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A TCI Book Review

Strategic Customer Care ­ An Evolutionary Approach to Increasing Customer Value and Profitability

Stanley A. Brown
John Wiley & Sons, Toronto, 1999, ISBN 0-471-64342-4

Stanley Brown is Practice Leader of PriceWaterhouseCoopers International Centre of Excellence of Customer Care. Coming from someone with such a worthy title, expectations can't help but be high regarding the advice and wisdom dispensed in the book. And by and large, the book does not disappoint - it delivers a useful framework in which to approach issues of customer relationship management, and contains many examples of organizations that are successfully adopting strategic customer care principles. The only complaint that one might make is that the style is a little dry and that some of the points made are pretty self-evident ­ but hey, who among us isn't a little dry and self-evident at times?

Brown proposes that there are three progressive stages of customer care that an organization can go thorough. These are:

Stage I ­ Customer Acquisition: Here the primary focus is upon attracting new customers. The main concern of management is upon issues such as the frequency with which cold calls are made, advertising and promotion, and other means of getting the word out to potential customers and closing sales.

Stage II ­ Customer Retention: In this next stage the organization has evolved to a point where it realizes that the cost of acquiring a new customer typically exceeds the cost of keeping that customer. Accordingly the focus of management centres around keeping customers ­ all customers.

Stage III ­ Strategic Customer Care: In this final stage of growth, management realizes simply that some customers are more valuable than others, and accordingly offers differentiated service (i.e. better service) to the most valuable customers. The total lifetime value of all customers is assessed, and those accounts that cost more to keep than they generate in profits are let go.

Typically, an organization will become more profitable as it moves through the evolutionary process, and the costs of acquiring and keeping customers are reduced. However, a point that Brown stresses throughout the book is that organizations cannot simply jump to a Stage III type operation; they must progress through the stages:

"While becoming a Stage III best practice organization should, in most cases, be your company's main customer care goal, it's critical that you understand the importance not only of evolving from stage to stage, but also evolving through each stage. In other words, your organization needs to experience each stage in order to develop the best practices that will provide the foundation upon which you can build for continued growth in each successive stage." (p. 23)

Another key element in Brown's conceptual framework is the notion of five pillars of customer care. These are the five areas in which any organization needs to have capability if any kind of customer care or satisfaction is to be provided. They are:

  1. customer information and profiling ­ in other words, ensuring that the right kind of information is collected on customers
  2. customer segmentation ­this involves taking the information collected and assessing its implications in terms of the different kinds of customers that an organization has
  3. customer research ­ this pillar involves collecting satisfaction information directly from the customer (a concept that Brown terms the 'voice of customer' - VOC)
  4. technology investment ­ this element ensures that the organization is equipped with the right technology to be able to collect and analyze customer information, as well as communicate with them
  5. customer management ­ this area of competence relates to how customers are managed (i.e. communicated with and responded to)
Each of these pillars is discussed in detail (separate chapters are devoted to each) and the differences between Stage I, II and III organizations is discussed.

Regarding the first pillar, customer information and profiling, Brown reviews the kinds of information that a supplier should have on their customers: mostly it is standard stuff such as the history of the company, how much they spend on all suppliers, what your share of their wallet is, etc. He also reviews various sources of this type of information ­ again no surprises here: industry associations, trade journals, public databases, annual reports, etc. For the market research novice, this could be useful but for anybody who's been in the game for any time at all it's pretty basic. He profiles Levi Strauss and Hewlett-Packard as two organizations who are leading-edge in this regard.

Turning to customer segmentation, the second pillar, he does present a useful conceptual scheme to segment customers according to their value to the organization:

Customer Segment (Type of Relationship)

Characteristics of Customer

Transactional / Competitive Relationship

  • primarily focused on price
  • interested only in the transaction at hand, not in longer-term relationship
  • see the supplier organization as simply one of any number of potential suppliers
  • typically tend to be high maintenance accounts, with low or negative profitability, and limited potential to become more profitable

Niche Relationship

  • also largely price-focused
  • tend to regard supplier organization as filling a specific niche; not receptive to allowing supplier to cross-sell
  • also tend to be high maintenance accounts, with break-even profitability
  • some potential, though, to increase the amount of business done with these accounts
Sustaining Relationship
  • customer regards supplier as key value-added supplier, in a number of areas
  • accounts are moderately profitable
  • moderate degree of commitment to supplier
  • supplier is in good position to move the relationship to the next tier, to major provider
Major Provider Relationship
  • suppliers is regarded as a major and key supplier to customer
  • customer is interested in longer-term relationship with supplier
  • relatively profitable accounts
Strategic Partners
  • have entered into partnership with the supplier organization
  • customer and supplier share risk
  • offer the highest profit potential

The data collected at the customer information and profiling stage, plus the organization's own data, is used in assigning customers into this framework.

