Insight




Intriguing Perspective: Customer Relationship Management (CRM) System is Overvalued – Part I

A system will not get you anywhere near an affectionate service you could be providing.

In most cases, many companies are trapped into the comfort of having CRM in place that they overlook deeper insights on their customers beyond the data provided by CRM. This Part I piece is written to intrigue your perspective on why CRM system is overvalued and what benefit we will gain through making our customers loyal instead of satisfied by putting more attention to providing emotional value.

Having CRM system ≠ customer-focused

Many executives believe their companies are client-focused because they have a customer relationship management (CRM) system in place and know a lot about what their customers buy. You may feel that having gigabytes of data is vital to understanding your customers, adding the fact that data is easy to collect and analyze. However, when you use CRM systems to target your marketing efforts or gather customer information, you are changing the way your company serves consumers. You are replacing potential personal connections with spreadsheets, mailings and sterile shopping.

“There is a reason why Gordon Ramsay hates the combination of frozen-food and microwave. It convince us that it is helping the kitchen running, but it makes the cooks neglecting their job and destroys the quality of what dining-service is.”

Nothing is worse than having a heated food, not only it doesn’t have the same quality as fresh food, but the way it is being processed only by a microwave is something that is clearly not qualified on a restaurant level (what’s the use of having cooks, then?). It is the same case as using CRM, while it makes things easier in collecting the customers’ data, the content that you got from the software is different if you meet them individually or in small groups. By asking them what’s on their minds, you can build a relationship that can’t be acquired by using a software. Initially, most of your profitability will come from a loyal, emotionally connected customer base.

How emotional value rises above functional value

The real value that we should be striving for as a company is the emotional value that we need to have with the customers. To create emotional value for the customer, think “laterally”. For example, we can start by giving extra service for them without being asked. It requires creativity, and because of that, the more we know makes them satisfied by our service and the more we engage in personal understanding and commitment to the customer, the more likely we will gain their loyalty.

“A satisfied customer is not necessarily loyal, because they are satisfied by our products that meet their expectations.”

The important thing to remember is that there is a gap between satisfied customer and loyal customer (with the latter being in the higher level). A satisfied customer is not necessarily loyal, because they are satisfied by our products that meet their expectations. On top of that, satisfaction is ephemeral and it can change overtime depending on each interaction with your business. That is why, while CRM measurements are accurate for a given moment in time, they can’t capture the depth of customer commitment over the long term.

Unlike satisfied customer, loyal customer has an intimate relationship or connection to your business. It starts with good service, but it evolves into a mutual personal relationship. The company makes effort to know and care for the customer, and vice versa. And here are why the real value is on the loyalty of the customers:

- They provide a rich return on investment
- They value what you provide, it makes them less price-sensitive
- They cost less to serve because they know your processes
- They are unlikely to desert you because of a single mistake

In conclusion, instead of depending on a system that is not fully providing the real experience the customers get in your business, it is better to be customer-focused. Standard CRM measures that come from the customer data don’t accurately reflect the quality of the relationship between you and your customers. You need to develop long-term relationship, not one time sales. The customers themselves are the one who will know truthfully whether or not you are customer-focused. You don’t need to make an effort of convincing them that you are customer-based. Always think about the customer in terms of both service and emotional response. Wear your customer hat to work every day.

In Part II, the article will discuss deeper on the principles used to build strong bonds with customers, how to acquire as well as retain them and measuring their loyalty.

Source:
Barnes, James G. Build Your Customer Strategy: A Guide to Creating Profitable Customer Relationships. United States: Wiley, 2006.
Kale, Vivek. Implementing SAP® CRM: The Guide for Business and Technology Managers. United States: Auerbach Publications, 2004.

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