Differentiate on relationships. Products and services are commodities.
A sustainable customer-focused enterprise has to do more than meet or exceed customer expectations with its products and services. It must also develop and maintain strong relationships with profitable customers. Relationships are unique. Products and services are just commodities—until combined with profitable relationships. Profitable customers behave differently. They want a relationship. They buy value.
Managing the relationship--with the same rigor and energy with which you manage the product and service-- transforms your company into a sustainable customer-focused enterprise.
What has been missing has been the ability to proactively manage that relationship. As Peter Drucker famously said, “You cannot manage what you cannot measure.” To manage relationships, you must measure relationship development. A key relationship development metric has been missing until now. We call it Relationship Value.
When the relationship is actively measured and managed, your organization can unleash the potential of all your stakeholders, customers included.
The Information Age is morphing into the Relationship Age while business processes are stuck in Industrial Age silos.
The Industrial Age brought us mass production and specialization. It worked really well. So well that business processes and tools have been “siloed” ever since whether appropriate or not.
The customer relationship is fragmented among marketing, sales, services, finance, and operations silos. This internally-optimized approach has led to a series of customer interactions that are not integrated or synergistic. The customer experience is often a roller-coaster ride of good, bad, and sometimes down-right scary experiences.
Now the Relationship Age demands collaboration, cross-functional processes, and relevant, actionable intelligence about relationships, tied to business results.
But the data for that intelligence and cross-functional process is trapped in the Industrial Age marketing, sales, services, finance and operations silos. Frontline Staff spends way too much time bridging the gaps to satisfy Relationship Age customers.
Data for cross-functional understanding is just as trapped in social media silos instead of being brought into a collaborative stakeholder community where relationship development can be tied to initiatives important to your enterprise’s success. And the data owned by your enterprise.
It’s time for a game changer.
Sustainable competitive advantage comes from actively measuring and managing to customer behavior and profit patterns better than the competition. Though multiple competitors might have relationships with the same customer, each is different. Each relationship is unique.
Unlike the purveyors of competitive advantage in the past—control of resources, economies of scale, and technology—competitive advantage and differentiation derived from unique customer relationships can’t be copied by competitors.
Relationships with profitable customers are of mutual benefit to both parties. Profitable customers behave differently. They buy value. They want a relationship. You can see the difference in the relationship patterns.
When the relationship is actively measured and managed, your organization can unleash the potential of all the staff to create value.
In a sustainable customer-focused enterprise, everyone is focused on the customer, from the people who engage the customer directly to those who support them throughout the organization, from finance to operations. Being customer-focused is everyone’s job.
Every interaction with the customer, by anyone in the organization, strengthens or weakens the relationship. Whether it is an assigned account representative for an industrial supply chain; a client representative at a financial services company who integrates all of the financial products used by an enterprise client; or even security at the front door-- customer-focused companies have realized the importance of relationships.
In a customer-focused enterprise, customers are seen as active participants in the business.
- Customer relationships are tied to profit.
- The customer relationship measurement is tracked and managed like any other operational effectiveness measurement.
- The organization is aligned in a cohesive framework for high-profit revenue, while still being extremely responsive to its customers.
It’s time to think differently to achieve breakthrough performance like this.
With Customer Relationship Intelligence (CRI) and our breakthrough metric, Relationship Value, you can.
COLLABORATE: To Take a Customer Point of View.
Collaborate on a Relationship Development Process.
- Relationships drive business. Always have. Always will.
- Relationships are created one Interaction after another over time.
- The Relationship Value metric measures whether an Interaction moves the relationship forward or backward. For example, downloading a demo is worth less than meeting with key executives. One bad Interaction can destroy the goodwill built up by a series of positive interactions; undermining the relationship and jeopardizing the company’s ability to build a sustainable competitive advantage.
- It is the cumulative effect of the Interactions in developing the relationship that is determinative--not what Interactions were used or even how many--as long as the Interactions are cohesive and integrated.
