A recent report from McKinsey, the management consultants, looked at customer service and how frontline engagements can make or break customer relations.
The report highlights the findings from Forrester Research in 2005 that only 10% of companies surveyed agreed strongly that the CRM project had met business expectations.
Yet academic research and business analysis has shown consistently that enhancing the breadth and depth of customer relationships converts into an improved P&L. It is much more cost effective to up-sell and cross-sell than it is to acquire new customers. The cost of acquisition in many industries means it takes time, sometimes years, to achieve pay-back, With churn in early years many companies are spending money on winning customers who they lose before they regain any of the costs.
What McKinsey discusses is the importance of creating a ‘spark’ to turn a sceptical or negative customer into a committed loyal one. When a customer is unhappy with the service or product there is a ‘moment of truth’. If handled well the negativity can be reversed and an evangelist created. It is critical employees feel able put the customer ahead of the businesses or their own agenda. Other research has shown that most people do not complain but those that do often have extensive contacts. They will use this social network of contacts to relate their experience – good or bad.
Research on the European banking industry showed the following depending on if the customer considered they had either a positive or negative experience of the bank addressing their issues:
|
Action taken by customer |
% acting if positive |
% acting if negative |
|
Did nothing |
13 |
28 |
|
Bought more product |
58 |
- |
|
Bought new product |
29 |
- |
|
Bought less product |
- |
14 |
|
Changed bank |
- |
15 |
|
Stopped buying product |
- |
20 |
|
Bought product elsewhere |
- |
23 |
Whilst over a quarter of people ‘do nothing’ when upset they will probably tell people in their social network about their issues. But others will reduce spend and tell people!
McKinsey have estimated the ‘wallet gap’ in spending is 20% from positive to negative.
Whilst CRM deployments improve business efficiency especially routine processing tasks they often have little positive effect on the emotional engagement with customers.
Customer emotional engagement is a human-to-human action. The engagement happens at multiple levels: thoughts and feelings, values and beliefs and personal and emotional needs.
At one level this is company cultural issue. The core philosophy of the company has to be aligned to re-enforce the attitudes and behaviour of staff when interfacing to customers.
How can this by achieved?
McKinsey’s identify 4 areas to ensure employees are able to ensuring positive ‘moments of truth’ for a customer:
· Employee self empowerment to put customers needs above all else
· Positive outlook
· Empathetic awareness of themselves and customers
· Selfless approach
They also identify what they call ‘environmental levers’. These are the support and personal development infrastructure that management provides to employees
- Create clear meaning and clarity of purpose for employee role
- Opportunities to improve capabilities
- Reward infrastructure
- Visible and active leadership (‘walk the talk’)
Comment:
Looking at previous research on employee engagement we see there is a big delta between the ideal as expressed above and the reality with many companies. A large percentage of employees do not feel engaged or communicated with, do not trust their managers and so will not recommend their company to others.
If employees are not positive about things how can they even start to help a negative customer become positive at a ‘moment of truth’? It just will not happen. A CRM investment must be matched by a customer centric culture, attitude and behaviours or the ROI will just not happen.
Disclosure:
Like many people I was caught up with CRM in the 1990’s. At the time I was working for a Fortune 500 Technology company and trying to implement a business improvement project which entailed evaluating marketing, PR and sales tools and processes across multiple business divisions and markets in Europe. Corporate had decided to consolidate media buying, branding and agencies worldwide. I was tasked with ‘selling the idea’ and then rolling it out across Europe working with 4 autonomous business divisions and their subsidiary offices across Europe. The whole programme was to be self-funded from savings made in ‘unnecessarily duplicated’ local agency fees and locally generated campaigns. With almost 100 local agencies, 4 divisional marketing directors and VPs it was like trying to herd cats. From Corporate HQ it looked so simple. Just appoint a single ad agency, select a single CRM vendor and get ROI from reducing 100’s of agencies to a handful.
I attacked the assignment with relish and was helped by reporting to the European President and being on the main board as Director of Communications. Fair to say that unravelling the whole inter-connected mass and choosing the select few agencies and a single CRM platform was hard. After 2 years it seemed we were well on the way to achieving our ROI goals before strategic business divestments changed the objectives. One big issue was we had largely failed to consult our customer and channel partners. This led to some real disappointments and expensive re-development. In hindsight we would have probably failed to achieve the targeted ROI and enhance the customer experience.
I then spent 5 years working for organisations either directly or via software vendors/System Integrators on CRM deployment projects. My experience is that most that were failing to achieve the ROI expected were due to a failure to properly map external customer expectations and needs onto the system design. They were secondary (if considered at all) to the business process and IT needs.