The Three Ages of Customer Business

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Browsing through the programme of the IIR Customer 2007 conference in Düsseldorf, where I am presenting in May, it struck me that there were three different philosophies of CRM on show. The philosophies are quite distinct, are associated with different industries and correspond to what I increasingly think of as the three ages of customer business.

Yesterday: The Customer Relationship Management Age

This was the age of traditional CRM. Back in the 80s and 90s when companies thought they could rule the world with over-engineered technologies like SAS, Siebel, SAP. Like mathematician Hari Seldon in Asimov’s Foundation science fiction novels, companies though that they could manage customers through analysing the customer data contained in enormous databases. But companies didn’t know enough about customers to really predict their behaviour, and customers didn’t like being the targets of irrelevant marketing, being sold padded-out product bundles and the complete absence of service once they had handed over their money. That isn’t to say that traditional CRM wasn’t successful, it was highly successful, but it came with a heavy price of growing customer dis-satisfaction. It wasn’t a long-term solution to the perennial customer business problems.

Industries still strongly attached to CRM include data-rich ones like financial services, untilities and telcos. And of course it goes without saying that there are exceptional companies who have broken their industry mould to do things very differently.

Today: The Customer Experience Management Age

Today is the age of Customer Experience Management. Recognising that treating customers as targets to be milked for all they were worth had only served to alienate them, companies have sought to balance the relationship with customers through Customer Experience Management. CEM essentially gives a modicum of control back to the customer, through creating customer experiences based upon what customers actually want to do and how they want to do it. It has been spurred on by advances in the neurosciences which have highlighted the role of emotions during experiences and by the Internet which enables so many of them. But these are early days still and there are already signs that companies are finding it hard to organise themselves sufficiently to really deliver a superior customer experience. It is one thing to design a superior customer experience, but it is another entirely to organise all aspects of the front-office and partners to deliver it, the back-office and suppliers to support it, and training, measurement and reward to enable it.

Industries wrestling with CEM include service-dominant ones like airlines, hospitality, retailers, sports, even automotive.

Tomorrow: The Customer Co-Creation Age

Even though we are still in the middle of the CEM Age, companies are already recognising that it isn’t enough. Having being given a modicum of control, customers are hungry for more. They know what they want and they are increasingly willing and able to shop around to get it. And they are only willing to pay rock-bottom prices. Far-sighted companies have taken the advice of user-driven and open innovation pioneers Eric von Hippel and Henry Chesbrough to heart and are starting to work closely with lead customers to drive innovation, to open source marketing and to support customer advocates recommending products to others. And customer self-service is rapidly becoming the norm. Many of these changes are enabled by the Internet, by the ‘objectisation’ of products & services and by portals that bring together different parties in multi-sided markets (like CustomerThink).

Companies experimenting with Customer Co-Creation include EliLilly, P&G, 3M, Lego, Orange, General Motors and Mastercard. And there are many more. All household names with an eye on the customer-driven future.

Who knows where it will end.

One Possible Future: The Peer Production Age

Even as we see companies experimenting with Co-Creation, there are tentative signs that customers are taking matters entirely into their own hands and producing what they are other customers want themselves. Aided and abetted by start-ups that provide them with peer-production tools. Whether that is mashups of Internet Web2.0 applications, peer lending schemes for small finance sums or ‘infomediaries’ brokering customers’ purchases from external companies on customers’ terms. Is peer production the brave new world of customer business? Only time will tell.

With these three ages in mind, stop, and ask yourself a couple of questions:

First. What type of company do you really want to do business with? I thought so.
And Second. What type of company is your company? I thought so too.

You know what you have to do.

What do you think? Are the customer inmates taking over the business madhouse? Or will the business empire strike back?

Post a comment and get the conversation going.

Graham Hill

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