iProceed Customer analytics and CRM

Value of customer analytics
Customer relationship management is key to value creation

Recently my Compaq laptop just died, literally. Since the computer was out of warranty, I had no one to turn to. Compaq (now part of HP) would not even entertain my call (Can you believe it? A company does not want to talk to people who actually bought its products). So I turned to the Web to see what could I do to fix my computer. The only place I could find some information was a bulletin board (hosted ironically on a Compaq/HP server) that is full with literally thousands of frustrated customers like me who bought this specific model from Compaq and continue to have problems. Many of them, like me, knew nothing about the internal workings of a computer. Some technically savvy people figured out that the problem was manufacturing-related and the company must be definitely aware of it. While some helpful people continued to post tips and ideas for others to try (I actually read a tip that I should put my laptop overnight in the refrigerator, which I did, and it did work for an hour or so during which time I downloaded a few critical files), there was not a single tech-support person from the company trying to help or even trying to ask follow-up questions to better understand the problem. The outcome: I now tell everyone that I know about the problem with HP and ask them not to ever bother buying a computer from HP. Of course, when I bought my new computer, there was no Compaq/HP computer on my shopping list. What a way to do business for any company? Your customers, who are supposed to help by word-of-mouth marketing, actually become your worst enemies.

So what are the negative consequences of mistreating and ignoring your customers:

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Inability to leverage your existing customers to buy more and to recommend your products to other likely buyers

Erosion of brand equity

Tendency of customers and likely customers to associate poor customer relationship management with bad products

Greater likelihood of abandoning the relationship as soon as an alternative is available (sometimes customers switch to even an inferior offering simply for the 'feel-good' factor)

Lack of information on customer profile, segmentation, and customer needs: information that can be very usefully applied to business and growth strategy

Lost opportunity to improve product because data on defective product is not collected

What are smart business leaders doing?
Take the example of Gary Loveman, the president and CEO of Harrah's Entertainment. The former Harvard professor, who taught service management, is applying the basic principles of customer care at the company. The results are there for all to see. Harrah's Entertainment is now one of the most successful companies in the gaming industry, even in a post-9/11 world. The secret: the company spends enormous amount of resources on knowing more about its customers and on learning what they want, then doing it, and finally going back to the customers to ask again what can they do better. A great CRM success story.
Apart from Harrah's Entertainment, many other companies like Cisco Systems, Brother International, Jostens, and Volvo are all recognizing the value of customer analytics and in developing a better understanding of their target customers, segmenting them, and doing what it takes to delight them (Related link: Customer relationship management). This approach should work for companies of all sizes. And if anybody ever tells you that customer service is a cost-center, you need to throw that person out of the company. In my work I have found that customer service is actually a great investment. If you pick any of the companies that do well, whether at creating shareholder value or making the Fortune list of most admired companies, they do two things really well: they treat their customers and employees right.

How to leverage your customers and likely customers?

First of all, reject the notion that customers are a cost center. Treat every interaction with your customers as an opportunity for strategic growth.
Hire some good customer service folks and train them to call your existing customers (particularly the ones that call very often and keep complaining, the ones that you must have considered dumping). Engage them in positive discussion and ask what can you do better. Remember, we Americans forgive anyone who is willing to improve and will actually also help on the way. On the other hand, we can be brutal when we get mistreated.
Use the data from customers effectively and that is where customer analytics is critical. Use it to find out product quality problems before they become more widespread, look for trends among your customer base, and find what you can do better to make them buy more and recommend you to their friends and family. The cost of acquiring a new customer is prohibitive for businesses of all sizes. You will always have some customers that have a high cost-to-serve, but these difficult customers are also a great resources to make you better. So use them for constructive goals, rather than dump them.

Questions, comments, feedback, and suggestions