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Accenture

Businesses need an alternative customer-centric approach – one that balances the needs of the customers with the needs of the organization.

When the concept “customer centricity” first reached the market, many companies embraced it with open arms - and open checkbooks. Here, conventional wisdom said, was a forward-thinking model for customer interaction that would help companies in virtually any industry break out from the competitive pack and boost profitability.

As theory, customer centricity was simple and direct: above all else, satisfy your customers at every interaction and the money will follow. Having accepted this mandate to make the customer king, companies went searching for ways to serve their new masters better. Many created call centers that would allow them to handle large volumes of customer interactions more efficiently and cost-effectively. Many introduced new service options, such as self-help features that allowed customers to control their own service experience; others implemented technologies, such as data warehousing solutions that gave managers access to more complete customer data.

After making these usually quite costly investments, companies waited for a surge in revenue and market share. Many are still waiting. What went wrong?

The problem with the customer-centric model lies not with the theory. The premise that organizing strategy and operations around the customer will help optimize the lifetime value of customer relationships is hard to refute. However, many companies faltered when they tried to implement the theory, and their early missteps became even more pronounced when the economy took a sudden and prolonged downward turn.

The Limitations of ‘Inside-Out’ Customer Centricity

At Accenture, we find that many organizations, in the rush to delight their customers at every turn, implemented tactically focused solutions, which tended to produce short-lived benefits. In the transition from concept to execution, these organizations lost sight of their ultimate goals - profitability and growth - and launched a spree of activities that, while customer-focused, were not aligned with a unifying customer strategy.

A good example is the large, U.S.-based telecommunications ­company that, during the 1990s, launched a series of customer service programs. One of these initiatives, spearheaded by the company’s customer service organization, consisted of implementing automated self-service features that would speed interactions and reduce cost to serve. At the same time, the company’s marketing organization launched a campaign promoting the advantages of its live-operator ­service to customers. Such a fragmented approach to improving the customer experience was unfortunately common, and many organizations soon found the cost of the programs quickly outstripping their benefits.

Even worse, perhaps, many companies based their customer-centric efforts on the inherently flawed assumption that all interactions are equally important. As a result, the costs of attracting, retaining, and serving each customer relationship assumed proportions far greater than the value of some of these relationships. Consider the case of a Mexican mobile phone operator. Several years ago, while locked in a fierce battle for market share, this company paid roughly $1,000 to attract each new customer. Its monthly profit per customer was approximately $35. However, with phone users switching service every 18 months, the company lost more than $400 on the average customer during that year and a half. As stories like this demonstrate, some customer relationships are simply more valuable than others - and operating budgets should be allocated accordingly.

All this is not to say the money that companies spent to become more customer-centric was wasted. We believe that as the practice of CRM evolves, these investments (and lessons learned) will continue to play a critical role. What businesses need now is not an alternative to being customer-centric, but a better approach - one that balances the needs of the customer with the needs of the organization.

The Advantages of ‘Outside-In’ Customer-Centric Organization

BEA Systems demonstrates such an approach. This leading software company developed new processes, including a shift from product sales to solutions sales, and implemented new technologies, such as salesforce automation software, that significantly improved its ability to meet customers’ expectations. However, rather than simply implementing changes that would improve customer treatment, the company also made sure its customer initiatives were well-integrated and aligned with the corporate strategy. This win-win approach optimized the customer experience - evident in the fact that the company was able to woo an unprecedented 56 accounts away from competitors and close 18 new deals, each worth $1 million or more, in a short span of time. In short, BEA’s approach to focusing on customers was carefully aligned and balanced with the needs, resources, and goals of the organization.