- The Relationship Value KPI expresses the cumulative effect of a series of Interactions in developing or destroying a relationship, essentially becoming a numeric proxy for the underlying Interactions.
- Relationship Value measures cause-and-effect. With numbers there are patterns, enabling a strategic overview. Good patterns can be replicated. Destructive patterns can be avoided.
- Relationships are cross functional. A relationship development process aligns key Interactions found in marketing, sales, services, social media, community, finance, operations, and more BIG Data sources in one Interaction Record in one CRI Interaction Database.
Collaborate to build a unifying Operational CRI System.
- Operational CRI is real-time operational Business Intelligence for the front office. Operational CRI is a ‘game changer’ and the only enhancement to a Business Intelligence tool that balances individual customer Interactions with the cost to engage. Accumulated Interactions create the Relationship Value KPI, improving relationship development effectiveness and profitability.
- Integrate the Industrial Age and social media silos at the data level. Build a unifying Operational CRI (Customer Relationship Intelligence) System into existing BI / database infrastructure and then embed in contact management program(s).
- Enable the Operational CRI process using a collaboration layer cross-functional platform to access BIG Data. Our relationship development process highlights the Interactions that matter, including their Relationship Value (RV) and variable costs. Transform customer relationship management from anecdotes and “gut feel” into quantitative data based directly on these actions and transactions.
- Control the layer with Business Intelligence dashboards. Access the dashboards directly or through windows in other applications. The CRI Strategic Dashboard provides management the ability to track strategy implementation. The Operational CRI Interaction Dashboard is operational and interactive. Frontline Staff, interacting with customers, provide updated reactions not otherwise captured within BIG Data.
Leverage Collaboration Layer Platform Services: A host of new database tools and techniques have been introduced in recent years including Data Virtualization, Data Integration, ETL, Master Data Management, Data Federation, Data Governance, and Advanced Analytics like Predictive Analytics, Data Mining, Sentiment Analysis, Text Analytics, Discovery, and more. They can now be employed in what was previously managed in an ad-hoc fashion at best– collaboration to affect customer relationships.
Innovators’ Note: An enterprise deployment of Operational CRI is built into a sophisticated BI / dashboard infrastructure to integrate the entire customer lifecycle at the data level. The BI tool is then embedded in contact management program(s) across the enterprise. Until recently most BI tools have been used as point solutions for individual functions. Operational CRI needs an enterprise view.
Early on we had envisioned that the Operational CRI System would be built on top of existing CRM tools, then we thought Marketing Automation tools, and then the community/ collaboration platform for Social Business. (We put that Social Business POV in earlier HACKs. See Materials for links.) These customer-facing and community systems do have contact management programs, which are needed. But each of these tools alone is incomplete. Some of the cross-functional Interaction data needed is collected by each of these tools and other existing customer-facing and community systems. But we also need ERP data that includes shipping, billing, and collections information.
In other words, we need BIG Data. Interactions are harvested from BIG Data sources—all the customer-facing and community systems, and finance and ERP systems. The CRI Interaction Database integrates and links the data from all these sources to show one view. —one Interaction Record for each Individual Contact at play within each Enterprise Customer Segment or Stakeholder Community Initiative. Any one person could have a series of Interaction Records for different segments or initiatives being created simultaneously—so a sophisticated database infrastructure is mandatory.
Business rules make the integration of the Interactions collected in each system into the Operational CRI System seamless. It merges into the Individual Contact’s Interaction Flows across the Acquisition/ Closing/ Retention continuum as if it had been collected by only one system instead of dozens or hundreds. Where the Interactions are unstructured, or only partially structured like the activity streams coming off collaboration or gamification tools, business rules convert the Interactions to a structured data stream.
In addition to tapping into the Interaction data already being collected in these operational customer-facing and community systems, there are extension opportunities already built into these systems that could be taken advantage of without needing additional software.
COLLABORATE: To Harvest Relationship Age GOLD.
