proposition.

Principle 4: Interventions should safeguard company interests.

CRM interventions work to implement Mom and Pop’s business sense. Interventions are made in certain ‘business cases’ because they will likely stabilize or increase customer value.

Our sample auto dealership identified 4 interventions:

1 – Honeymoon Check

4 - 8 weeks following the delivery of their new vehicle, customers are invited back to the dealership. Here the customer receives tips on how to best use various features of the car and is given the opportunity to ask questions. Any missing information is discussed and resolved. Likewise, the service manager, who will guide the customer going forward, is introduced.

(7)

2 – Service Offers/ Customer Club

The customer receives an offer to join the brand club. As a club member, he or she receives invitations to exclusive club events and special service offers that complement traditional services (winter maintenance, spring check, etc.). The offers are designed to match the customer’s known needs (security, onboard systems, power, family, comfort, etc.).

3 – Service Recovery

If the dealer notes that a customer has not visited the dealer service center at the normal service interval, he makes contact. If the customer gives specific reasons for staying away, attempts are made to improve customer sentiment. If that fails, the customer will receive attractive offers to return to the dealer service center.

4 – Repurchase Maturity Check

The dealer reaches out in a timely manner and asks the customer if and when he or she is planning to replace the current vehicle or purchase another. The dealership uses the core customer data, previous dialogues, and knowledge of overall customer sentiment in his intervention. If the customer expresses an intention to repurchase, then the dealership sets a process in motion that will hopefully result in an extension of this customer’s life-cycle in her or his car dealership.

Principle 5: All customer dialogues must be flexible and personal.

Mom and Pop had it easy. They directly served customers that were present in the store and were well informed about each one. Today, however, customers use a variety of

communication channels and the contact person of the provider often varies. In fact,

sometimes there isn’t even a contact person available because the consumer uses self-service. Customer knowledge, or gaps in customer knowledge, are often unknown to the current contact person, which makes for poor conditions for a personal conversation.

This is troublesome because good dialogue is a prerequisite for transactions and interventions to create positive customer experiences. A dialogue system designed to fill the gaps described above must therefore have the following characteristics:

1.

It must connect with the customer on every communication channel – in-person, by mail, phone, email, in chat setting, or over social media.

2.

It must provide each service agent with all available information about the customer: who they are, what their demands and preferences are, the current transaction or intervention stage, and the status of customer sentiment.

3.

It must support service agents. Agents expect suggestions for guiding the dialogue, as well as recommendations for tailored solutions that meet the needs and preferences of customers.

(8)

4.

It must be straightforward for agents to enter all relevant information about a dialogue.

This allows the next service agent to advance or complete the customer journey.

5.

Last but not least, it must provide elements that allow customer dialogue hassle-free and encourage the customer to receive vender dialogue offers in the future.

The 5 points above raise CRM up to a new level. The classic silent dialogue of CRM is no longer the go-to model. Today’s CRM builds an experience that provides value added to both the company and the customer. It manages what Mom and Pop managed in the past, but uses the technologies that are available to customers and providers today.

5. How to marry CEM and CRM

As we have seen, CEM and CRM must work together to create long-lasting customer value. This holds true in both directions – value for the customer and value from the customer. CEM works to ensure positive experiences during the customer’s lifecycle and CRM helps to reap the benefits from this lifecycle and – most important – to extend it.

The tasks at hand are easy to describe:

1 –

Formulate a value proposition that is adapted to the company’s strengths and weaknesses and to its competitive environment.

2 –

Systematically realize this value proposition using CEM on the most essential customer journeys.

3 –

Strengthen your fundamental CEM position by using extrinsic customer bonding strategies that make provider shifts less attractive.

4 –

Develop CRM interventions that can be proved to increase and secure customer value.

What is easily said is not always easily done. Formulating a value proposition, implementing it with the appropriate transactions and interventions, properly integrating extrinsic customer bonding, and designing an integrated CEM + CRM system are each a challenging task.

What Mom and Pop managed to do using instinct, chutzpah, and empathy, requires now – in today’s markets and organizations – a real effort in systematic customer thinking and goal-oriented implementation.