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Customer Relationship Management:

To get it right, add customer insight

How can you put delight into a system?

A national association recently launched a study of how to become more customer-centric. It’s not that the association was losing members. In fact, it’s one of the strongest and least dysfunctional large association I’ve ever worked with.

My contact there mentioned that there was a disparity between member satisfaction rates and member renewal rates. The numbers made it seem plausible that some members were renewing because they felt they needed to -- not necessarily because existing products and services would otherwise compel them to renew.

Closing the gap between satisfaction rates and renewal rates presents an opportunity to find out how to get some members to love what you do. But how can you manage for that?

We’ve been talking in this series of articles about customer relationship management and perceived customer value. This time we’re going to review the basics and give you a couple of worksheets you can apply to your own association.

The great thing about CRM and perceived customer value is that they give you the tools to be in charge of your own growth and sustainability.

You do this by looking for new ways to exchange value with your members and prospects so they help you grow. If you delight prospects, they’ll join. If you delight members, they’ll probably stay and give you “lifetime customer value” like you haven’t seen before.

In the long run, any customer-centric strategy must create a more sustainable organization.

You can gather from what I just said that one key metric for determining how “customer centric” you are relates to what I called “customer delight”. Notice that I didn’t’ call it customer satisfaction.

Here’s where I start to take apart the notion that the problem we face is closing the gap between customer satisfaction and member retention.

The limits of customer satisfaction

Customer satisfaction is an important metric, but it has its limitations. In fact, it is entirely possible that a given organization’s customer satisfaction rate could be very high even as the organization was shrinking in size, market share and sustainability. The reason is simple: Customer satisfaction surveys usually poll customers, not prospects or ex-customers. And they certainly don’t usually poll customers of the competition.

Let’s examine how to fix this problem with customer satisfaction metrics.

Prospects choose to buy from or join an organization if that organization provides a better value over competing offerings. That’s how you grow your organization. But prospects may perceive you completely differently than your members. If you’ve been using IBM compatibles for years and you’re considering an Apple Macintosh, you have a completely different point of view on the product than a die-hard Mac fan.

Some associations may feel as though they don’t have “competition” per se, but they’re wrong. You’ve got to examine mindshare and wallet share – in short, are you providing enough of what delights prospects and members for the dollar?

Let’s look at how to delight prospects and members as you would if you had competition.

How do you do that?

Let’s review what we’ve covered so far and throw in a few more concepts for good measure. These concepts are:

• CRM – in which interactions and feedback create your business rules

• PCV – in which value creation becomes a science

• User group analysis – in which you expand your perspective on how your members create value in their lives

• Loyalty precursors – in which you discover the most overlooked steps in defining and measuring loyalty

Who are your customers?  What do they want?

Before we consider what it means to become customer-centric, we should explore how important it is. In fact, it’s more important today than ever.

First, keep in mind that your members judge you within a shifting context. The economy is changing, laws are changing, web sites are changing. More specifically, the tools, stresses and opportunities in a member’s career change over time.

And even more to the point, your existing products, services, member interactions and “brand” set an expectation for each of your members. As you become more member-centric, you’ll change those expectations. At first, you’ll delight your members with your changes. Over time, they’ll get used to what you’ve done and will look for your next moves.

You’re on a treadmill and you can’t get off.

Don’t fret.  This has always been the case to one extent or another. Organizations have always had in interest in improving products and services. It helps them create an evergreen market; it keeps competitors at bay; and it keeps staff busy.

The difference is that the driver of change is no longer the organization, it’s the customer. My colleague Paul Greenberg, the author of CRM at the Speed of Light, calls this phenomenon the “customer eco-system”. The customer is at the top of the food chain, and organizations have to become the “prey”.

The way I talk about it is perhaps more dramatic. When associations noticed a huge drop in revenues after the terrorist attacks in Washington DC and New York, they started blaming fear of terrorism for their problems. I propose that something even more frightening than terrorism is facing associations, and that thing is Google.

Why Google? Think of it this way: The two most important reasons that individual members join an association are usually because they can meet other folks with the same interests and because they can access specialized content that is otherwise hard to find. But with Google, members and prospects have a choice. You may think that what you can find on the Internet is no risk to you, but you’d be wrong.

