Executives are becoming disillusioned with technology-driven customer relationship management (CRM), says Reap Consulting MD Doug Leather.
Leather commented on key CRM trends during the launch of the company`s latest evidence-based study, "State of the Nation IV", in Johannesburg last week.
Reap`s business partner, London-based QCi, conducted the survey of over 700 companies worldwide.
"Technology-driven CRM has not delivered value, as it has focused on cost reduction rather than the enhancement of the customer experience," says Leather.
"Empirical research in 'State of the Nation IV` shows that customer management has a direct impact on return on capital employed, reinvestment rate total, operating profit margin, return on asset, reinvestment rate per share, return on equity per share and net margin.
"As the fourth report of its kind, 'State of the Nation IV` shows that progress is being made, although slowly, towards customer management best practices.
"Eighty percent of business value today is tied up in intangibles, one of which is the value of customers. Yet there is no empirical measure for reflecting customer value on balance sheets and analysts have no way of measuring customer competence when evaluating companies. Both of these factors need to change and a few forward-looking companies have shown signs of understanding and embracing these realities.
"Only 2% of companies surveyed have regular win-back programmes even though bonded customers are six times more valuable than unbonded customers. Companies that understand who their most valuable customers are and which customers have fully committed to the brand and which then apply the right actions against this understanding, can double their profits in three years."
Quick bucks aren`t the answer
Leather points out that short-term profit objectives hamper the delivery of proper customer management.
"The need to focus on short-term profit can be overwhelming. There is often an uncomfortable relationship between the need for short-term returns, to appease the demands of shareholders, and the requirement for long-term investment and sustainability.
"We know from the Enron, WorldCom and Equitable Life scandals that the balance sheet can be misleading. A company can make excellent profits this year and look good on the balance sheet if it cuts customer service standards to increase productivity, fires 30% of its staff, cuts its marketing budget by half, fails to invest in product development and cuts all of its IT development budgets. The focus on short-term profitability will compromise the company`s long-term sustainability.
"Another key finding is employees are critical to the creation of value through good customer management. Companies that embrace this truth as the conduit to customer management boost their profits 100% relative to those that don`t.
"This year`s report was the first to draw the line of sight conclusion that corporate competence leads directly to superior business performance, through the intermediate steps of employee behaviour, customer experience with brand and through various channels, committed customers and customer behaviour. All of this is by way of driving through a systematic approach to customer management," he says.
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