1. Spend time and money where there is the greatest payoff.
- The money is in Retention. In a typical established business, some 80% of revenue comes from repeat business and renewals; only 20% comes from new customers. (In reoccurring revenue businesses, the Retention percentage is even higher.)
- Another 80/20 rule. 20% of customers account for ~ 80% of revenue and often 100% of profit.
- These high profit customers cost more to engage, but the payoff is HUGE. (In our starting benchmark, 3X the cost, but 16X the revenue.)
- These high profit customers behave differently than other customers. They want to engage. They want a relationship.
- With our new metric Relationship Value we can capture their behavior patterns to tie the patterns to profit and to optimize value creation.
2. Understand customer behavior—their relationship patterns—early enough to act to make a difference in outcomes.
- Relationship Value is a real-time leading indicator for profit and for sustainable competitive advantage. This matters because profitable customers behave differently. You can see it in the relationship patterns. Shown here are results from our starting benchmark. Lagging indicators like historical profit or satisfaction—which most Executives use-- won’t let you act in time to matter. Averages or aggregates don’t let you see which relationships to pay attention to.
Operational CRI (Customer Relationship Intelligence) is
- As simple as Frontline Staff knowing the next best action to take because they can see what their company’s best practice pattern is.
- As mission critical as a Manager having time to investigate an exception and optimize the results—good or bad—when they see a relationship fall out of pattern.
- As sustainable as capturing the innovation of top performers in relationship development for process improvement and repeatable process. Comparing the RV relationship patterns of the set of Individual Contacts managed by top performers to other team members to see how far off the norm they are. See our HACK Measure Performance Innovation with CRI.
- With CRI you can identify customers with profit improvement potential—within high profit customers and others that could move up in value.
- Identify customers at risk—hard to do with averages, as most Executives rely on. Losing even one key customer relationship is a hard-to-manage risk…after the fact. With RV relationship patterns you can see what is going on in real time. You can measure and share the depth and risk of the multiple relationships at play in high-value Business-to-Business up and down the organization.
- Managers compare RV relationship patterns across industries, territories, product lines, regions, divisions, business units, etc. Correlate to profit and satisfaction.
- Innovate cross-functional best practices for their own company and allocate resources--tied to outcomes.
A sustainable customer-focused enterprise makes better use of its resources. It measures relationship development from communities and customers to the enterprise with the breakthrough Relationship Value metric and manages with an Operational CRI System.
This visionary Relationship Age organization can
- Recognize and reward the unsung heroes in marketing, sales, services, and community who create value every day by developing deep, lasting relationships with profitable customers. The ultimate collaboration.
- Align behind a common relationship development strategy so that everyone knows what to do, and why. Everyone knows how their strategy is working in real time. Everyone. See our HACK Measure Strategy Execution with CRI.
- Quantify “goodwill,” the value of their company over and above its book value, based on the soundness of the company’s relationships, using Relationship Value, a leading indicator for profit. Quantify what people actually DO, not just what they SAY they’ll do.
- Satisfy the longing that people have to be a part of something bigger than themselves and to be recognized for what they do. Harness the power and unleash the potential of all stakeholders in initiatives critical to the success of their enterprise.
- Use Relationship Age analytics and processes to transform BIG Data into relevant, actionable intelligence about relationships, tied to profit and actively managed by the company.
Create an affordable, quick way to validate Relationship Value (RV)--as a leading indicator for profit and satisfaction. Validate RV, while providing strategic, operational guidance potentially worth millions to Executives. We call this operational process RV-Q.
A RV-Q Benchmark Project is how to get started.
Find Executives, who take pride in being visionary leaders and see the first-to-market benefit as greater than the risk of being the first to employ our breakthrough, patented CRI Framework.
A RV-Q Benchmark Project can address critical questions:
Can a discernible difference be seen between the Relationship Value patterns of these customers?
- Those contributing the highest profit and those where money is lost?
- Where revenue is growing and those where revenue is shrinking?
- Where share of wallet is growing and those where share of wallet is shrinking?
