Product-Driven to Customer-Driven


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Carol Smalley
Managing Editor, CRMGuru

Posted 29-Apr-2003 07:31 AM
Posted by Carol Smalley (Editor) on behalf of Gary Hancock [[email protected]]

An organisation I’m working with is currently managing customer communication using a product-centric approach, i.e. each product manager manages proactive direct communications with his/her customers; there is some coordination of core communications (e.g. customer magazine) and planned cross selling. I’m trying to convince them that they should separate audience management from product management in order to achieve a more planned approach to maximizing customer value. Given that they are hitting their commercial targets in the current structure, they’re reluctant to invite the upheaval of a restructure. Do you have examples of organizations that have moved from a product-focused approach to a customer-focused approach, looking specifically at the organisational implications and the impact on organizational productivity/efficiency and, ultimately, customer value? Thanks for any help.

Carol Parenzan Smalley
Managing Editor
[email protected]

Francis Aglen

Posted 15-May-2003 03:00 PM
You don’t mention how the sales contact is organised—does each customer hava separate sales contact for different products? The classic example moving from a product orientated approach to a customer centric sales approach is IBM. There was a time when a corporate customer could be receiving sales calls from the AS400 team, the AIX team and the Wintel server teams all competing with each other for the same piece of business. IBM realised that this put customers in an intolerably confusing position and now have a customer centric approach to sales.

Marketing communications are instigated by individual product groups but executed through a single global agency to ensure that all campaigns adhere to corporate standards and support the core brand messages.

The real issue for your client, surely, is what works best for their customers? If the product centric approach means that customers are not able to aggregate the business they are doing with the supplier it means they will not be able to negotiate effectively and will be exposed to massively duplicated order administration (and so will your client).

The key thing is to find out how customers feel about it.

Carol Smalley
Managing Editor, CRMGuru

Posted 20-May-2003 08:04 AM
Posted by Carol Smalley (Editor) on behalf of Eric Raymond [[email protected]]

Wow! And I thought I was having trouble converting companies from a market based to customer centric approach to communications. You’ve got an uphill climb to say the least, but still attainable.

First, if your client has a Customer database, the question has to be asked, “What are we capturing this data for, both tactically and strategically?” If it’s to be used for product development and market research to guide advertising and marketing, then you can stop the drive to get to a customer centric level of communications.

One of the more effective ways we’ve helped companies identify the issues related to where they sit with customer relationships is to conduct a “Relationship Survey” which allows us to generate a “Relationship Strength Index.” This is the real crux of getting to the issue of what customers expect from your client. If the goal is to create a differentiation in services but consumers currently view your client as a commodity provider, you have an opportunity to put the customer in the drivers seat by giving them choices about the kind of relationship you’re going to have. Even surveying those customers who signed up for a service, then left prematurely can be surveyed to find out what can be done early in the relationship to create a more satisfying customer experience; translating into loyalty when the customer has choices further in the relationship.

We also create Relationship Roadmaps which maps the lifecycle of a customer based upon the products or services used and their own lifestage, and then we show how to leverage customer data and transactional histories to drive relationship building efforts. All designed, by the way, to increase retention rates.

Most product driven companies don’t differentiate much between customers. Market driven companies want to put people into clusters, segments, or buckets. Not much fun if you’re a customer. At the same time, most of these market driven companies have invested in CRM solutions, but are primarily using the data to drive personalization in direct marketing activities. Those companies that sell through a sales channel like dealers, franchises, brokers, agents, or field sales people have another challenge because of who really owns the relationship, and who’s responsible for driving the customer communications.

