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Profiting from Customer Lifecycle Value

As product differentiations blur, companies are increasingly turning to create customer-centric organizational behaviour to establish experience based differentiation (EBD) to remain competitive. This creates unique challenges while implementing CRM strategy in multi-department organizations with numerous customer touch points.

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Components of Customer Life-cycle Value

Customers are critical for any organization, hence, it is not unusual for them to adapt various customer centric strategies to win trust and retain them, thereby maximizing profits. An organization hopes to create a mutually profitable relationship with its customer and tries to secure their loyalty. It is therefore essential to understand the different stages of customer life cycle and create effective strategies.

Customer life cycle can broadly be categorized into the following three stages, each stage requires in depth focus and strategy.

  • Acquisition

  • Realization

  • Value Mining

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Grading process maturity

As organizations continue to embrace the new opportunities for growth, it's important to improve business processes in these challenging times and move forward from traditional focus on routine, predictable, sequential processes towards broader, cross-boundary processes that include more unstructured work. Whether your organization is mature or maturing, it's important to always assess and self-audit the processes involved.

How evolved are my processes?

An organization is a complex web of processes. For businesses to become adaptive, dynamic, flexible and agile, the business has to be managed from a process perspective. A business is driven not by a single process but perhaps hundreds of processes. Some processes are mission-critical to the overall value chain whereas other processes operate in a supporting role.

Begin with discovering the processes involved.Once the processes have been discovered,documented and analyzed, they can be improved - executed at lower cost with higher quality, performance, visibility or adaptability.

Often, the top line managers are required to step back and review current operations and develop process solutions designed to help you maximize resources, eliminate waste, achieve productivity and deliver improved results.

Businesses managed by processes can ensure that all sales, service and marketing initiatives proceed on a pre-defined, consistent path, leaving room for appropriate, relevant deviations according to their needs and circumstances.

Understanding Process Scorecards

The Process Scorecard offers a way of evaluating a process or methodology by rating its impact on services, quality, costs and how effectively it is used and applied.

Begin with identifying the processes and evaluating each one of them. Findings from the scorecard assessment are then translated into an actionable plan to close the gaps and reformulate the departmental and enterprise's understanding about these processes.

Business processes can always be improved. With a culture of continuous improvement, your organization will always be on the cutting edge and in line with the needs of your customers.

Single process trap

Start-up organizations begin their business with a process. As they grow, it is required to analyze the existing process/processes across all departments. Their growth demands new processes to be implemented and a re-engineering of the existing processes.

Today, the efficient use of time is vital. The way leading companies manage time-in production, in new product development and introduction, in sales and distribution-represent the most powerful sources of competitive advantage. The biggest disadvantage of following the initial single process is that it leads to an increase in the cycle time due to a lack of operational efficiency.

A single process makes it difficult to structure and implement mechanisms that ensure the coordination and integration of core processes and key functions across organizational boundaries. There is no single way of managing different processes. Organizations running on single processes fail to create or sustain a long-term competitive advantage.

With maturity, the nature of processes in any organization become different and have separate traits. Also, it is not financially feasible to manage high and low value processes using the same process management infrastructure.

Often, merging multiple processes into one leads to an ultra complex process that leads to a complete failure in achieving desired results.

CRM Maturity Model

Many organizations today have started customer relationship improvement programs. They have conducted assessments and followed by creating actions plans, only to hit the implementation barrier - "What should we do next?" The CRM Maturity Model helps to address this implementation barrier, it can be applied to improve the way we handle overall customer experience management in several ways, they are described below:

  • Macro measure for an organization institutionalizing continuous improvement.

  • Normative model of organizational best practices at different maturity levels.

  • Basis for assessment and evaluations.

  • Strategy for improving customer relationship management.

  • Discovery approach for defining and to bring about these specifics changes in the ways they handle their customers.

 

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Throughout the life of an organization, the management experiments with various thoughts and creates strategies. The strategy in the CRM Maturity Model involves maturing organizational customer centric processes by building layers of process capability as described by the five level (layer) model.

This model prescribes an orderly and focused path for organizational process improvement and strategically recommends manageable ways to guide an organization to the next maturity level.

Based on the maturity of an organization, it is in one of the stages mentioned in the exhibit below. Most start-ups and small-size organizations are at stage 1 or 2. In these stages, organizations decide to make improvement efforts for their core strengths, first informally and intuitively. Large or mid-size organizations are at stage 3, they begin their work on defining the organization's wide single definition of processes. Their aim is to shift to the next maturity level where execution is monitored to assess the impact on business. At stage 5, the organization is formally and continually examining the effectiveness of its process performance and optimizing those processes, the 'learning organization' becomes a reality. Process owners estimate and then track the quantitative impact and effectiveness of change. Productivity and quality is improved continuously and in a controlled manner.

