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Business Strategy Series

Creating competitive edge through improved customer relationship management

Tajinder Pal Singh Toor,

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To cite this document: Tajinder Pal Singh Toor, (2008) "Creating competitive edge through improved customer relationship management", Business Strategy Series, Vol. 10 Issue: 1, pp.55-60, https://doi.org/10.1108/17515630910937797

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Creating competitive edge through improved customer relationship management

Tajinder Pal Singh Toor

Introduction

This article describes some of the Best Practices for Improved Customer Relationship Management in order to gain competitive edge and market dominance. According to the 2008 Executive Survey by Gartner and Forbes.com, retaining and enhancing relationships with current customers is the number one business issue, followed by attracting new

• customers. There is an increased need to constantly reengineer business strategies that

improve the customer experience and increase profitability for the company. Decision makers should investigate the attractiveness and suitability of sales solutions targeted towards improved customer relationship in order to advance revenue growth and margin expansion. This paper lists some key factors/practices for Improved Customer Relationship

• Management. The factors/practices are listed below:

(1) Reach more Customers and Markets. (2) Keep Scores and Feedbacks. (3) Building Partnerships. (4) The Importance of Customer Profitability. (5) Manage Customer Experience. (6) Make Customers Insiders.

Reach more customers and markets

Success story: Chicago Spa – an absolute hit with the men folk When Tiffani Kim noticed female customers of Tiffani Kim Institute Medical Spa bringing in husbands and boyfriends, she started reaching out to the male market. After renaming men’s manicure/pedicure treatments ‘‘sports buffs,’’ instituting couples’ nights to encourage women to introduce men to the Chicago spa and otherwise exploring the new demographic, Kim, 47, reports that a significant portion of the 80-person company’s revenue now comes from men. ‘‘It will never be like the women’s spa business,’’ Kim says. ‘‘But it has gotten to be a good 30 percent of the business.’’ Some key points:

B Do no harm. ‘‘Don’t expand in such a way that it’s going to get you hurt,’’ says Clarkson

University marketing professor Larry Compeau. Appealing to a new demography requires changing something about your offering. Before doing it, make sure the changes

DOI 10.1108/17515630910937797

• VOL. 10 NO. 1 2009, pp. 55-60, Q Emerald Group Publishing Limited, ISSN 1751-5637 j BUSINESS STRATEGY SERIES j PAGE 55

Tajinder Pal Singh Toor is a Project Management Professional Consultant/ Advisory System Analyst based at IBM, Merrillville, Indiana, USA. Downloaded by Northumbria University Library At 23:35 01 November 2018 (PT)

will not alienate the customers who got you where you are. Retail businesses should be especially aware of how a new group of patrons can change the experience for existing

• customers. Kim clearly had to make sure that having increasing numbers of men in her

spa did not turn it into a boys’ club.

B Look before you leap. ‘‘Do your homework first,’’ Compeau urges. ‘‘Make sure the new

demographic market values your product.’’ Your market research could consist of hiring a research company, talking to potential customers in the demographic group or, as Kim did, just paying attention to what goes on at the front desk.

B Go slowly. Kim modified her offerings incrementally over a period of years to make sure

the effort and risk were worth doing more. That’s the way to go, according to Compeau. ‘‘I’d advise changing as little as possible at the outset to see how the market responds.’’ The last things to change should be the hardest to undo. And you do not want the experiment to be irreversible.

B Consider Multi-branding. Its what Toyota does with Lexus and what countless other

corporations do with their own brands. Entrepreneurs can reach new demographics without alienating old ones by giving new offerings different identities. It can be as simple as a restaurant using the same kitchen to serve two dining rooms, each with its own entrance, signage, pricing and demographic market.

B Look at everything connected with your business and its value proposition to see how it

might be modified to enhance its appeal to a different demography. While it’s easy and sensible to do as Kim did and change little more than the label affixed to new offerings, you might need to do more. Look at your: pricing; associated services; promotional techniques; and distribution methods. For example: Everyone knows Toyota makes Lexus, but you cannot go into a Toyota dealer and buy a Lexus. The products have completely separate distribution systems, which helps keep them separate in the minds

• f completely different demographics. For example: Wal-Mart has seriously embarked on

a series of initiatives to drive two key ideas – sustainability and relevance. ‘‘Not only is Wal-Mart going upscale, but Wal-Mart is going green‘‘.