I’d suggest you find a company that can do some Relationship Surveying to build a case to begin migrating to a customer-centric approach. I believe most C-Level executives understand the need to focus on retention, loyalty and existing customers because most of them have signed off on the CRM investments. After you capture some data on this surveying, and put it into a Roadmap to view how customer relations are going to be managed, you can then drill down into each phase of the Roadmap (customer lifecycle) to the tactical communications. You can then make decisions on where relevancy will help the relationships, and where it’s not necessary because of the type of communication you’re sending. This will help build the budget and plan and allow everyone in the client organization to see how they’re involved in managing customer relationships. We call this “migration management” because we want to have a strategy that talks to a new customer just as we want to talk to a customer who is in the process of defecting to a competitor. They are not mutually exclusive, but a larger strategy can effectively manage how you get, develop, and keep customers. Your client can either acknowledge this important shift in marketing and give you some budget to build your case, or wait until a competitor begins stealing customers. Just a few ideas. Kind Regards, Eric

Eric G. Raymond
Sr. Director of Business Development
Relationship Marketing, Inc.

Carol Parenzan Smalley
Managing Editor
[email protected]

Vishal Sarkar
Member Council

Posted 27-May-2003 08:23 AM

From my experience on this, I think you may be able to present a case to the top management and subsequent product mangers to go in for a unified approach to customer communication. You can use various resources in CRM fora to project the importance of CRM and centralized communication. But that is only the first part of the process towards customer-centricity.

The challenge is to implement these recommendations in any organization. This is an issue more in the realm of change management. The idea of moving from a product-driven to customer-driven organization can only be accomplished by creating an internal structure in the organization which complements customer-centricity. Most common challenges that need to be met deal with –

-changing roles & new job descriptions
-changing power structure
-cutting across inter-departmental politics
-employee buy-in
-providing continuous feedback mechanisms
-designated point of contacts, etc

I think that your scenario will also need to address the above issues as you try to make a move towards customer-centricity. One must always remember that people resist change as change also brings in some turbulence. This is where clear top down communication on the vision and object of going in for customer centricity (or for that matter any change program) helps to smoothen things.

As the current product managers are achieving their targets, they may see no value in going for any change. Moreover, there are power issues that come in when trying to centralize communications. Employees may start getting a feeling that their jobs may become less secure with certain key functions being moved away.

These are just some of the organizational change issues that I think you should start identifying and resolving at the earliest. They take time and often neglected, these are the issues that decide the success of a CRM initiative.

Feel free to write in if you need more help.



Graham Hill

Posted 06-Jul-2003 01:07 AM

You may need to change the organisation structure, roles & responsibilities less than you imagine.

The answer to your problem lies in using a Customer Value Management approach to campaign optimisation.

Most companies are still driven by their products, not by customers. Each product manager will have growth targets set during the budgeting cycle and will have to deliver them with a mixture of outbound communications. This usually results in a series of product campaigns, that are driven by the order in which they wil be carried out and their expected response rates, not by an integrated customer view. So the first product campaign to run will ask for 100,000 customers names from the marketing organisation in order to achieve the 1,000 additional sales (with a historical 1% response rate). This process will be carried out for each successive campaign until either the company’s customers have been exhausted, (or until they are exhausted by the sheer volume of irrelevant junk mails!).

The answer to your problem lies in marketing campaign optimisation. This takes the customer targets for each planned campaign over the entire planning period and identifies which customers should be targeted with which campaigns to maximise value creation over all the campaigns. The identification of which campaign each customers should receive is driven by Next Best Product or Next Best Activity analytics and which campaign the customer will actually receive by optimisation algorithm’s (often linear or integer programming algorithms or more complex mathematics) in marketing optimisation software.

This targeted marketing campaigns approach produces an optimised campaign schedule which delivers the maximum value from the combination of planned product campaigns and targetable customers. And it really works. One leading European credit card company with a sophisticated direct mailing operation increased campaign response rates by 25% and reduced marketing costs by 10% using this approach.

And this is but the first step in a Customer Value Management approach to CRM.

Note that the approach hasn’t required any formal changes to the structure of the organisation, or its roles & responsibilities, just that customer segment managers work with product managers to set the constraints within which the optimisation process works. As companies become more customer oriented and the emphasis moves from finding customers for product campaigns, to finding the right product campaigns for the customer, then the CVM approach works just as well if not better.

Graham Hill
Independent CRM Consultant


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