Revitalizing acquisition

Acquisition isn't about simply adding customers to the base. Not all customers are profitable. Customer acquisition models should be built by applying intelligence on existing data to identify the traits of profitable customers and make greater efforts for these prospects, using relationship approaches.

Intelligent acquisition models should be built for screening prospects by using historical transactional data with the following objectives:

  • Identifying profitable customers.

  • Identifying those customers who are not profitable.

  • Basis for assessment and evaluations.

  • Identifying those customers who are not profitable.

These models can then be executed on existing customers also for cross-departmental acquisition. Cross-departmental acquisition also requires:

  • Channel unification to record all interactions done with customers across any of the channels provided like email, text messaging, phone calls, etc. This information should be available across departments to create cross-selling strategies.

  • Channel unification to record all interactions done with customers across any of the channels provided like email, text messaging, phone calls, etc. This information should be available across departments to create cross-selling strategies.

  • Optimization of processes for different product lines should be done along with process unification. No two products should be sold using the same process, this can also reflect in the way processes are implemented on systems.

  • On-boarding experience for a successful sale; customers are most sensitive to the organization's attention towards them. This provides the organization with an opportunity to begin a profitable and long lasting relationship with the customer.

Driving realization

A sea of change is upon us and the broad outcomes are already visible. Businesses need to realize the customer's value to be competitive in this decade. Though, CRM strategy is all about creating effective customer relationship, however, once a customer is on board; they should have high satisfaction levels and be profitable for the organization. With the above goal in mind, strategy planners should work on setting-up and streamlining processes for customer service desks, which are the first interaction point post sales. Companies are now capturing tremendous value from their support businesses by taking a more careful, fact-based approach to designing their service processes and pricing them appropriately. Customers can be segmented according to their service needs rather than their size, industry or type of equipment.

Also, to transform new customers into loyal ones, organizations need to maximize the value they derive from every customer interaction. Customer service and quality of product/service offered helps in shaping customer's perception about the organization.

Value Mining

CRM solutions are a strategic imperative for forward-looking enterprises and provide a competitive advantage. When implemented correctly with alignment to the business strategy and with proper user adoption, it provides accurate business intelligence. An important objective of top management is to determine whether profitability will increase or decline and often disagree that short term ROI does not necessarily translate to lasting value.

At the organizational level, CRM is a strategic focus on customer behavior and related interactions. Technologically, it uses data mining to identify customer preferences and behavior. For business processes, it improves efficiencies and effectiveness of all departments.

The most valuable application of CRM data is for systems and processes that identify and assist in leveraging relationships with the most valuable customers which also includes increasing 'wallet share'. To achieve this, integration is required between data generating applications and business processes and also between data mining applications and the CRM solution.

An effective CRM solution drives customer satisfaction and stakeholder satisfaction simultaneously. It facilitates applying cost-effective resources to provide a seamless, high-quality experience for a company's most valuable customers and pinpoints the least desirable ones.

Managing stored consolidated relational data through data warehousing and sorting and searching it using data mining tools to identify patterns, delivers great value for a CRM implementation. Filtering and analyzing raw data generates actionable information and subsequently competitive intelligence.

CRMnext optimizes the value from lead and customer data by identifying trends and opportunities to improve the overall performance of pre-sales, sales and post-sales across departments. Using the data generated through mining, organizations can redesign strategies to personalize offers, reward loyalty and improve customer experience for greater returns from long term profitable customers.

Joseph M. Juran, a business management consultant suggested the Pareto Principle (also called the 80-20 rule) that in terms of customer value translates to - approximately 20% of an organization's customers generate 80% of its profit. This principle has similar implications in regards to customer support and marketing.

Ideally, based on the Pareto Principle, an organization's strategy should be to focus on the 20% of its customers that contribute the most to its bottom line. Tracking and improving products, services and the overall customer experience based on the individual needs of this segment will ensure higher ROI.

 

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The Pareto Principle also makes us perceive that 80% of our productivity is generated from 20% of our activities. Business leader like to spend a majority of their time and money on activities that provide the highest returns.

Capitalize on customer relationships by strengthening them and using untapped opportunities to increase profits. This is facilitated using a CRM solution which is accessible around-the-clock from any web-enabled device and displays real-time information from across geographies related to interactions, activities and the company's pipeline.

Getting more from your customer data store

Customers are critical for any organization, hence it is not unusual for organizations to adapt various customer centric strategies to win trust and retain them thereby maximizing profits.