Keep scores and feedbacks

Key fact: ‘‘Feedback’’ is the essence of an organization’s success Organizations are increasingly dependent on accurate feedback in all areas of operation, from marketing and CRM to employee management and training. Feedback management has become a vital part of every company’s efforts to increase efficiency, achieve continual and ongoing improvement and ensure customer satisfaction leading ultimately to a more successful business. Traditional methods no longer meet the requirements of collecting, analyzing and managing feedback from all relevant players. A new approach is required, with a new range of sophisticated yet user-friendly tools. Advanced feedback solutions help companies Some key points:

B Prioritize action through real-time analytics. B Increase enterprise knowledge and focus through push reports. B Increase response rates through multi-channel delivery (web, phone, paper). B Optimize channel selection to minimize feedback process expense. B Optimize the number of survey responses. B Save at-risk customers before they are lost. B Save time through easy-to-use survey creation, deployment and management features. B Reduce survey deployment time through easy-to-use hosted solutions. PAGE 56jBUSINESS STRATEGY SERIESj VOL. 10 NO. 1 2009

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Building partnerships

Key fact: ‘‘Joint-venturing’’ – a stepping stone to unanimous growth Why partner with others? Meaningful partnerships are the foundation for success. Partnership is what enables many companies to make continuous improvements. By sharing with others, you can direct your resources and capabilities to projects you consider most important. Businesses increasingly need to develop and manage complex ecologies or organizations around themselves so as to succeed. The selection of strategic partners with whom to collaborate is now becoming a life or death issue for most firms. Barriers between companies, which used to be solid and absolute, are now permeable. Iconoclasm and creativity are now the keys to success. For generations companies built moats between themselves and their competitors. Today the most successful companies build bridges. And that is only the beginning. Growing role of partnerships in the new economy Corporate leaders must adopt, practice, and orchestrate what appears to be conflicting policies, such as joint-venturing with competitors. In today’s new world, the competitive pressure has been intensifying, it is becoming harder to achieve leadership and stay on top, and, thus, competitor in one market may establish alliances in another. Acquisitions of and mergers with competitors have also become a common practice. ‘‘More and more, those who can examine the code, challenge it, and rewrite it for success in their companies, fields, and industries will be the leaders and role models.’’ Strategic alliances Strategic alliances enable business to gain competitive advantage through access to a partner’s resources, including markets, technologies, capital and people. Teaming upwithother addscomplementaryresourcesandcapabilities,enabling participants togrowandexpandmorequicklyandefficientlyisbeneficialforfastgrowingeconomies.Inthe process, they save time and boost productivity by not having to develop their own, from

• scratch. They are thus freed to concentrate on innovation and their core business.

Joint ventures Joint ventures involve sharing the risks and rewards in an enterprise or project co-owned and operated for mutual benefit by two or more business partners. There are good business and accounting reasons to create joint venture with a company that has complementary resources, skills or assets, such as distribution channels, technology, or finance. Business Process Outsourcing (BPO) Although the quest for cost savings inspired initial forays into offshore outsourcing, companies are now using offshore delivery to achieve significant improvements in business performancetransforming outsourcing from a tactical and technical point solution to a long-term business strategy for creating and defending competitive advantage. The decision makers are looking to leverage global sourcing to gain long-term process optimization, business-oriented measurements, and enhanced control over ITassets and activities. Extended enterprise: virtual integration Through virtual integration, the walls between enterprises crumble. Companies stop being self-contained business units that produce products or services, and become integral elements in a larger system. In the new world of virtual integration, no matter who signs the check, all the people are working together for a common cause. Vertical integration performs, virtual integration innovates.

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Customer partnership ‘‘Customer partnership is a shared journey to create a future for both parties that is better than that either could have developed alone.’’ The customer is the foundation of your

• rganization’s success.

Helps your organization to maintain the focus you need to make good decisions and harness the power and commitment you need to weather volatile times. Commitment to long-term relationships that create synergies of knowledge, security, and adaptability for both parties

The importance of customer profitability

Key fact: profitability requires comprehensive review of the business relationships with Customer To support vital resources, businesses spend a significant amount of time and effort maintaining customer satisfaction. Within the automotive supplier sector, many, of these relationships have been strained by the incessant need for annual cost reductions. As companies continue to scramble to react to this pressure, the fundamental economic issue becomes whether or not there is room in the supply chain for profitability and return on investment. The profit dilemma The most significant issue is whether the suppliers feel as though they have a reasonable shot at making money in this sector. Many suppliers have had to face the possibility that a valued customer is not generating revenues equivalent to the resources required to provide the best possible product. At some point, every supplier faces the following question: Does the revenue from existing customer ‘‘X’’ fall short of the costs and investment needed to provide continued exceptional service? Determining profitability – considering example of automotive industry To properly determine the accuracy of any cost/profit report, the management team should conduct a thorough assessment of it. Verifying that bills of material and routings have been updated to reflect current production and ensuring that all direct costs are accumulated is just the first step. Given the growth in overhead expenses relative to direct costs, evaluating whether burden is allocated consistently with what drives these costs is paramount. Without this rigorous periodic evaluation of direct costs and overhead, a supplier can be short-sighted in its evaluation of where it is making or losing money. Generally (though not always), the findings of a thoroughly vetted report will be relatively consistent with the owner’s intuitive sense. To the extent there are inconsistencies, a re-evaluation of the assumptions is necessitated. An accurate cost report will quantify and weigh all costs associated with doing business with a particular customer, enabling a true evaluation of whether a further investment of resources is justified. Developing alternatives If a comprehensive review of the business relationship reveals that a further investment in the customer is no longer profitable, what can be done? While terminating the relationship is an

