Crm Turning Customer Loyalty Into Profitability

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Successful CRM: Turning Customer Loyalty into Profitability

By Bob Thompson
CEO, CustomerThink Corporation
Founder, CRMGuru.com

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October 2004

Compliments of:

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Copyright © 2004 RightNow Technologies. All Rights Reserved.

Executive Summary
Customer relationship management (CRM) gained recognition in the mid-1990s, primarily driven by its perception as information technology (IT). However, not enough attention has been given to the fundamental drivers of CRM success: strategy, metrics and the organization. Successful CRM is about competing in the relationship dimension—not as an alternative to having a competitive product or reasonable price—but as a differentiator. If your competitors are doing the same thing you are (as they generally are), product and price won’t give you a longterm, sustainable competitive advantage. But if you can get an edge based on how customers feel about your company, it’s a much stickier—sustainable —relationship over the long haul. The purpose of this white paper is to take a fresh perspective on how successful CRM really works. The essence is that you can dramatically improve your chances of getting an ROI from your CRM initiative by following three simple steps: 1) Understand the value your customer wants, 2) deliver that value profitably and 3) repeat. Simplistic? Perhaps. But that doesn’t mean it’s easy. Most companies have entrenched ways of doing things, focusing on products, rather than customers. Organization inertia and self-interest are also to blame. As GE’s former CEO Jack Welch said in 2000, “Bureaucracies love to focus inward. It’s not that they dislike customers; they just don’t find them as interesting as themselves.” In this white paper, you’ll learn why listening to the voice of the customer is so crucial to CRM success—and how genuine customer loyalty impacts corporate profitability. You’ll also find out what the latest research indicates about the gap between potential and actual CRM benefits, and the four key drivers of ROI for CRM projects. Plus, you’ll learn the unvarnished “truth” about CRM success and failure, minus both the positive and negative spin sometimes promoted by vendors, consultants, analysts and the media. The bottom line, though, can be summarized as follows:

CRM can work as a differentiating business strategy.
CRM delivers a return on investment for two out of three projects. CRM produces solid short-term returns but lags in providing full strategic benefits. CRM success starts with putting customer interests first. Period.

Said another way, you can succeed with CRM by being SMART: Define a customer-centric Strategy; use appropriate Metrics ; ensure your organization is Aligned with your objectives; Redesign work processes as needed; and use appropriate Technology tools as enablers. But it all starts by putting your customers first and creating a better relationship with them than your competitors offer. Differentiate or Else

At a conference in London in May 2004, business strategy guru Michael Porter delivered a simple but powerful message: Effective business strategy means be ing distinctive. How? Business strategy experts say that you can differentiate based on: 1) the core product/service offering, 2) the price or total cost of ownership or 3) the total relationship and customer experience. Staying ahead of competitors solely through product leadership is becoming more and more difficult. In an interview with Fast Company, Porter stated, “It’s arrogant for a company to believe it can deliver the same sort of product that its rivals do and actually do better for very long. That’s especially true today, when the flow of information and capital is incredibly fast.” It’s also painfully obvious that every business in an industry can’t compete using the same cost/price model. Generally only one or two companies can achieve the scale and efficiencies necessary to compete based on low price and profitably sustain this...
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