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In
business circles, the acronym of the moment would
have to be CRM.
Corporations
the world over are spending tens (or often
hundreds) of millions of dollars apiece in the
name of these three unassuming little letters.
Of
course, those letters stand for customer
relationship management — a term that
basically refers to technology and business
systems that together automate the management of
customer relationships.
The
promise held out by CRM is an appealing one, but
before you grab your chequebook and attempt to
collar a software vendor, it’s worth pausing for
a moment to consider whether or not it’s actually
possible to automate the management of
customer relationships.
Or
are, as many media reports suggest, these
countless millions of dollars being squandered in
a fruitless quest for an impossible dream?
If
customer relationship automation is, in fact, a
viable business objective, it would be nice to
have a road map to follow to maximise one’s
chances of arriving at the ultimate destination
unscathed.
This
article examines the viability of customer
relationship automation, and then presents such a
road map.
Why
automate relationship management?
The
recent interest in the automation of customer
relationships can be attributed to two factors:
-
Market
pressure for continual improvement in
organisational efficiency.
-
The
availability of technologies (particularly in
the areas of telecommunications and the
Internet) that at least hold out the promise of the automation of relationship management
processes.
Market
pressures make automation a priority
Automation
increases the throughput
of a process.
Of course, throughput is good because it
increases the utilisation of infrastructure,
drives down costs, and inflates profits.
Manufacturing
processes were the first organisational processes
to be candidates for automation.
This is because, at the birth of the modern
corporation, manufacturing was the bottleneck in
organisational throughput.
(Demand exceeded supply.)
The
best known example of early manufacturing process
automation is Henry Ford’s employment of the
assembly line in the Model
T manufacturing process.
For
most of the second half of the last century, the
attention of organisations was on the automation
of manufacturing processes.
As
a result, we are now in the position where most
organisations have removed the bottlenecks from
their manufacturing processes.
Accordingly (at least from a manufacturing
perspective), supply typically exceeds demand.
Because
manufacturing is no longer a bottleneck,
improvements in efficiency in this area will have
little impact on organisational efficiency as a
whole.
Just
think, if you wanted to improve the efficiency
of a machine, you’d first apply oil to the
parts that squeaked.
Adding oil to well-oiled parts would have
little effect.
In
order to extract further efficiency improvements,
managers have had to focus on the new bottleneck
in the organisation.
This new bottleneck is the front-end
of the organisation — or the interface between
the organisation and its customers.
New
technologies promise relationship automation
In
manufacturing terms, the two factors that make the
greatest contribution to efficiency are throughput and quality.
In
the management of customer relationships,
efficiency is a function of throughput
and intimacy.
It’s
worth noting that, in both cases, these factors
appear to be mutually exclusive.
One would assume that quality (or intimacy)
would decline as throughput increases.
In
a manufacturing context, the reality is that the
technologies that enable economies of scale, also
enable economies of quality.
(Both throughput and quality benefit from
the elimination of variation — the basis of mass
production.)
But
what about throughput and intimacy?
Are they not mutually exclusive?
Well,
until recently they were.
If we look at retailers, a high volume
retailer has always provided less customer
intimacy than a low volume one.
Let’s
compare a corner store with a traditional
department store.
The
former provides both geographical proximity and
familiarity (the retailer remembers your name and
your preferences).
But
to access the lower prices offered by the latter,
you have to drive further, and sacrifice the benefits of familiarity.
Recently,
however, technology has enabled these two key
components of intimacy to be scaled.
Relational
databases now allow organisations to remember
names and preferences (familiarity), and
telecommunications and the Internet provide
customers with access to organisations from the
comfort of their own homes (proximity).
Of
course, the best example of the scalability of
intimacy is Amazon.com
(perhaps the world’s most mature
practitioner of CRM).
You
can shop at Amazon.com
from anywhere in the world where you can
find a telephone jack and an Internet Service
Provider. And
Amazon.com
remembers your name, your preferences and
your purchasing history.
(Amazon.com
can also use this information to e-mail you
— surprisingly accurate — recommendations of
books that may be of interest.)
The
value of personal interaction
It’s
one thing to use technology to deliver (at least
some of) the components of customer intimacy, but
it’s another to expect customers to maintain an
ongoing relationship with a computer.
Or
is it?
The
key question here is: how critical is personal
interaction to the maintenance of a customer
relationship?
If
it’s absolutely critical, the requirement for
personal interaction is always going to be a
constraint on the automation of relationship
management (a bottleneck).
Accordingly, the key promise of CRM may not
be deliverable.
The
answer is that the requirement for personal
interaction is a situational thing.
The
requirement for personal interaction varies from
customer to customer and from touchpoint
to touchpoint. (A
touchpoint is a point in the customer relationship
management process where a customer comes in
contact with your organisation.)
In
some situations, personal interaction can
obviously add value.
