Recently, I got a call from the supermarket I usually shop at, asking if I needed a particular brand of hair colour. The last time I visited the store, the brand was not available, and so they were calling to inform me that the stock had arrived.
I was delighted for two reasons — one, because my brand was now available; and two, because my store had taken the effort to inform me. Needless to say, this incident only increased my ‘potential future loyalty’ to that store.
So, what was the company trying to do, contacting a customer like me? The answer lies in ‘customer relationship management’ or CRM.
What is CRM?
At its core, CRM is all about understanding and serving customers better. The idea has been around for a long time — our nearby grocers practise it by giving financial credit to customers, offering door delivery, and other services.
Today, CRM has become more sophisticated with the advent of information technology. Supermarkets use tools such as RFDs to track a customer’s purchase history, behaviour, and product requirements. This enables them to understand their needs and serve them better.
In my case, by informing me that my preferred brand of the hair colour was back in stock, the supermarket ensured that I did not move to another store seeking the same. Since they have access to the products I regularly buy through their database, they knew my product requirement.
Customer information
CRM can also be used to identify potential customers who may leave a business. One of my friends working in a big telecom company, narrated to me how they do this through CRM.
Telecom companies have access to their customer’s product / service usage pattern. This includes the volume and value of their telephone calls, their non-voice revenue, international usage and other information.
While tracking the density of messaging, if the companies find it dropping for a particular customer, it creates an alert in the system. Then, the company probes for other patterns such as increased internet (to check for possible Whatsapp messaging) and data usage. If they still find that the overall revenue stream from a set of customers is indeed falling, the conclusion they reach is that the customers are planning to move to an alternative telecom company (or use that in addition to the current one).
The sales team is then informed about these customers ‘possibly exiting’ the service in the near future. The team may then follow it up with a series of actions such as special offers, alternative plan options and so on.
Retaining customers
Overall, a strategy is worked out to ensure that the customer’s chance of staying with the telecom company is heightened. By doing this regularly, my friend said, the understanding about what behavioural patterns lead to customer defection, has increased. This, along with suitable follow-up steps, has reduced customer exit rates of this company substantially.
Peter Drucker’s quote, “The purpose of business is to get and keep customers” is simple, yet powerful. In today’s age, CRM needs a lot of investment in various areas — money, training required for people, and recruitment of right people, among other parameters.
But at the heart of it, CRM is all about serving customers better. While technology can help gain a better customer understanding, what the companies do with that information finally determines the success of CRM efforts.
And if a neighbourhood grocer is indeed able to do better on that front, then he will steal his customer’s heart.