- Participants in a Stakeholder Community and those not, tied to financial gain? See our HACK Measure Innovation Community with CRI.
- Any other extreme within a customer segment.
Is Relationship Value a leading indicator for these or for other significant segments within the customer base? How does what people DO, quantified by RV-Q, correlate to what people SAY?
RV-Q Benchmark Steps:
- Develop a pro forma high-level RV-Q data model of approximately 100 major Interactions and 30 some associated VoC Interactions in a custom-tailored Interaction Process Flow (IPF) working with the Business Intelligence team as well as cross-functional teams representing Marketing, Sales, Inside Sales, Customer Service, Communities. Deliverable: Team buy-in and validation of IPF scenarios.
- Determine data requirements--what data is available to support an end-to-end understanding of the IPF. Review available predictive modeling. Identify data gaps. Deliverable: High-Level Data Map.
- REPORT: Identification of key lifecycle components needing further analysis.
- Identify critical process gaps. Map the customer experience across two to three of those process gaps to better understand cost and the three aspects of Customer Value—Brand Value, Product Value, and Experience Value. Deliverable: Roadmap for Process Improvement. See our HACK Measure Value Creation and our Thought Leadership Paper on Value Creation.
- Populate major Interactions in the Interaction Process Flow with Relationship Value and variable Interaction costs. Run the RV-Q data model. Deliverable: A starting benchmark to demonstrate the efficacy of RV as a leading indicator.
- Optionally, correlate the IPF to actual available historical Interaction Record of customers. Collect key data to complete the historical record of priority customers with teams responsible. Deliverable: A Back-Tested Validation.
- REPORT: Address questions posed and recommend next steps, including potentially building an Operational CRI System to measure RV-Q going forward. Transform BIG Data into relevant, actionable intelligence. See our HACK Measure Management 2.0.
Alternatively, focus on a Stakeholder Community Initiative as a way to get started.
Social media and communities are driving the integration of Marketing, Sales, and Customer Service silos. That reality—and that many of the Interactions are already digital and part of BIG Data—makes measuring and managing communities a reasonable place to begin with a RV-Q Benchmark Project tuned to a Stakeholder Community Initiative.
Stakeholder Community members become involved in the work of the enterprise through various open and closed initiatives—such as self-help, evangelizing the enterprise and the enterprise’s offerings, or product development.
- Stakeholders include customers, prospects, suspects, employees, partners, suppliers, influencers, and interested parties (media, bloggers, analysts, regulators, investors, politicos, and more).
- The initiatives are the business purpose that has often been missing from Social Business activity streams.
- New product initiatives become externally-focused by moving from a “Research and Development” approach to a “Collaboration and Development” approach. And here, development is increasingly an agile execution. See our HACK Measure Innovation Community with CRI.
- Already Stakeholder Community members are becoming enmeshed in enterprise business processes—tracking packages, looking into the supply chain, and having products configured just for them. All of these Interactions help develop relationships.
And we see these additonal BLUE SKY opportunities going forward:
- BLUE SKY: Product and process design is mobilized by the need for extreme configuration and modular plug and play capabilities.
- BLUE SKY: Customers give instant, relevant feedback.
- BLUE SKY: The Enterprise is open and transparent to all Stakeholder Community members. All strategic and operational dashboards are visible to all with drill-down details.
- BLUE SKY: Real-time corporate governance becomes possible.
- BLUE SKY: The Enterprise literally competes on relationships. A majority of Stakeholder Community members become true partners with the Enterprise for sustainable community advantage and global competitive advantage.
Are you a C-Level Executive who
- Runs a Business-to-Business enterprise with high-value offerings, (A sweet spot.)
- Is eager to be an early adopter, and
- Has a mindset for innovative change.
Then RV-Q is your answer to justify a game change to compete on relationships.
A game changer as momentous for the Relationship Age as the Time-and-Motion measurement innovation that lead to mass production was for the Industrial Age. If we have our way, enterprises will be innovating the relationship development process for decades to come.