As the BEA case illustrates, customer-centric capabilities are much more likely to lead to customer profitability and increased market share if they are developed from the “outside in.” Whereas many companies base their entire CRM program (and, in some cases, their business model) on improving customer treatment through discrete initiatives, those that achieve the greatest benefits approach their customers with a holistic understanding of the organization, its key differentiators, its overarching customer goals, its capabilities, and its resources. These are the companies that attract, satisfy, and retain customers and, at the same time, optimize profitability by establishing programs that:

• Increase revenue for new or existing customers;
• Decrease the cost to serve existing customers;
• Decrease the cost to acquire new customers; and
• Decrease the cost of intro­ducing and managing new products and services.

To achieve these sorts of benefits on a regular basis, companies should think about their customer-focused initiatives holistically, develop new capabilities for increasing customer satisfaction and profitability, and manage the execution of the customer strategy more efficiently.

Think Differently

The CRM industry appeared on the business landscape in the early 1990s as a means to enable more efficient customer transactions. Shortly thereafter, its focus expanded to include all customer interactions, across multiple channels. By the late ‘90s, new technologies and data analysis and modeling tools were available that allowed companies, for the first time, to gather customer insights, predict customer behaviors, and target their marketing, sales, and service initiatives much more effectively. As this evolution occurred, companies became more adept at implementing ­solutions and augmenting existing capabilities. However, in doing so, many companies failed to align these efforts to each other and to an overall strategy. Without a holistic approach to managing customer relationships, these companies typically ended up with a series of uncoordinated programs that failed to leverage the ­benefits of an integrated approach.

Today, tools are available that enable a much more disciplined approach to executing customer strategy. Companies that take advantage of these tools are able to both reduce the cost of service delivery and improve the value of customer interactions - producing better results than focusing on just one factor or the other.

For example, developing and applying a systematic roadmap to implementing capabilities helps companies optimize the benefits of the capabilities they acquire in these ways.

This approach ensures they address all customer interactions and contact points in an integrated fashion; consequently, it is more likely to influence customer attitudes and behaviors than a piecemeal approach. It also helps ensure that multiple customer efforts are coordinated and working with, not against, each other.

• It is critical for aligning customer-facing functions and maximizing the overall return from the investment in new capabilities. By incorporating and integrating improvements to the entire customer experience - prospecting, sales, service, order fulfillment, post-sales support, field service, billing, new-product introduction - it is much easier to generate a greater return on the investment.
• It allows new customer-facing capabilities to be delivered in phases, which allows for more effective budgeting, funding prioritization, and conflict resolution. In addition, given that a comprehensive customer relationship management program can take years to fully implement, a roadmap allows companies to focus on those efforts that deliver maximum value first, regardless of changes in management or funding.
• It helps manage the leadership’s expectations and minimizes disappointment in results. A phased approach that is tailored to the needs and goals of an organization helps executives understand where they are in the implementation lifecycle and, more importantly, when they can expect certain results.

AT&T Consumer recently demonstrated the benefit of using such a roadmap when it launched a $2.6 billion program focused on transforming sales and customer-care operations over a five-year period. By driving these operations through a comprehensive program - rather than treating ad hoc components through incremental steps - the company expects to dramatically improve customer satisfaction and reduce its customer service costs by at least 50 percent.

Act Effectively

A systematic plan requires systematic action. For many organizations, bringing their customer strategy to life requires them to design and implement new capabilities - almost all of which are based on the more effective use and analysis of customer insights. Companies that learn to transform customer and prospect data into value-generating knowledge and actions are better positioned to drive sales efforts, reduce customer churn, and improve customer treatments and profitability. (See related article in Chapter 1: “An ROI-Based Approach to Implementation and Management)

Executing more effectively, however, can be a serious challenge for companies unused to applying customer insights to drive profitability. In these cases, external service providers can help. Accenture, for example, has devel­oped methodologies and tools that help companies tap the value often locked inside customer data repositories. Generally, the essential capabilities needed to enable what we call Customer Insight include the ability to:

• Translate analysis results into effective customer experiences. Specifically, by using these results to drive customer segmentation programs, companies are much more likely to develop campaigns or service programs that will satisfy new and existing customers.
• Integrate batch data analysis and real-time data ­optimization. Data analysis typically identifies customer trends and a segment’s propensity to buy. Real-time data optimization, on the other hand, allows companies to deliver customized experiences and campaigns that meet their ­customers’ needs. By building capabilities in both of these areas, companies are able to stay one step ahead of market demand and continuously attract, retain, and satisfy their buyers.
• Apply common analytical tools across customer-facing functions. Companies typically have many different customer data sources at their disposal, such as billing histories, customer service interactions, channel usage, and purchase records. Without a mechanism to capture this data consistently, it is often difficult for companies to integrate these data sources to achieve a common - and extremely valuable - view of their customers. Accenture, for example, offers a standardized database application for putting customer data into analytic models. This application contains all of the queries and processing companies need to extract, transform, and format their customer data for complex analytical functions.
• Create a roadmap for successful change. Accenture provides another tool that helps companies align customer segments, customer behaviors, protocols for treating customers during sales and service interactions, potential offerings, and cost-to-serve. Such systematic use of customer insights allows companies to understand their customers - and their service delivery costs - at a detailed level. Armed with this insight-driven blueprint, companies are in a much better position to optimize sales campaigns, customer experiences, and customer value.

In addition to customer insight capabilities, companies should be sure that their sales and service personnel have the right tools to help them manage customer relationships appropriately. These capabilities include sales targeting and account planning practices, knowledge management systems, training, and self-service features that enable customers to help themselves.

Such tools are only part of the answer. Using these tools and resources often requires employees to transform their behaviors and develop entirely new skills. Building more effective sales and service capabilities may also involve restructuring the organization, implementing new forms of incentives or compensation aligned to new key performance indicators, and launching training programs that reduce time to competency. (For a more detailed explanation of how new sales and service capabilities can drive business value, see related articles in this Chapter: “Service Management: Turning Service Into a Growth Engine “ and “How to Build a High-Performance Salesforce.”)

Manage Efficiently

The greatest challenges to implementing a holistic, systematic approach to managing customer relationships tend to involve time, money, personnel, or all three. Becoming customer-centric usually involves multiyear, multiphase initiatives, which require vigilant and efficient oversight, and the executives charged with managing these customer relationship programs are typically busy running day-to-day customer operations. Especially in tough economic times, the required resources - both human and financial - are hard to come by.

Fortunately, companies can now ease the management burden by leveraging strategic sourcing options that provide for more efficient oversight of CRM programs. Co-sourcing and co-managing, for example, have emerged as two of the most innovative and attractive management alternatives. In these scenarios, a company enters a partnership with a service provider who assumes much of the management responsibility and provides resources, capital, and assets as needed. The service provider and the company share responsibility for specific business outcomes, not just a technology implementation.

The strength of a highly structured, systematic approach to ­managing customer relationships lies in the dual benefits that come from improved customer treatment and profitability. Implementing a holistic, systematic customer program can be a complex and expensive undertaking. As with the disjointed ­projects of the past, it is all too easy for companies to lose their strategic focus. And if they do, the efficiencies they hoped to gain from integrating their activities around a common plan quickly ­disappear. Looking for outside help can significantly lessen the risk of failure.

Shared Power. Shared Rewards.

Until recently, companies seemed to face a Hobson’s choice: they could focus on pleasing their customers at any cost, or they could be profitable. Today, we know that taking a systematic, outside-in approach to becoming customer-centric gives companies a real choice - and real opportunity to delight their customers while operating profitably and efficiently at the same time.

The days of serving the customer at any cost are past. For now, however, customer expectations of faster service, lower prices, and customized treatment will probably continue to escalate, and companies will be compelled to respond to these demands by building customer-centric organizations. The good news for ­customers and companies is that customer centricity is now ­economically feasible. A systematic, holistic approach that truly optimizes the CRM dream allows both of them to share the power - and reap the rewards.