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Slide share British Quality Foundation UK - Customer Relationship Excellence

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Here is 'an oldie but goodie' I wrote for the British Quality Foundation in London - keeper of the EFQM Business Excellence framework. You will be able to see how things have evolved by comparing to recent materials on this subject - but still lots of nuggets! Enjoy

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Slide share British Quality Foundation UK - Customer Relationship Excellence

  1. 1. 10 U KEXCELLENCE APRIL/MAY 2001 Feature Customer loyalty C RE enables an organisation to position itself as the preferred and recommended supplier of goods or services, whether in the con- sumer or business-to-business market. Achieving this excellence requires a sys- tematic approach that considers the value pro- vided to the customer and the organisation’s strategy to achieve competitive advantage. While CRM is concerned with ensuring that organisations have the necessary information to effectively identify and manage customer rela- tionships, CRE focuses on the processes neces- sary for effectively building and managing customer relationships. Clearly the two are complementary and provide a total solution. CRE primarily addresses the fifth criterion of the Excellence Model (customer processes) and particularly 5e (customer relationships are managed and enhanced). The full benefit of a CRMimplementation will be slow to come or may never arrive, if the organisation is not truly customer focused. For the past eight years, MQI has been develop- ing an integrated CRE framework that is consis- tent with both the Malcolm Baldrige Award and the Excellence Model. CRE has come from 15 years of worldwide consultations in areas relat- ed to customer processes: • gathering customer requirements and expectations • adding value • measuring satisfaction and loyalty • call centres • complaint and enquiry management • developing relationship strategies A truly systematic process for building and maintaining superior relationships with impor- tant customers, while making life for all cus- tomers easier, faster and less costly, CRE is the highest level to which an organisation can aspire. At this level, the customer relationship strategy and alignment approach is critical to its success. CRE integrates all the approaches con- tained in the inner concentric circles (see figure 1, page 12) into a macro level process or system - an organisation becomes increasingly pro- active as it moves through the circles. There are a number of key factors which must increase in their levels of sophistication as the transition to CRE occurs. For example, the strategy for cus- tomer problem/complaint management is often short-term damage-control and preservation or recovery of relationships. At the outer circle the strategy is on building long-term customer loy- alty and competitive advantage. Two factors in particular affect customers’ per- ceptions of how well their needs are being met: • market volatility - the current price wars in the telecommunications and credit card industries are examples of this • changing technology - two industries transforming through technological changes are mailing and banking Organisations tend to shift from an internal focus to an external (customer) focus as they MQI believes that the route to customer loyalty is through building and maintaining excellent relationships. It has taken the well-known management strategy of customer relationship management (CRM) to new heights with its development of customer relationship excellence (CRE). MQI’s president, Ted Marra, explains how CRE can change businesses for the better put excellence into your CRM PROFILE MQI provides training, facilitation and con- sulting services. Its specialist areas are relationship excel- lence - a system which integrates all critical customer processes of an organisation - and performance excel- lence - the integration of the Excellence Model into an organi- sation’s strategy. INFO Marra Quality Inc (MQI) 12136 Chancery Station Circle, Reston, Virginia 20190 T: 001 703 435 4113 W: www.marraquality .com
  2. 2. THE BENEFITS OF CRE: • lasting and positive cultural change through customer-focused drive • enhanced customer loyalty • increased market differentiation and competitive advantage • improvements in employee satisfaction and morale • growth in market share, particularly through positive referrals • innovative improvements in product, service, processes, policies and strategy THE PRICE OF LOYALTY Data from the Technical Assistance Research Programs (TARP) shows: • a typical customer may be worth more than $300,000 over a lifetime • some customers will switch to a competitor over issues such as a $25 service charge disagreement. move from a stable environment of slow tech- nological change to one of high volatility and constant technological change. These competi- tive challenges create opportunities for organi- sations to establish strong enough relationships with customers to discourage them from con- sidering the competition, and to reduce the impact of constant change. So why is CRE important? The main reason is customer retention; most companies lose 15-20 per cent of their customers each year1, for rea- sons such as inability to prove themselves as a valuable resource to customers, changing customer expectations, more aggressive compe- tition and lack of recognition of the lifelong cashflows derived from customer loyalty. GETTING TO GRIPS WITH CRE A major factor in building relationships is knowing the stages of the customer relationship lifecycle: • potential • new • mature • in process of defecting Each stage brings with it unique requirements and expectations. Many organisations miss opportunities to understand the customer’s critera for choosing the organisations with