The reason is that customers – your members – make choices based on value. They have to. They don’t have unlimited funds. So they have to get an appropriate level of quality for a given price.

Let’s look at that a moment. Assume we can come up with a measurement for quality. Let us say that a given member joined for your journal and the journal gets a quality score of 100 points. Let’s divide that by the cost of membership. What do you get?

OK, that’s the value score for your journal.

Now, let’s say that a member or a prospect goes to Google and gets similar information to what you have in your journal. It’s not as good, of course. Let’s suppose the quality is only half as good as your journal. Google then provides a quality score of 50 points.

Now, let’s divide by the cost. But the cost of using Google is zero. (It’s not surprise that a recent edition of Association Management magazine profiled several association executives and all but one stated that their favorite website was Google. Little did they know, however, that their favorite site is putting their value proposition at risk.)

By the same line of argument, you can show that social network programs like LinkedIn, of which I’m a member, can get some of the benefits of a membership organization. And because it’s free, LinkedIn provides good value.

Of course, I’m exaggerating to make a point. Your members probably won’t be able to get from the Internet alone what they can get from being a member. The risk of using Google is that it may provide irrelevant information, unqualified information, incoherent information – and most associations provide relevant, qualified and coherent information.

So your members really are in charge. They’re staying on top of what you’re doing in the shifting context of what they need.

And you’ve got to create a value score for what you do that can compete with Google. Don’t rest on your laurels, because you can bet that Google and other similar companies are working hard to create a web of free or cheap information that dramatically improves the quality of the content returned in searches.

So before we get into what it means to be customer centric, I hope I’ve relayed to you the urgency behind the quest to actually be customer-centric in the first place. You have no choice anymore. The customer-centric eco-system has changed everything.

Market segmentation

Let’s take out pencil and paper. I want you to write down three of your most important market segments. Next to each, list what they want from you, in order of importance. For each item you list, also guess what percent of your resources are allocated to provide that value.

The purpose of this exercise is not to be accurate, but to approximate your existing understanding of who your members are, what they want from you, and how you respond to what members want.

CRM principles

We’re now going to examine what it means to be customer-centric. You can’t do this anymore without talking about CRM. And if you’re smart, you’ll focus on the “R” in CRM – after all, you must establish a relationship before you can manage it!

First, create a relationship with a customer or prospect – in your case, the member or a prospect. Second, manage that relationship using processes and technologies that support the creation of value in that relationship.

CRM implementations often miss the boat on both counts. Many companies are just too product-centric to know how to establish a relationship with a customer. You’ve seen the Orick vacuum cleaner commercial that starts out with a shot of a vase of big, sumptuous red roses. A voice-over – the owner of the company – asks, “Do you want to know what women really want?” After which, we hear a vacuum cleaner motor as the roses get sucked out of the vase. “They want a really light, really powerful vacuum cleaner!”

I would venture to say that Mr. Orick is obsessed with his vacuum cleaner to the point he doesn’t realize that I regularly vacuum my own home, and I’m not a woman at all.

Some associations and for-profits are obsessed with software solutions to “member management” problems. At least it’s a step in the right direction. These software systems used to be called only “Association Management Systems”, which is a company-centric a term as you can get. But even Microsoft CRM, which is making some headway in the association market, must be substantially modified to actually make it customer-centric.

In fact, most organizations made mistakes as they deployed CRM solutions. First, they weren't sure what it was. Some thought that it had to do with better help desk training, e-mail newsletters and web site personalization. Others thought they didn't even need a particular CRM “solution,” that all they had to do was better motivate the troops and everything would magically improve.

Help desks and good web sites are two tactics that can certainly be part of a CRM solution. But a big part of CRM is setting and meeting expectations in ways that differentiate an organization. Help desks and web sites are only two critical "promise-keeping" business processes.

Improving how your association deals with members isn't just about being peppy with them. Paul Greenberg stresses that CRM is definitely not an attitude. "Systems improve business interactions with customers. To think you can improve customer relationships reliably and consistently with only an improved attitude is wrong. You need a program, an initiative, and that's CRM."

