The Customer-driven Business Model
Think of the Customer-driven business model as a loyalty machine. Get your business running this way, get your act right, and Customer loyalty is the natural end result. When you look at the machine, you’ll find it has principal areas.
The top area is about the acquisition of new business.
The left hand side is about looking after Customers and fulfilling all their needs.
The central core – I think of it as the engine of the Customer loyalty machine – is Customer Superformance.
And then to the right, issues to with complaint handling and resolution.
Effectively, now you have a step-by-step guide to the process of CRM. A guide to the building and managing of real Customer loyalty: a to becoming a Customer-driven business.
The 17 key issues for Customer loyalty
This is a model for a business devoted to CRM and the business of loyalty. And you can see the additional benefits of this devotion around the sides of the model: lower costs, improved brand performance and increased business efficiency. This is a veritable treasure chest of untapped potential for your business. Look at the issues which rain (sideways rain!) on improved brand performance. On the other side, more rain! This time showering improvements to costs and meanwhile, every issue leads to eventual increased business efficiencies.
1. High focus marketing is the process of focusing on those Customers in your prospective market which have the highest potential of loyalty for you. These can be modelled out from analysis of your Customer database. The strategic concept here is to secure dominant market share of those Customers who `lock’ with your core corporate and brand values – those things which differentiate you from your competition. The essential you.
2. In turn, naturally, you must then embed those core values into your sales process. This optimises the `fit’ between the way you attract Customers and what they want – or are buying – from you.
3. Once you get that fit, there is a dramatic improvement in the quality of business which you gain. Effectively, you are now taking the cream from the marketplace and leaving the rest for your competitors to fight over.
Is your plug in?
Most businesses are running the bath with the plug out. They have the taps of sales and marketing full on. They are scrabbling round in a frenzied search for new Clients. Meanwhile, because salespeople are `so busy’, the easiest new business to get is being missed. Customers of all grades are flooding out down the plug. Success Story: One European insurance company just refocused on existing Customers and increasing loyalty :: Business shot up 650% (exit figure) in six months.
4. In turn, this has two effects which will be of enormous benefit for your business: firstly, higher loyalty means lower Customer attrition: secondly, this will be a major factor in `putting the plug in’. In consequence, you will cut back radically on the very high costs of hunting for new business from totally `cold’ prospects.
5. Next, from the model, you can see the natural follow-on is that Customer lifetime values are enhanced. If you haven’t already started calculating and using lifetime values I really do encourage you to do so. The use of lifetime values seems to be almost like turning on a light to so many of those who remain unconvinced by the ethical, moral, cultural or philosophical rationales for rebuilding their business around the Customer.
6. Once you have defined and calculated your measures of lifetime values, you can start the process of managing them and beginning to appreciate the full benefits of what can be achieved. There are two significant uplifts which you will get from managing Customer lifetime values upwards. Firstly, you will find that the conversion to sale ratios are improved by about double. You can imagine the effect this has on sales costs. They tumble! Secondly, you will find that, simply being aware of, and managing, the process of Customer lifetime values brings the in-built benefit of extending them.
Now that the light is turned on and you can really see what’s what, the argument for delivering Customer superformance – actually exceeding Customer expectations with every transaction and interaction – begins to make supreme sense. It is only when you look at the financial dynamics of lifetime values that a lot of the things you must do for loyalty building become affordable. Trying to run a business devoted to Customer loyalty but costing it against single transactions doesn’t work. Make the shift and the debate about whether Customers deserve, or are worth it, just falls away.
7. Now the earnest business of prolonging Customer `life’ by keeping them deliriously, constantly and actively satisfied with your business, the service and values you deliver and the products which you make or distribute, should become a permanent quest which will preoccupy and obsess all staff. The obsession applies whether they are Customer facing or not. Customer superformance is a benign and wonderful concept. It must take place at every opportunity and in every area. It will bring nothing but prosperity, growth and profit to your business.
