The Essentials of CRM Architecture and Engineering

By Michael Lowenstein

  Michael Lowenstein, CPCM, is managing director of Customer Retention Associates, a customer and staff loyalty program development, research, and consulting firm located in Collingswood, New Jersey (www.customerloyalty.org).

  With over thirty years’ management and consulting experience in customer and staff loyalty research, CRM, loyalty program development and refinement, customer win-back, service quality, customer-driven corporate culture, and strategic marketing and planning to draw on, he is an active speaker, workshop facilitator, and trainer, and he is a regular featured contributor to three customer loyalty newsletters.  His keynote, general session speaking, and workshop facilitation assignments have been in the United States and Canada, Europe, South America, and Africa.  He also provides expert customer loyalty commentary and articles for several professional CRM sites on the Internet.  

   Michael is the author of two widely-regarded books:  Customer Retention: Keeping Your Best Customers (1995), and The Customer Loyalty Pyramid (1997).  He is also co-author of Customer WinBack: How to Recapture Lost Customers – and Keep Them Loyal (2001).   Additionally, he is a contributing author to Redefining Consumer Affairs (Society of Consumer Affairs Professionals, 1995), The Answer Book for Customer Service Managers (Bureau of Business Practice/International Customer Service Association, 2000), and Customer.Community: Unleashing the Power of Your Customer Base (Jossey-Bass, 2002)

   He has been a customer loyalty instructor for Pennsylvania State University and the American Management Association; and he holds an M.B.A. degree in marketing from the University of Pittsburgh, and a B.S. degree in economics and marketing from Villanova University.  He is listed in several international, national, and professional Who’s Who directories.  His clients include First Union, Toyota, Prudential, Westvaco, Cigna, Charles Schwab, Borg-Warner, Sygma, Comcast, Baptist Health Care, Metropolitan Life, Microsoft, Alliance of Community Health Plans (ACHP), Daimler-Chrysler, and Georgia-Pacific.  

   Customer Retention Associates specializes in helping clients optimize customer loyalty and value through customer and staff loyalty research, loyalty program development and refinement, loyalty action training for front-line staff and management, and customer save and win-back protocol development.  The company is a founding member of the CRM International Consortium (CRMIC), an affiliation of independent CRM and customer loyalty practitioners from around the world, which is based in Europe.  The mission of CRMIC is to offer leading-edge customer loyalty and value solutions.

Virtually everything a company does, but especially its strategy, structure, managerial style, and capabilities, buy-in, and loyalty of employees at all levels will impact customers.  Further, CRM programs, indeed all customer-related processes, need to embrace and include both internal customers (staff) and external customers (end customers, former customers, potential customers, suppliers, the financial community, etc.) at planning and implementation stages.

Creating customer loyalty requires both a corporate and individual mindset on behalf of customers.  The mindset must be both proactive and commitment-based.  It is people and processes that make CRM effective, or ineffective, not merely the application of technology, service, or any other individual component of CRM.

Marketing theorist Theodore Levitt has said:  “The purpose of business is to get and keep customers”.  That’s an easy to understand way of postulating that, next to having a customer retention culture and infrastructure, everything else a company does is secondary. Leading-edge customer research organizations have determined that the most successful companies have a focused and well-integrated approach to customers.  They have also found that companies consider having such a single, integrated approach a key priority; however, very few companies have been able to fully achieve this.

A lot of what goes on at successful, customer-focused companies, doesn’t appear, at first look, to be CRM-related.  If CRM were thought of only in terms of technological, marketing, or service aspects, that would be true.  However, as stated, we see CRM as holistic, embracing every process.

New approaches to customers and frequency marketing programs will only be part of what creates true customer loyalty and advocacy for leading-edge companies.  These companies are committed to customers.  Their cultures are totally customer-focused.  Customer information is both extensive and continually updated, and systems are designed for their staffs to readily share and apply knowledge. Their leaders live the organization’s mission.  In the United States, such companies as MBNA, State Farm Insurance, Federal Express, Saturn Corporation, Dell, Wegman’s Markets, Southwest Airlines, Rosenbluth International, Servicemaster, and Ritz-Carlton Hotels, to cite just a few, exemplify this commitment.  Everything they do is completely customer-centric.

We believe there are twelve common attributes of commitment-based companies:

   Culture

1. Total company involvement in customer retention and loyalty
2. Active internal communication, cross-functionalism, and cross-training
3. Staff proaction and continuous learning
4. Visible and involved senior management

Information

1. Customer data mining, one-to-one understanding and insight
2. Hands-on research, communication skills training
3. Regular direct customer contact by all staff levels
4. Customer partnership and sharing of information
5. Formal, and frequent, customer research
6. Full inventory complaint gathering, evaluation, and response

   Action

1. Customer and competitive data used as a foundation for improvement
2. Internal and external customer teams

Several years ago, the CREDO Special Issue of Customer Loyalty Today led with an article saying that many companies were finding barriers to the full implementation of customer relationship management:  culture, time, senior management commitment, integration issues, and technology.  Most of the delegates were challenged to prove that customer loyalty would lead to increased profitability, puzzling because the proof for this has been general knowledge for over a decade.  Perhaps the explanation is that, given a choice of relationship-building devices to implement immediately, the most frequently selected first choice by CREDO delegates was a customer loyalty program.  This is the type of fuzzy, convoluted, tactical thinking which can undermine even the most resilient of companies.

In a recent study by the Chartered Institute of Marketing (C.I.M.) in the U.K., results among 1,000 adults showed that only eight percent believed that regular contact with suppliers is more beneficial to themselves, while fifty percent thought that such ongoing relationship benefited the suppliers.  Worse, only nine percent of these respondents felt wanted that contact to be driven by the supplier.  These are alarming numbers, and they strongly suggest that consumers are rejecting common customer relationship practices.

To succeed at customer relationship management, the cold reality is that frequency programs are not enough.  Great product is not enough.  Exceptional service and customer-sensitive staff are not enough.  Use of new communication technologies, sophisticated software,  and multiple contact channels is not enough.  Tight, efficient operational processes, though essential to sustaining customer loyalty are, also, not enough.  What works is the company-wide commitment to customers, the ongoing creation of customer-perceived value and ‘barriers to exit’ which leads to loyalty and advocacy. 

Success will be defined by three outcomes: the highest share of customer possible, optimal lifetime customer value generation, and the lowest voluntary churn (among both customers and staff).  This requires both discipline and commitment.  It’s not easy, and nobody promises it will be; but, like Levitt’s definition of the purpose of business, it is elegantly simple.