Processes are enabled to take advantage of customer loyalty by increasing retention, and making them advocates of the organization. Not all the customers are profitable; hence models need to be built which uses the customer transactions and interactions with the organization as inputs to output the list of profitable customers.

In today's digital era, organizations have captured trillions of bytes of data about customers, suppliers and operations. They can embed data models to gather sets of information that can be translated into frontline actions. The ability to make decisions across marketing groups, brand management groups and sales groups gets improved with this integrated valuable insight.

Data mining techniques can help in exploring this data to cite common patterns. This involves following these steps:

  • Data Exploration - involves data preparation.

  • Model building and Validation - involves choosing the models that are best suited.

  • Deployment - involves using the chosen data to proceed with the generation of the outcome.

When should I move to unification?

As organizations evolve they are often met with roadblocks to hamper progressive growth and their desired goal. These factors have a cascading effect on the performance and profitability in the short and long term. It is important to understand what these factors are and work towards avoiding them.

Lack of a business process and well defined strategies:multiple processes running within anorganization without proper alignment reduceefficiency and causes loopholes in its operations. Aselfish business strategy that focuses on purely products and profitability will lead to customer churn and poor lead conversions.

Inconsistent information:lack of a centralized database for internal documents and customer information leads to several hindrances in the smooth running of an organization. This becomes most apparent when employees attrite and their information related to products, leads, customers or solutions specifically they were handling is lost.

Best practices not unified:streamlining best practices which are specifically for independent departments cause breaks in company-wide business operations and alignment.

Cascading rework:lack of an accurately implemented system to streamline tasks and activities with related alerts will lead to miscommunication and time consuming rework for internal and external tasks.

Inconsistent procedures for similar tasks:if automated processes are not implemented for repetitive daily tasks like generating reports, emails, printing document etc. the time for productive work is reduced greatly and affects the overall productivity.

Unmanaged commitments:lack of clarity on information and timelines for tasks and activities that are dependent on multiple departments or teams, leads to false commitments, breaks in coordination and unhappy customers.

Work overload:a lot of the factors above will create an unhealthy work environment and attrition. Filling in for people who have left, dearth of centralized information, limited access to customer interactions will result in an overload of work in terms of creating reports, documentation and meeting customer commitments.

 

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The above points and diagram make it clear that an organization's business strategy requires to be dependent on customer and internal 'needs' for achieving success - it's vital to transition from being product-centric to customer-centric.

For organizations to optimize customer lifecycle value in a sustainable and progressive fashion, the following path to unification explains the different stages in development:

Year 1:The organization's management is inconsistent in this stage, characterized chiefly by a lack of structure and uniform practices. Individuals follow a unique process and applies standards independently. To move to the next level, the organization usually needs to build cooperation among individual communicators.

Year 2:The organization is in the process of putting their structures and standards in place. A group of information developers collaborates to introduce establish style standards and institute uniform practices. Managers and staff begin to institute quality assurance practices. To move to the next level, the organization and its leadership must make a firm commitment to following the processes and standards put into place.

Year 3:The majority of the staff support and are committed to following uniform processes, templates and standards. Sound planning and quality assurance activities are incorporated into every project.

Staff begin to find opportunities for improvement, including redesign of legacy information, customer studies and benchmarking with other organizations. To move to the next level requires a firm commitment to following high quality practices and commitment to project planning, estimating and scheduling.

Year 4:The organization's leadership may change without a loss of commitment to planning, quality assurance, hiring and training plus budgetary controls. Organizations here, become increasingly sophisticated in handling customer studies, assessing and meeting customer needs and managing return on investment. To move to the next level, the leadership needs to increase their business understanding. They need to strengthen their commitment to increasing productivity, controlling and reducing costs, focusing on customer satisfaction and aligning strategically with overall business goals and objectives.

Year 5:The organization is characterized by a level of sustaining innovation beyond the commitment to mature practices. An optimizing organization continually questions its own practices and standards by continually seeking ways of meeting customer needs more effectively and cost efficiently. We see an organization with a special focus on customer needs. Employees are knowledgeable about customers and continually seek collaborations to improve quality and measure the success of their innovations.

 

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The study and analysis above highlights the fact that the best period for unification is between years 2 to 5.

To cultivate continued, profitable business among the best customers - an organization needs to know how to reward them. It is also important to understand which segments of customers are dormant and will come back later.

CRM solutions provide this transparency for customer information in an organized and efficient way. Escalations, enforcement rules and alerts ensure alignment with business strategies and an ongoing process to remain updated on customer details and specific needs. Collaborative products and services are the future for mutually profitable relationships between enterprises and their customers.

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