which they do business, or to capture competi- tive information while it is still fresh. Resolving customer issues in the product or service design stage will strengthen customer relationships. Ted Marra is an inter- nationally-known management consult- ant and president of Marra Quality Inc. His clients have included such companies as Xerox, IBM, Motorola, Boeing, Electrolux, DuPont, Nortel Networks and Siemens. He previ- ously held manage- ment positions at a number of companies including: General Motors, Firestone, Babcock and Wilcox, and Goodyear. He has been involved with the Malcolm Baldrige Award for 12 years, is a judge for the Air Force Quality Award, and has been a judge and member of the Board of Directors for the Massachusetts Council for Quality. CUSTOMER FOCUS MQI recommends assessing your organ- isation annually on the dimension of cus- tomer focus across all Excellence Model cri- teria. An example can be found on the MQI website and will be discussed in the BQF Excellence Awareness 2001 workshop: Customer relation- ship excellence 25 June Dunchurch Advert half page vertical
  3. 3. 12 U KEXCELLENCE APRIL/MAY 2001 Feature Customer loyalty products, services, technology and support. It represents a true source of differentiation: com- petitive advantage. GET ALIGNED FOR SATISFACTION Once this has been established, the organisation is ready to develop the most effective relation- ship strategy and alignment approach. Rela- tionship strategies should be linked to the overall strategic plan of the organisation. Rather than trying to improve the situation of all your customers at once, start where you are likely to receive the best return for your invest- ment. As you do this, it will positively improve and innovate around the processes, people and systems common to all customers. In the ‘do’ component, a company must ask ‘who will exe- cute the relationship strategies?’ Primarily, this will be the customer contact personnel, but information systems will also be involved, as will human resources and finance, providing inputs critical to successful execution. The cus- tomer response capability is actually a part of the ‘do’ component of the process - the central nervous system for many companies. So how does a company know if it has been successful? Clearly it must have an effective and balanced relationship measurement system (‘check’) in place to evaluate whether its approaches are working. The final step (‘act’) must be developed, in which approaches are considered to address an effective and efficient integration of a variety of customer relation- ship feedback. Organisations should evolve their customer processes in alignment with the concentric model. Ideally, organisations begin by building a strong base around complaint and enquiry management. Then they must focus on those processes that result in some interaction between the company and customer (eg requesting service, technical support) - to achieve service excellence. European business has not yet fully realised the importance of customer loyalty. One of the areas which MQI has found to have held back the progress of European firms is investment in employees, especially those who deal with cus- tomers. In addition, in a recent EFQM survey of member organisations, senior management indicated that one of the most strategically important areas for improvement was cus- tomer-focus. CRE could be the tool to catalyse customer-focus in European business and drive excellence in organisations determined to take their customers seriously Figure 2. Customer relationship excellence and the plan-do- check-act cycle An organisation’s reputation often creates a ‘halo’ effect (I feel good about doing business with this company) in the marketplace; if an organisation has multiple business units, this can enhance marketing and cross-selling. This perceived value is a benefit they believe the competition is unable or unwilling to provide. Figure 1. Evolution to customer relationship excellence Reference: 1Bain, The Loyalty Effect, Harvard Business School Press, 1996 PLAN Customer and market understanding Relationship strategies ACT Fact-based management and improve- ment CHECK Customer relationship measurement CUSTOMER RESPONSE CAPACITY Call centres Complaint and inquiry man- agement DO Strategy execution and alignment Focus on customer contact personnel Business partners Toll free call centres Customer satisfaction and loyalty measurement and management Customer relationship excellence Enquiry problem and complaint management Proactive Proactive Reactive + proactive Reactive Reactive Process driven service excellence Strategy Listening posts Analysis and review Human resources Information technology Perceptions of relative importance focus on who, in the customer’s mind, is a competitor. For example, the customers of an electric utility may call their customer service centre for assis- tance. In doing so, customers often go beyond simply comparing their experiences with the gas, telephone or water company, drawing on experiences with facilities completely outside the utility industry. This is the competitive (or comparative) set that an organisation needs to understand as it is driving customer expecta- tion of the electric utility customers to levels which, if not met, lead to dissatisfaction. At an operational level, CRE follows a ‘plan-do- check-act cycle (see figure 2). Organisations must begin by identifying their most important customers using effective, local decision criteria and the requirements (needs), expectations (wants), and sources of value for these customers. Here the purpose is to invest your resources wisely: target the things which count the most with your most important cus- tomers, thereby giving you a disproportionately high return for the investment. Value is added through an organisation’s processes, people,

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