8. You are about to kick start your business into the next phase of its development in becoming Customer-driven. Those improved conversion ratios pay off with much higher incidences of cross and up-selling to your existing Customers – the easiest, least expensive, sales your business can achieve. It is quite common for the movement of activity and resource away from `cold’ conquest or prospecting to focus on existing Customers will improve return on investment by five to 15 times – an average of a tenfold improvement.
9. With the simultaneous effect of Customer superformance and our improved conversion rates yielding more cross- and up-selling, we find the all significant share of Customer spend increases rapidly. This is a great loyalty builder and a great way of measuring the success of your loyalty work.
10. Now you will start to see the loyalty factor climbing to levels you would only ever have dreamed of before – if you had been ready or able to measure it.
11. As the natural result, you have a vastly improved dialogue with Customers and this will begin returning benefits to you. They value you because you have amply demonstrated that you care about and value them. The word `natural’ here is interesting because if you look at the model you will see how naturally these steps fit together. Given that you perform and listen and deliver, everything fits holistically, harmoniously into a natural order. It is this natural quality of the process that gives it such elegance, that makes it as right for you as it is for your Customers.
12. With the dialogue between you and your Customers enabling discussion, debate and free exchanges about their needs and feelings and encouraging honest, frank feedback regarding your efforts for them, you now arrive at a virtuous circle of product and service enhancement. With openness abounding, debate and discussion taking place, you can `sit’ with your Customers and discuss the future. You can discuss what you are getting right and wrong, what they want and don’t want, what their views and feelings are. This will yield a wealth of new product and process development ideas and activities. In turn you can ask Customers for opinion and counsel. They feel involved, heard and recognised. And you can discuss all your new ideas with them.
13. Turning to the model again, observe what is happening to the right of the Customer Superformance panel. Once you turn the spotlight onto amazing your Customers at every opportunity, exceeding their perception of service and value, you will find complaints plummet to all time lows. This is good news and bad news! On the one hand, it is obviously good news, Customers are happy with you and what you are doing for them. On the other hand, it is bad news because complaints are valuable opportunities to build Customer loyalty.
14. As you manage complaint figures down, notice how this contributes to a further reduction in your Customer loss rate (on the left hand side towards the top of the chart).
15. Handling complaints efficiently and effectively, of course, gives you valuable experience in how to react to unhappy Customers. The more you learn, the faster you act, the better you should become at complaint resolution.
16. All of this, supported by the radically improving standards in Customer superformance, brings you another naturally flowing benefit. Moving back to the lower left panels of the chart, we see how, once we have started genuinely to work the loyalty spell, we can actually – if gently and sensitively – ask the Customer to help us. We can ask them to provide us with referrals.
The power of word of mouth
A published research about the UK motor insurance market discovered that, based on a sample of 65,000 motorists, `word of mouth’ provided their business with more name awareness than television, press and direct mail put together. In fact, `word of mouth’ tops the list at a tad more than 27 per cent. Let this tell you something about what your Customers will do for you – if you get it right!
They say that a happy Customer tells three or four people. And an unhappy Customer thirteen.
Which is probably why it’s unlucky!
17. Then, finally, we gain the full benefit of what I described earlier as the cheapest, most effective advertising you can buy – word of mouth. These are the unsolicited testimonials with which Customers reward those with whom they are wholly content, those who get it right, leaving them actively satisfied. So supremely happy they want to tell the world about you.
Before we finish this piece on the Customer-driven business model, let me ask you to notice one or two more things – these are positively magic qualities for your business and perhaps the secret of the success of the whole concept of CRM, managing loyalty and a Customer-driven business.
At the beginning of this section I listed the additional outcomes as: improved brand performance; lower costs; and increased business efficiency. I’d like you to just look at the number of arrows which point to increased brand efficiency and equally the number which point to lower costs. And for that matter, while you’re counting arrows, it wouldn’t do any harm to note that there are quite a few pointing to the panel `less need for new Customers’! Also note that everything in the chart move towards increased business efficiency. That’s why I describe this process as benign, virtuous and holistic. It is as near as you will get to organic. It enhances the lives of all it touches. That is why it works. It simply returns the dynamics of the business to `reset’.