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  Q1 2007 - Volume 1, Issue:123
  Think Customer

A company that thinks of its customers and their needs, is the one that is likely to succeed

Just look at the sizeable way the Customer Relationship Management (CRM) application market is growing and you will understand why companies in mature markets across the globe consider it imperative to spend money in managing customers.

CRM is the buzz today as companies realize it no longer pays to be indifferent to customers. CRM solutions are helping companies gain better insight into the behavior of their customers and are increasing their profits through improved customer relations.

So significant is the demand for CRM solutions that Salesforce.com, a company that provides on-demand CRM solutions is among the fastest growing software company in the world. Launched in 2000, Salesforce.com now has over half-million subscribers and approximately 25,000 customers.

Companies spent an estimated $35 billion in 2005 on CRM solutions according to Worldwide and US CRM Services, 2006-2010, Forecast and Analysis. AMR Research, an independent company of experts predict the market for CRM products to reach $18 billion in 2010. In India too, the CRM market is growing at a fast pace. IDC estimates the 2005 CRM India market at $74 million and expects it to grow at a CAGR of 22.5 % to reach over $200 million by 2010.

Should Indian companies invest more to know their customers better? The answer is that it is not optional anymore. Consumers have changed in India and companies need to change too. It is no longer an India, where competition was once limited and customers had little choice. Indian companies need to understand their customers. Doing this will help them modify their business operations to ensure excellent customer service.

When you think customer, ask these questions

  What am I selling to my customers?

Am I selling them innovation (iPod), or a lifestyle statement (Motorola's Pink Razr mobile)? Am I offering them convenience (Amazon.com) or cost advantage (Wal-Mart)? Understand very clearly, the statement you are trying to make to your customer.

  Who are my customers?

The better you understand this question; the better is the chance of them buying your product. If for example you are selling cereal for children, will you target the child, who will then demand for it from their parent? Alternatively, will you sell it to the mother as a nutritious meal for the child?

Your selling, packaging and marketing strategy are to be appropriately tuned to capture the attention of the real customer, regardless of who is buying the product. You will understand this better, if as a parent, you see your teenager come home with goodies that you pay for. There is an important lesson here for an entrepreneur coming up with the business plan - UNDERSTAND YOUR CUSTOMER AND THEIR HOT BUTTONS.

Other questions to be asked are: How do I sell my product? Why should the customer buy it and why from me? What is the value of a long-term customer relationship? How to make my customer my brand evangelist and sales person? How do I sell profitably?

Customer is not a King, but an Emperor

Step aside customer satisfaction and delight. The new buzz in customer loyalty the world over is Net Promoter Score (NPS). As the name suggests, NPS measures the difference between the percentage of customers who are 'promoters' (loyal enthusiasts who keep buying from a company and then urge their friends to do the same) and 'detractors' (unhappy customers trapped in a bad relationship).

While a strong correlation between NPS and a company's revenue growth is evident, companies oblivious to this, continue to focus on their products, rather than their customers. In their singular focus on product life cycle, companies often miss tracking the market and customer life cycle. The thinking of every entrepreneur needs to shift from maximizing the company's profit from each transaction to maximizing profit from each relationship.

Sell Solutions, not products

Product-driven companies push their offerings to every customer in the database, and end up failing to notice customer differences. Unaware of the specific needs of customers, they squander the opportunity to cross-sell or up-sell.

Marketing guru Philip Kotler says that product-centric companies (with heavy investment in assets) think in the following sequence: Assets > Inputs > Offerings > Channels > Customers. By doing so, they diminish the success rate of a new or improved product, as unless a product is priced, distributed, advertised and sold in a manner that customer prefer, the chance of it succeeding is minimal.

In contrast, a customer-oriented company follows a sense-and-respond approach that acts as a critical differentiator: Customers > Channels > Offerings > Inputs > Assets. Putting the customer right at the beginning places the company in a better position to develop appropriate channels, offerings, inputs and assets.

A customer life cycle analysis enables better product positioning, delivers maximized value and offers substantial benefits that include:

  • Increased Customer Lifetime Value (CLV is the net present value of the stream of future profits expected over the customer's lifetime purchases)
  • Better mining of customers
  • Reduced customer acquisition cost
  • Greater profits due to enhanced customer references.

Building a strong customer bond

Companies that are keen to develop a strong bonding with their customers need to follow certain basic rules such as:

  • Hiring the right people, not just those with right skills, but also the right attitude.
  • Following an inverted triangle organization chart: customers on top, below front-line employees who interact with customers and below that middle and top management.
  • Ensuring cross-departmental participation in planning and managing customers
  • Understanding the 'voice of the customer' to also capture their unstated needs
  • Recognizing and rewarding employees who are customer focused.

Competitive advantage is a company's ability to perform in one or more ways that competitors cannot or will not match. With the dominance of digital technologies (especially Internet), customers expect companies to go beyond delighting them. Unless the perceived value of the product is attractive, the customer will not press the 'Enter' button.

Customer is not a King, but an Emperor. Think customer and Long lives the Company.

- Vani Kola

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