From CRM to CMR

Howard Wright, CEO, Insight2Foresight Ltd
Mail & Express Review August 2009 CRM assumes a supplier centric view of customer relationships

We have grown up over the last 10 years with the concept of Customer Relationship Management (CRM) as a core competence of most of the larger companies. This concept is particularly appropriate when the balance of power in the customer/supplier relationship is weighted towards the supplier.

The postal industry has depended on this approach to the customer/supplier relationship as an engine of growth for the direct mail business with much emphasis placed on customer lists, address management, business intelligence, brand management and advertising.

However, this model is changing rapidly as the whole social nature of the Internet shifts the balance of power from supplier to customer.

The global market for CRM had been predicted to grow from $8.9bn in 2008 to over $13.3bn in 2012. However, this assumes that the traditional view of CRM continues and the model does not become broken over that period.

The balance of power is changing

Typical CRM systems deal with four key areas:

• Front office operations – Direct interaction with customers.
• Back office operations – Operations such as billing, maintenance, planning, marketing, advertising, finance, and manufacturing.
• Business-to-Business relationships – Interaction with other companies and partners, such as suppliers/vendors and retail outlets/distributors, industry networks.
• Analysis – The analysis of data in order to plan target marketing campaigns, conceive business strategies, and judge the success of CRM activities.

This set of tools and services concentrate on the outbound management of the relationship with the customer whether that is a business customer or a consumer.

The question is what happens when this relationship flips and the customer gains control of the relationship. In this new environment I contend that a new model needs to be built:  that of Customer Managed Relationships (CMR).

We are starting to see evidence of this particularly in the consumer space as peer recommendation and feedback is one of the primary ways consumers are making buying decisions and choosing suppliers.

The old model, of trying to manage the relationship where the supplier has little or no control of the conversations, feedback loops and viral nature of some of these new paradigms, is set to be challenged in the next few years. The concept of a company managing its customer relationships is one we may see under threat as Social Networks and other such Web phenomenon change the landscape of the customer supplier relationship.

The big challenge is going to be ‘how to influence the influencers’

With direct customer feedback available to prospective and current customers the relationship can change almost on a day-by-day basis and a number of companies have found that their reputation is no longer in their control.

Sites such as eBay and Amazon pioneered the concept of direct customer feedback as a mechanism for influencing the customer relationship. Other companies as well as a range of independent websites and services are adopting this technique. Recommendations can now be obtained for schools, doctors, car dealerships, consumer goods suppliers right through to personal recommendations for individuals that are impacting recruitment and advancement in companies.

The focus is shifting from ‘managing brand’ to ‘influencing reputation’

Customer and particularly consumer behaviour has proved to be very unpredictable as has seen in the current global economic crisis where customers have ceased spending, stopped travelling and started saving on a scale which was not predicted by governments or industry experts. The viral nature of these behavioural changes has surprised many and has introduced uncertainty in the relationship between the customer and the supplier. Recommendations can be harmful as well as very positive and can have a major effect on sales and service.

We are moving from ‘business intelligence’ to ‘customer intelligence’

The global nature of communication and the holistic nature of social networks can also have an impact in that reputations in the US can be affected by actions in China or Europe. No longer can companies manage on a country-by-country basis. They need to see their reputation as a global asset (or liability) rather than something that just happens.

Embracing the concept of Customer Managed Relationships

It will not be easy for companies to shift their mindset to the idea of Customer Managed Relationships (CMR). The loss of control of the relationship is going to be a hard pill to swallow and there will be no quick fix.

Many companies have made significant investments in CRM systems and have built their business processes around these platforms so change is not going to be rapid. We are talking evolution rather than revolution.

But companies that embrace this new concept and start to recognise the change in the landscape early are going to create a competitive advantage.

1. Start to understand your customers better:

• How many of them use social networks:
• A simple search by company name on Facebook, Linkedin etc. will give you an idea of the potential scale of the issue.
• Have their buying habits changed:
• Are they looking for different characteristics when doing business – value, speed of delivery, information, recommendation etc?
• Where do they go for advice when looking to purchase goods or services:
• Who are the influencers, who do they look to for advice, how do they buy things in their personal lives? This latter point can have a surprising influence on business purchases.

2. Understand what customers think of your brand and/or your company:

• What is being said about your company in the blogosphere:
• Again simple searches on sites such as Technocrati can provide insight into what is being talked about on blogs around the world.
• What are employees saying about your company on sites such as MySpace and Twitter:
• Employees and ex employees tend to be very vocal, honest and free with their views and experiences on these sites. Although very naive on their part it can give you an insight into how your company is perceived.
• How is your brand portrayed in the media:
• Services such as Lexus Nexus provide an aggregated search capability on the world’s media. Other sites such as Yahoo that provide a free alert service can also give you insight into your brand perception.

3. Start to build a global reputation influencing strategy:

• Develop a global reputation influencing strategy:
• Consider ways of influencing your reputation through Social Networks, Blogs and the media. There are consultancy companies who are starting to specialise in this area so consider getting external help.
• Use the power of Social Networks within your employee and customer base to start the reputation influencing strategy:
• Ensure employees understand the impact that social networks can have on your reputation. Although it might be funny at the time they post something negative it can have lasting impact on them as individuals as well as the company.
• Consider employing bloggers to start to build a new reputation landscape for the company:
• Many companies are now using full time bloggers to monitor not only the blogosphere but also to influence the influencers through active management of blogs.

Other building blocks

If we go back to the traditional elements of CRM it can be seen that if these building blocks remain then they will have to shift focus:

• Front Office Systems
• need to evolve and transform into reputation management systems.
• Back Office Systems
• need to become increasingly efficient and flexible to meet the changing demands of the customer.
• Business to Business Relationship management
• needs to transform to respond to the power shifting further down the value chain towards the end customer.
• Analysis
• becomes increasingly important, as customer behaviour and buying patterns need to be reflected in the supply side provisioning of goods and services.

Defining CMR

I would suggest the following definition, very much as work in progress:

“Customer Managed Relationships (CMR) is how customers and contacts want to do business with an organisation. Buying of goods and services is based on peer recommendations and feedback from actual or perceived customer experience. Customers track interactions with a company and take cognisance of the global reputation of an organisation and use this in their decision making process.” (Howard Wright 2009)

Identifying that the landscape is about to change is the secret to understanding how to respond. Start to think now about the impact this shift to CMR could have on your business and ‘be prepared’, as Baden Powell stipulated to the scouting movement in 1937.

Impact on the postal industry

The postal industry is seeing a global decline in advertising mail driven partly by the global economic downturn – in the US advertising mail is down over 20% year on year. However, this could be masking the transformational impact of consumer power with companies shifting their marketing dollars to new channels and new ways of engaging with their evolving customer base.

The challenge for the postal industry is to understand how it can help in the CMR world by pre-empting the change. This calls for the development of new products and services to help companies engage with the influencers; and finding ways to help companies manage their reputations rather than just their brands.