A RV-Q Benchmark Project is how to get started.
It Takes a COMMUNITY and dedicated, innovative professionals to collaborate on the scale needed to develop Relationship Age business processes to:
- Retool from a company/product focus to a customer focus from strategy to execution to profit,
- Share operational control among Frontline Staff, Managers, and Executives,
- Recognize and reward the unsung heroes in marketing, sales, services and community for the value they create every day by developing relationships with customers,
- Build on proven methods, many of which our team has pioneered including profitability segmentation, Voice of the Customer, customer experience engineering, and valuing intangibles, and
- Invent new ones like Value Creation Mapping, Product Relationship Roadmap, and the Operational CRI System with its revolutionary metric Relationship Value.
Thanks to all the others on the Religence CRI Team: Jim White, Bob Sabath, George Fruehan, Kathleen Robinson, Dave Pearson, Richard P. Morgan, and Eve Thompson plus team members emeritus Ray Dunaway, Anne Chambers, John Kauke, and Steven Cox. This team of experienced senior people represent marketing, operations, finance, IT, and change management. A customer-focused enterprise is everyone’s job. Together we have commercialized our CEO’s business process patent and built out the Religence Framework for CRI. What a total pleasure it is to collaborate with this innovative, multidisciplinary team. Thank you.
Many, Many More Acknowledgements can be found at the end of our HACK Measure Management 2.0 with CRI for Real-Time Management/ Operational Control/ Profit.
And Even More in a Special Note on the Shoulders of Giants:”If I have seen further it is by standing on ye shoulders of Giants,” Sir Isaac Newton said in 1676. I feel that way now. Many of these giants are honored in a special thank you in my book, Customer Relationship Intelligence: A Breakthrough Way to Measure and Manage Sales and Marketing. Three standout in this HACK especially. –Linda Sharp, CEO at Religence.
Peter Drucker: For his famous statement “You cannot manage what you cannot measure.” Equally prescient was his understanding that the corporation is actually a community. Yes!
Theodore Leavitt: For suggesting that there is no such thing as a commodity if you differentiate based on the relationship between the buyer and seller, confirming my own insight about the importance of relationships. And for-- even as famous as he was, taking a call from me-- confirming my insight that some 80% of business for established companies is from repeat and renewal customers. There was nothing to be found in the literature at the time. Thank you, sir!
Michael Porter: For pointing out the essence of strategy is in the activities, which stimulated me to realize that the essence of strategy execution was in the interactions with customers. And for establishing that using other companies’ best practices, leads to standardization, not competitive advantage. His ideas stimulated me to think about how to measure and manage to a company’s own best practices.
FREE Electronic Copy of CRI Book. At the end of our HACK Measure Management 2.0 in the Materials section is an electronic copy of the second edition of our CEO’s book—Customer Relationship Intelligence: A Breakthrough Way to Measure and Manage Sales and Marketing.
Special Thank You to Challenge Sponsors. To the Management Innovation eXchange for providing the space and for giving us an opportunity to share our innovative ideas globally. To the current sponsor SAP and to McKinsey-HBR for sponsoring previous challenges. Our ideas have been made better by the exercise of posting our series of now six HACKs. –Linda Sharp, CEO at Religence.
©2014 Religence®, Registered USPTO, Patent Number US 7,526,434
Measure Management 2.0 with CRI for Real-Time Management/ Operational Control/ Profit.
Measure Value Creation with CRI for Long-Term Success.
Measure Strategy Execution with CRI to Compete on Relationships.
Measure Innovation Community with CRI to Tie to Business Results
Measure Performance Innovation with CRI for Repeatable Success
for Thought Leadership Papers and CRI Reference Section and our soon to be launched blog: Why Fly Blind.
for more on Customer Relationship Intelligence: A Breakthrough Way to Measure and Manage Sales and Marketing
for Slide Share of CRI: A Community Approach to Win in Social Media