August 24th, 2009 by Jessica Tsai

There are three ways to grow profitability (in order of popularity):

  • acquisition;
  • development; and
  • retention.

Thomas Cates, founder and president of consultancy The Brookeside Group, argues that the order is all wrong. “They’ve got it backwards,” he said (“They,” I presume, is your typical, sales-hungry business). CRM is “too often about technology, too often about big systems.” Cates is doing something bold — he’s putting the “relationships” back in CRM.

He highlighted the expenses of one company that spent the first third of its year paying for the costs of customer attrition, which he analogized to trying to fill a tub without a plug. “Plug the leak!,” he told the audience this afternoon at our CRM Evolution conference in New York this week. “Focus on retention first, then getting upsell and cross sells, then worry about new business.”

Satisfaction was the old standard — you fulfil your task, satisfy a customer, but that doesn’t guarantee consumer loyalty. With so many choices (50,000 products in your average supermarket! 300,000 products in your average Wal-Mart!), why would consumers ever tie themselves to just one vendor?

Cates describes the characteristics of any loyal relationship. They:

  • exist to meet each party’s needs;
  • are based on perceptions, not reality; and
  • are dynamic, always changing, and naturally drift apart.

Basically, if you really want a loyal relationship, he said, “get a dog.”

The Brookeside Group developed a Sales Intelligence System to measure “aroused motivation,” which basically helps you determine what stage on the relationship spectrum a customer is in his or her interaction with you, and how, depending on where the customer is, what you need to do to “arouse” them into action.

The system is broken down into six dimensions:

  • Integrity (satisfier): Are you a company I can respect?
  • Competency (satisfier): Are you (the company) skilled in what you do?
  • Recognition (motivator): Have you (the company) done something that makes me (the consumer) think my business is important to you?
  • Proactivity (motivator): Are you looking out for my best interest?
  • Savvy (motivator): Do I think you know my (the consumer) business?
  • Chemistry (motivator): Is our communication pleasant? Do I look forward to working with you?

On the other side of the equation, is the consumer Loyalty Index (ranked based on descending degrees of loyalty):

  • Loyal (a vocal advocate)
  • Value-added
  • Transactional
  • Antagonistic (a vocal detractor)

Cates argued that consumers with high “aroused motivation” exhibit significantly higher conversion rates compared to those with low around motivation, exhibiting behaviors such as:

  • 9x more likely to be responsive to a call;
  • spend 2.5x more; and
  • 4x greater retention rate.

“Companies don’t have relationships,” Cates emphasized, “people do.” Success is ultimately dependent on getting the right information to the right people (i.e.,  sales, marketing, or customer service), at the right time, so that they can best serve your consumers. To that extent, he added, “Departments can’t fix relationships. People do.”

Great Article!

I definitely agree that repeat customers should be the highest on the priority list – especially for small businesses who’s biggest hurdle in “acquisition” is establishing credibility and trust.

Good job!

Comment by Scott Annan — August 27, 2009 @ 4:37 pm

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