And in others, as Amazon.com
demonstrates,
it may be unnecessary.
But
in some situations, personal interaction may
actually subtract value.
This may be because your customer would
prefer the anonymity of an impersonal interaction
(would you rather have a person or a computer
advise you of your bank account balance?).
Or it may be that personal interaction
unnecessarily complicates an otherwise simple
transaction.
Before
you automate
The
news that it is, in fact, possible to automate at
least some of the touchpoints in your customer
relationship management process is potentially
very exciting.
For
many organisations, the customer relationship
management process is dependent upon significant
amounts of infrastructure.
This certainly applies to organisations
with retail distribution channels.
Again,
this point is well illustrated by Amazon.com.
In 1998, Amazon.com
enjoyed an increase in revenues of
approximately $300 million.
The additional infrastructure that was
required to support this increase in sales cost
Amazon.com just $100 million.
Now
if Barnes & Noble, (Amazon.com’s
principal offline competitor) had increased
its sales by $300 million over the same period, it
would have had to open 100 new stores.
This would have required an investment in
infrastructure of approximately $1 billion.
(In other words, Amazon.com’s
customer relationship management process
appears to be ten times more scalable than that of Barnes & Noble.)
But,
as is often the case with business process
reengineering, the automation of a customer
relationship management process is rarely as
simple as it looks.
The
problems we most often see relate to organisations
thinking locally, but acting globally — instead of the reverse.
By
thinking
locally, we mean that organisations
suboptimise their customer relationship management
processes.
And
by acting
globally we mean that they attempt to automate
everything or, boil
the ocean.
Boiling
the ocean
We
have seen many troubled CRM implementations that
amount to a valiant attempt to do that which is
quite clearly impossible.
While,
technically, it may appear feasible to
simultaneously automate a sales force, build a
call centre and
replace a number of legacy customer databases
with a unified, e-commerce-enabled CRM solution,
organisational inertia will obviously doom this
project to failure.
It
is important to begin any reengineering project
with a global view of the desired end state. However the scarcity of resources (particularly management
attention) and organisational inertia mean that it
is better to focus on those initiatives that are
likely to yield the greatest (and quickest)
results.
As
suggested previously, these initiatives should be
identified by looking for the bottlenecks in your
customer relationship management process.
(Remember, if it doesn’t squeak, don’t
waste oil on it!)
Suboptimisation
Suboptimisation
can occur when you optimise a component of a
process without regard for the impact of your
changes on the process as a whole.
This
is a danger for customer relationship automation
projects because it is so easy to underestimate
the importance of personal interaction.
(Your interactive
voice response system may reduce your
transaction costs, but is it disenfranchising high
value customers?)
Ask
yourself, if the technology is readily available,
should a recruitment firm automatically create a
web-based clearing
house for its candidates (as Monster.com
has done)?
To
a technologist, the obvious answer is yes.
From a technical perspective, it makes
sense to automate the matching process and to
remove the barriers between employers and
candidates.
However,
if this recruitment firm services an executive
clientele, this automation is almost certainly not
in its best interests.
An executive clientele will look for a
recruitment firm that deliberately
maintains barriers between employers and
candidates. In
other words, the inefficiency of this organisation’s matching process is actually a
design feature.
To
avoid suboptimisation, it is important to:
-
Maintain
a clear understanding of the objective of the
particular process on which you’re working.
-
Examine
the impact of proposed changes on a range of
customer profiles over a range of possible
situations.
Automating
your customer relationship management process
The
following four-step process enables you to plan
the automation of your customer relationship
management process, without falling victim to
either of these problems.
The
first two steps focus on the process as a whole,
and the last two, on the touchpoints that require
automation. (It
should go without saying that the bottleneck in a
customer relationship management process is almost
always a touchpoint.)
-
Define
your objective
-
Identify
bottlenecks
-
Identify
touchpoints
-
Optimise
touchpoints
Define
your objective
It's
sometimes easy to lose sight of exactly why a process
exists.
Even
if the answer to this question is obvious, it
should still be top of mind for the duration of
the planning process.
A
failure to do this can easily result in process suboptimisation.
Your
definition of the process objective should be
broad enough to discourage this suboptimisation,
though not so broad as to be meaningless.
For
example, if you were considering the automation of
a help desk, you might define the object of this
process as to provide
remote resolution of customer problems, thus
avoiding their escalation to field technicians.
If you were to define the objective as to provide
telephone resolution of customer problems, you
may overlook the fact that it is possible to
migrate a significant percentage of your help-desk
functionality to your Website, as Microsoft has
done with its Knowledge
Base.
Identify
bottlenecks
The
easiest way to identify bottlenecks is to
flowchart the touchpoints in your existing
process. Once
you have done this, ask yourself which touchpoints
are constraining the throughput of the process.
If the answer is still not obvious, ask
yourself, if
the throughput of this process were to double over
the next six months, which touchpoints will not
scale?