• ption, it is important to consider the full effect that this action will have on other customer
• relationships. Would it be more beneficial to reduce the costs associated with serving the

customer in question? What alternatives exist? Eliminate non-valued costs and/or identify savings that do not impact the end customer. There are numerous instances where suppliers have improved their profitability by reducing

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material content or by substituting or eliminating packaging requirements resulting in no appreciable impact to reliability, safety or quality. Source components or tooling to Low Cost Countries (LCCs). Most suppliers are at least considering whether an LCC strategy will benefit them in the short run. Many suppliers have recognized this possibility for years and have embraced this change in their business

• model. While the cost savings appear enticing, a supplier must compare the existing costs
• f producing domestically with the full costs of an LCC product, including additional

non-production costs to ensure the savings are not illusory.

Manage customer’s experience

Incident example: my dining experience at the ‘‘Palm Desert Marriott’’ The Palm Desert Marriott is a beautiful resort near Palm Springs, California. This past March, I was at the resort to speak to the American Hardware Manufacturing Association. The night before my breakfast presentation, I dined in one of the resort’s fine restaurants, the Tuscany. While the food and ambiance were very good, the standout of my dining experience was my wait person. She was prompt, attentive, and pleasant. But what I remember most happened at the end of the meal. ‘‘Thank you for dining with us’’, she said as she shook my hand. Each year, because of my business travel and love of fine food, I eat at least 300 meals outside my home. And yet, this was the first time anyone had thanked me and shaken my hand! While such a move on the part of a restaurant employee might strike most customers as odd, this wait person extended her hand in a manner that I found to be classy and natural. Then she added, ‘‘And don’t miss the comet, Halle Bopp, tonight – the sky is especially

• clear. Also at 7 p.m., you’ll want to watch for the lunar eclipse.’’

In those two closing gestures, a handshake and a suggestion to view the night sky, my wait person added immensely to my enjoyment of the evening. In fact, the real treat of my dining experience had nothing to do with northern Italian cuisine! It was about courtesy and

• astronomy. She managed my dining experience so that it was particularly enjoyable,

personal, and memorable. Some key points:

B No matter what business you are in, it is critical that you manage your customers’

• experience. Customer experience is a broader canvas for the service artist to paint on. It

is those seemingly little touches and comments – that often have nothing to do with your specific business – that will make your customers remember doing business with you as personal and enjoyable

B Your competitors are managing product or service delivery. You can leapfrog them all by

focusing on managing the customer’s total experience.

Make customers insiders

Incident example: when I felt like an absolute outsider I was seated in 3B of the first-class cabin of the slowly taxiing flight 675. The door was open to the cockpit, where the captain and first officer were pointing out to two flight attendants at something outside, to the right of the plane. One of the flight attendants came back to the first row to share her findings with some friends who were on board. She pointed out the window toward a hangar, and soon her friends joined her in fascinated attention. The rest of us in the first-class cabin were at least mildly curious about what the crew and a few favored flyers were observing. And we felt like outsiders. Since we were not part of the

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‘‘inner circle’’, we had to just sit there and wonder what interesting thing there was to see. The crew was too preoccupied to worry about such customer concerns. Customers want to be treated like insiders, not outsiders. They want to feel that the flight crew is interested in letting them in on information that affects their travel plans, allays their anxieties, and enhances their enjoyment. Some key points:

B Today’s leading-edge companies make their customers insiders. FedEx, for example, has

a web site that receives 108,000 hits every day. That is because their site allows customers to track their own packages. You cannot get much more ‘‘insider’’ than that!’’

B What are you doing to make your customers feel like insiders?

About the author

Tajinder Pal Singh Toor, PMP, PMI-SP has more than eight years of IT industry experience encompassing a wide range of skill set, roles, and industry verticals. He has experience in leading and managing complex projects. He has handled multiple roles – Project Management Professional, Advisory/Senior Quality Consultant, Lead Process Reviewer, Advisory IBM Audit etc. He acts as Expert Reviewer for Business Process Management Journal (BPMJ) and is a member of Emerald Literati Network. Tajinder Pal Singh Toor can be contacted at: Toor.tajinder@yahoo.com

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