Posted on | August 18, 2009 | No Comments
Forward by: Kevin Barrett
Customer or Profit? A Case for Customer Relationship Management (CRM)
In practically everything I do, I’m a customer, and I expect the businesses I patronize to put me first. But my expectations often don’t stand up against all the financial reasons the companies have for doing things other than the way that’s best for me. And I understand that.
I came across an article this week written by Alison Bond, and she makes a compelling arguments for how doing things that are right for your customers, does not have to be different from doing what’s good for your bottom line.
Alison Bond,is a director of The Halo Works Ltd., is the author, with Merlin Stone, of Direct Hit (Financial Times/ Prentice Hall, 1995), The Definitive Guide to Direct and Interactive Marketing (Financial Times/ Prentice Hall, 2003) and Consumer Insight (Kogan Page Ltd., 2004). She is also visiting fellow at CSEM, a partner of Brunel University.
Bond builds her argument on the difference between transactional metrics and customer-aligned metrics. Morrison tells how customer feedback can make your business more efficient. And Johnston illustrates how you can use customizable software to improve the service you give your customers and build you business.
At the end of the day you must be able to measure key aspects of your business to be able to make the correct business decisions.
One of the first mentors I had when I got into business was a Quality Assurance Guru, his name was W.Edwards Deming. Dr. Deming was hired as a consultant by 3M and I had the privilege to work with and learn from this Great Business Leader. (Here is the link to learn more about Dr. Deming http://en.wikipedia.org/wiki/W._Edwards_Deming)
Well, one of the things I remember Dr. Deming preaching, was if you can’t measure it you can’t change it. This is one of the first things I tell businesses that contact me for help in their business, and one of the reasons I am such a proponent of Customer Relationship Management (CRM) and products that help make this function almost effortless.
This article below helps point out the importance of tracking your customer every step of the way.
Have the Customer at the Heart of What You Do and Your Business Will Benefit
By Alison Bond, The Halo Works The Halo Works Ltd.
An organization goes in the direction of its measures, or at least it tries to. That is why it has measures. So for example, if an organization has a target to make a profit, the people in that part of the organization will shape themselves around the need to make that profit. If everyone in the company is focused on that profit target, that will be the staff’s primary concern.
However, it often doesn’t work like that. The extreme cases like Enron are classic examples of a target driving behavior in a negative way, but there are plenty more.
Say you are a creative business and hire a bunch of creative people to service your creative hungry clients. You, then, focus your creative people on profit. What effect does that have on their creativity? Does it make them more creative, or does it divert their attention away from the creative process and end up giving them creator’s block? What has this got to do with giving the customers want they want?
‘Company Y expands to hit its target of 50 vans but, sadly, runs out of money.’
We have worked in this area for many years, and we know that an organization that sets transactional targets such as how quickly representatives answer the phone or how many sales calls agents make are more likely to end up busy. Organizations follow their measures. But does being busy make your business better? We know from our work that busy is more likely to create a desire to “work the system,” which can create a climate that contributes to a move away from the customers. What we have found—and this is not rocket science—is that if an organization measures benefits and focuses on those, it will end up with a positive organization. A positive organization will want to focus on the customer because there is no benefit not to. But positive benefits include:
- Attracting and keeping the best people. There are not too many customers, or staff for that matter who are committed to making your company rich, but people do like to feel that they have made a difference.
- Attracting and keeping the best customers. People buy benefits. Customers are keen to realize the benefits they expected to gain from your product or service in a tangible way.
- Removing the temptation to match numbers with expectations. This eliminates one of the biggest drivers to contravene normal corporate governance rules and focus away from the customer.
- The organization will have a real and positive reason to sustain itself. This is because the reason for existing will be more than just profit. It will be a about doing things that help the customers and the staff members be the best they can be. This always benefits the customer.
Which company is going to be the most successful? One in which everyone is focused on profit? Or one where people are focused on the benefits the business provides? All our work has shown that the profitable businesses are the ones who align themselves behind the benefits they sell. Yes, they measure profits, but the main focus is on an alignment behind the core business they operate. Employees stay, and the customers are loyal.
A question we often are asked is how come Company X is doing so well while Company Y is struggling. Company Y appears to be working hard. You see its advertising or its vans driving around. But suddenly it goes out of business. Was it just unlucky? Can any organization just go bust? The good news is that it is not bad luck that forces companies out of business. It is a devotion to the wrong things, and being too successful in following those things.
Company Y might have set itself a target for growth, something like 50 vans on the road by the end of the next financial year. Company executives will, then, do everything it can to hit their target, including borrowing money, taking on slightly unprofitable contracts and not always paying attention to the service the company is providing. They are focused on a volume business, not a quality one.
Their customers, though, want something different. They do not care how many vans the company has. They want their parcels on time and delivered by people they trust. This is what Company X does so well. Company X focuses on quality, not just in its mission statement but also by what it measures. Company X executives think 50 vans would be nice, but the firm has only 32 really reliable drivers. So what is the point of 50 vans? A reliable driver delivers a reliable service. So Company X stays smaller and makes very good profits, and Company Y expands to hit its target of 50 vans but, sadly, runs out of money and has to close its doors.
Company X takes on 20 of Company Y’s drivers, 18 of whom prove to be very reliable. It gets some of Company Y’s customers, too, and has its best-ever profits. It was not luck. Company X is run by a team of people who know exactly what their customers want and the characteristics of those who can deliver what their customers want. They measure those things and stick with them. It makes Company X successful.
Being customer-focused allows Company X to do the “right” things for the customer. It is much easier to do the right thing when the organization is aligned behind the benefits that the organization sells and when employees are encouraged to provide those benefits and are measured on that. Ultimately, being customer focused is good for business. It may not meet a short-term target for mega-growth, but long term, clearly aligned customer focus will make organizations successful in a way that swift forays into the World of a Fast Buck will not.
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