The four principles of CRM: How they help, how they fail

CRM is founded on four principles, first set out the firm of Peppers and Rogers in the early 1990s.

1. Identify

2. Differentiate

3. Interact

4. Customize

Let’s examine each in turn and then uncover what’s right and wrong about them.

First, you need to identify your customers. This means you should know where they are, and then how to name them.

Perhaps you’ll attract enough of them to you or to your site to capture at least some minimal information from them so you can identify them as prospects and customers. Ideally, you’ll learn whether they are going to be “best customers”, or “good customers” – and in the case of prospects, “almost customers” or “tire kickers”.

If you extend the concept of customer to every person or organization with which you exchange value, your customers can include your suppliers – even members of your own staff. Finally, consider that the cost of maintaining some members may be much higher than what they pay as dues. In the CRM world, you’d have the right to “fire” these members – that is, you’d ask them to leave, or increase their costs to the point where they do not continue their membership. That may sound brutal, and it is.

In the world of for-profits, firing customers can make sense. And in the case of non-profits, where every member counts, you should still know what costs are associated with keeping each member happy. If it costs more than you get from them, at least you’ll know you’ve got to steal from some other part of your revenues.

So identifying customers requires systems and semantics. If you use CRM principles, you can make prudent decisions about how to service your best members to create an incredible experience for them, while still providing a valued experience for members that would, in the for-profit world, be fired.

Next, you’ve got to differentiate your customers. If you thought identifying customers was hard, wait till you get into the fight about what to call each group. We’ll discuss various ways of differentiating them in a bit, but I think from our first exercise, we have an idea about how difficult it can be to agree on the semantics of customer segments. For a moment, let’s take a simple example. If we define customer to include suppliers, you might divide them up into time-critical suppliers, quality-critical suppliers, and non-critical suppliers.

Notice I named them according to an attribute that might matter to members. Some members want their journal now – that would be supplied by a time-critical supplier. Other members want a meaningful annual meeting – that would be supplied by one or more of your quality-critical suppliers. The point of this naming convention is that it emphasizes that you are orchestrating an entire value chain for your members. Players in that value chain are your customers. They want something from you, and you want something from them – on behalf of creating value for members.

So, a key part of the differentiation process is to name your customer segments in ways that relate to the value that your customers demand.

Let’s look now at the second I, interact. This may sound obvious, but it isn’t. Most businesses and associations still have that top-down manufacturing and marketing model: Build a product, price it, promote it, push it through the channel, and when the sale is done, we’re thankfully through with that messy sales process.

But interacting is completely different. First, you give members and other customers a chance to tell you what they want and how they want it. Next, you do your best to provide that, and communicate while you’re doing it. Finally, after you’ve provided something of identified value to members and customers, ask them what they thought. This is what Amazon does. Of course, they’re still selling things, but it’s not like Ford sold cars.

Finally, we come to customization.

Let’s imagine we’ve come up with a way of differentiating your members into groups. If you give them all the same products, services, content and interactions, you’ll be diluting the value you can give to them. If Peter wants a plan for customer-centricity from me and Scott wants technology recommendations from me, why would I belabor technology points with Stan and annoy David with motivational management lessons? And yet most consultants, businesses and associations have one single message for each customer group.

That’s a shame, because differentiating your customers into groups gives you a chance to offer each group more of what it wants and less of what it doesn’t. If you can do that cheaply, then you’ve created an improved perception of your value. Remember, you’re offering value in exchange for value – so with good differentiation, you can either charge more and get the same value score you had in the past, or you can keep your prices the same and create customer delight. And that can translate into loyalty.

We’re getting close, but we’re not there yet.

Stay tuned for how more worksheets and proof that perceived customer value is the missing piece for many organizations doing CRM.

CRM Worksheets - Status by Principle

The purpose of this exercise is not to be complete, but to get the gist of your current understanding of how CRM-ready you currently are.

Paul K. Ward is a CRM, Branding and Customer Value Consultant www.Pkward.com.  Paul regularly meets with top Washington-area executives to discuss business best practices, and has recently inaugurated an advisory group for the American Society of Association Executives to assist in creating ASAE member value. He writes for ASAE Global Link, ASAE Association Management and Canada's The Canadian Association.

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