Don't fight for markets, know your customers better

By Laurens Sihaloho

JAKARTA (JP): Recently, a friend of mine took his car to his car dealer, after making an appointment, to have it serviced after it had completed its first 5,000 kilometers. He purchased the car about seven months ago. Instead of dropping the car off to pick it up later, he decided to wait in the customer service department's waiting room.

A few minutes later, Jack, the salesman who had sold him the car, came into the waiting room and greeted him by name. My friend was surprised that Jack recognized him after all these months.

Jack also inquired about my friend's spouse and children, whose nicknames he remembered as well. Jack also offered him a glass of hot cappuccino, his favorite!

How did he remember, he asked, when he dropped by for lunch one day. I told him, "When you made the appointment to service your car, the dealer's system's notified the sales department to look up your profile."

Jack probably did not remember my friend's children's nicknames or that he liked cappuccino.

"It was the dealer's database that recollected details of your family and your favorite drink. And you were impressed," I said.

What Jack did is part of customer intimacy or relationship management, or one-to-one marketing, or whatever one prefers to call it.

The point is the dealer's management had utilized computer technology to store details of their customers -- who they are, what they do, where they live, what they had purchased or how they can be reached.

The motto here is the better you know your customers, the more likely you are to keep them and sell them other products.

This is a part of Customer Relationship Management (CRM).

Each company may have a different interpretation of this concept. Some companies may feel it is good enough to instruct their staff to say "thank you for calling". Others may prefer their staff study in their customers' purchasing capability to predict what they would buy in future.

This is a simple interpretation of CRM. What is important is understanding what drives your customers to purchase, what their preferred marketing channels are, and even what their favorite pets and books are.

This knowledge can present valuable and often unforeseen business opportunities.

Needless to say, CRM is a strategy. It is not only a tool. It is a process of aligning organizational operations to attract, serve and retain valued customers. CRM requires a high degree of integration within the company.

CRM involves efforts that treat each customer as individually as possible in every function and department of the company.

The difficulty for a company in this respect is to transform itself from a product-centric firm to a customer-centric firm. This is not just a matter of installing the required technology, but also requires adaptation of the corporate culture and organizational structure.

It would be difficult to develop rational and meaningful CRM if the organization and its culture does not change the way they treat their valued customers.

According to a survey done by Earns & Young in 1999, 75 percent of CRM transformations failed to meet their objectives because companies were more focused on the technology, which is merely a tool.

The managements overlooked the operating implications associated with the adoption of CRM.

Focusing on CRM would bring greater profits and customer loyalty. A study by Harvard Business School and Bain Co. showed that organizations that improved customer loyalty by 5 percent increased profits by 25 percent to 85 percent.

This figure is consistent with Pareto Law which says 20 percent of your customers contribute to 80 percent of your business. Companies are still perplexed on how to optimally apply Pareto Law.

The CRM paradigm is a way to identify, acquire and retain customers for a lifetime relationship.

The evolution of CRM has given birth to "eCRM" -- information technology and Internet-based strategies and tools to win over valued customers.

This is not the time to fight to increase one's market share, which is costly. Moreover, a company that focuses on expanding its market is bound to face stiff competition from its rivals.

Focusing on customers is much cheaper, more profitable, and less obvious to competitors.

The era of e-business has created knowledgeable, sophisticated and demanding customers. Embracing the Internet customer wave, forward-looking companies are acutely aware of the tidal forces reshaping global businesses.

If businesses do not change the way they serve their valued customers, they may not survive the competition.

Change now or die.

The writer is a consultant at PT Ciptamaya Mitra Solusi, an information technology consulting firm in Jakarta.