You
will often discover that the bottleneck is not
where you might initially have assumed it would
be.
We
often encounter sales managers who are considering
using Sales Force Automation software to improve
the productivity of their sales forces.
In this situation, we question whether or
not the sales force is, in fact, the constraint in
the sales process.
More
often than not, we discover that salespeople are
operating nowhere near their peak capacity —
accordingly, they are not a bottleneck.
The real bottleneck is the process that
generates sales opportunities.
(Hence the importance of our Relationship-centric
Marketing process.)
Map
touchpoints
Once
you have identified the touchpoint (or touchpoints)
you wish to optimise, you can plot it on the Touchpoint Optimisation Matrix below.
This
matrix enables you to specify appropriate
communication channels types by mapping your
touchpoint into one of four quadrants.
It
then enables you to narrow your selection by
considering the trade-off between the scalability
and the effectiveness of different channels.
[click
to enlarge]
To
plot your touchpoint on this matrix, simply ask
yourself the following questions:
-
Should
this contact be initiated by your organisation
(push) or by your customer (pull)?
-
Is
personal interaction of neutral or negative
value to this touchpoint (transactional)?
Or does it add value (inter-personal)?
Optimise
touchpoints
Once
you have determined the quadrant to which this
touchpoint belongs, you will be faced with a
choice of communication channels.
Typically, there is an inverse relationship
between the scalability of a channel and its
effectiveness.
For
example, an outbound telephone call is more
scalable (less expensive) than a face-to-face
customer visit from a salesperson.
However, if the touchpoint is the point at
which the decision is made on a $100,000 purchase,
you will probably be prepared to pay a significant
premium for the increased effectiveness of the
more expensive channel.
Accordingly,
your choice of channels should take into account
the significance of the touchpoint — in
isolation, as well as in the context of the
ongoing relationship with the individual customer
(or customer profile).
Now
that you have your choice of appropriate
communication channels, it’s important to give
careful consideration to the design of the
touchpoints (and the environment surrounding these
touchpoints).
This
is particularly important when you’re dealing
with inbound communications, where the choice of
channel is generally your customers’.
To
explore this point, let’s return to our
help-desk example.
We’ll assume that this help-desk has
three communication channels:
- A
web-based knowledge base (self-help)
- A
web- and e-mail-based job system
(asynchronous assistance)
- Telephone
support (synchronous assistance)
Customers'
initial inclination will be to use the telephone
support service for all support problems.
Because this channel is difficult to
scale, this organisation’s challenge will be
to migrate customers to the more scalable
channels.
While
an obvious solution to this problem is simply to
charge for telephone support, this heavy-handed
approach may well result in the sub-optimisation
of the customer relationship management process.
(Charging penalises all users —
including those for whom this is the most
appropriate channel.)
A
more realistic approach is to design the
touchpoints (and the environment surrounding
them) so that the preferred channels are
perceived to be the path of least resistance.
The
following initiatives might be appropriate:
- Advertise
an e-mail and a Web address rather than a
support telephone number.
- If
customers have access to computers, arrange
for support staff to train them in the use
of the knowledge base at the same time they
are solving their problems.
- Have
support staff enter all jobs into the
e-mail-based job system — so that
customers receive automated e-mail updates.
These updates, can promote both the
knowledge base and the job system.
- Arrange
for your job system to automatically query
your knowledge base when jobs are entered
and present results as possible solutions,
prior to logging the job.
This
example should illustrate that the design of the
touchpoints is just as important as the technology
used to automate the touchpoint (if not more so).
On
the subject of technology, it is a mistake to
assume that those touchpoints where personal
interaction is necessary cannot be scaled.
The
reality is that, these touchpoints often benefit
from the same technology that is used to automate
the purely transactional
touchpoints.
The only difference is that this technology
is used to empower the staff responsible for
direct customer contact, rather than being used by
the customers themselves.
Not
an objective, an obsession!
This
article began by asking the question, is
customer relationship automation a viable business
objective or an oxymoron?
It
should now be clear that the words automation
and relationship are not mutually exclusive. (In fact, as the banks and Amazon.com
have
demonstrated, we sometimes prefer those
relationships that don’t require personal
interaction!)
As
far as the first part of the question is
concerned, the automation of customer relationship
management should be more than a viable business
objective — it should be an obsession.
In
an environment where supply typically exceeds
demand, the future of your organisation depends on
continual innovation and seamless integration with
your customers.
Your
manufacturing department has just passed you the process
improvement baton.
Go
to it!
This
article was researched and written in
conjunction with Mike
Smith at Simbient
Solutions.
Simbient Solutions specialises in
integrating Web interfaces with back end
solutions (i.e. CRM and ERP systems).
Simbient’s clients include E*TRADE,
Fairfax, General
Electric and Shopfast.
[Agree?
Disagree? Please drop me a line and let me know.]
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