Regarding the need to collect customer satisfaction data and hear the (VOC) Voice of the Customer , Brown outlines three types of customer information that are useful: 1) customer satisfaction index measures, 2) customer action measures (to enable the supplier organization to predict the future actions of customers), and 3) 'important actions' ­ i.e. things the supplier can do to focus efforts on customer care. He introduces a concept of a 'performance wheel' (which is just plain confusing) and shows how some organizations have actually taken the VOC philosophy to the point where they have developed a Customer Bill of Rights. IBM, Kodak, FedEx and Toyota are the best practices profiled here.

The next pillar is technology, and here Brown presents four technologies that he suggests should be employed in a customer care strategy. These are the Internet (no kidding!); sales force automation software; enterprise customer care software; and what he calls 'virtual selling' (which is essentially using the computer to tie in various other representatives of the company when making a sales call, so that the potential customer can see the guy on the shop floor, or someone else within the organization). Again, no surprises here.

The fifth and final pillar is 'staged customer management'. Here the governing philosophy is for the supplier to manage their customers differentially ­ according to the segmentation strategy outlined above. An organization's strategic partners and major supplier relationships would clearly receive the best and most attentive service ­ transactional and niche accounts might get the heave-ho. Brown discusses various ways of managing customers, including the use of call centres, and how to structure customer complaints processes.

This is all in Part 1 of the book. In the second half, he presents a 12-step process for an organization to undertake if it wants to evolve into a customer care enterprise. The 12 steps are:

  1. Management alignment and mobilization: this involves getting the buy-in and consent of management to pursue a strategic customer care course of action
  2. Change readiness assessment: the critical step here is determining if the organization is ready to embrace strategic customer care, and identifying the individuals and teams who will help make it happen
  3. Customer segmentation: this entails collecting the necessary data and undertaking the segmentation exercise as described earlier
  4. Customer profiling: here, Brown suggests that an organization go through a detailed customer profiling exercise (as outlined earlier) on its strategic customers (i.e. those at the top end of the segmentation structure)
  5. VOC intervention: the next step is to do some research on those strategic customers by getting their perspective on your organization as a supplier
  6. Gap analysis: this involves identifying those areas where improvements could be made, based upon the VOC responses and the perspectives of senior and middle managers
  7. Management call to action: here the troops are mobilized, and strategic account management teams are assembled for those base customers and strategic partners, as defined by the customer segmentation framework
  8. Strategic action planning: this involves the teams developing their plans regarding how to improve service and satisfaction to the customer
  9. Customer alignment: here the teams inform the customers that the account team has been formed, and enlist their support in the overall effort (which customers should be happy to give) ­ this ensures a one-to-one alignment between the supplier organization and the customer
  10. Team training: here the team is trained to work as a team
  11. Implementation mobilization: getting on with it
  12. Performance monitoring and adjustment: for obvious reasons
This captures the essence of the second half of the book, which goes into mind-numbing detail for each of these 12 steps. There are many interesting case studies given in this part of the book, though, which give a little life to the last 150 pages, including:
  • PHH's 'partnership approach' to customer care
  • Baxter Healthcare's customer segmentation strategy
  • American Express, and their focus on technology-assisted niche marketing
  • British Airways' selective approach to customer management
  • Siemens' approach to corporate account management
  • Sears' use of performance indicators as drivers of change
  • GE Plastics, and how they train their customers
  • Huggies' approach to targeting expectant mothers as new customers
  • FedEx's methods for measuring customer satisfaction

Strategic Customer Care contains a lot of good advice on developing an approach to identifying and keeping an organization's best customers. It's not the most exciting reading in the world, and there is lots of redundancy throughout, but it all makes good sense. In particular, the customer segmentation framework he presents is valuable, and an approach that many companies and organizations would do well to adopt.






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