Customers are from Mars, companies are from Venus

TALKING POINT

Lior Arussy

Strativity group founder and president Lior Arussy speaks on why CRM fails and frames a convincing argument for customer "experience" management in BPOs.

"Of late, there's been no dearth of customer relationship management (CRM) failure stories. I believe that CRM fails because companies do not learn to accept that they live in a different 'ecosystem' from their customers.

Let's look at the corporate ecosystem: it focuses on channels and costs, raw material and a bunch of things like that. There are two forces at work here: increase of margins and decrease of costs.

Customer in their ecosystems look for status, recognition, convenience and speed. None of the factors here exist on the company's planet. The two forces here are to reduce price and increase personalisation.

The biggest problem that companies do not want to face is an inherent conflict between them and customers. The past couple of years, companies dedicated their time to report their cost-cutting efforts to the stock exchange. Who paid the price for this? The customer. Why? Because customers now get a more regular, uninnovative product. Then companies have the gall to say they want to increase their margins.

Research shows that a majority of customers are willing to pay $ 20 to $ 30 more for a pair of custom-fit jeans. But jeans manufacturers are still forcing their customers to wear sizes that they decide for them.

The second problem is that companies treat customer strategies as a programme or an initiative. We call it the lipstick on the pig: we have an inefficient operation that we'll try to package nicely by advertising. Companies consistently focus on basics; they never question whether the core value propositions are any good.

What they fail to remember is that a relationship with customers is the choice of the customer, not the company's. Experience is where you can build it. How do you create a relationship? The building blocks are consistent positive experiences.

Instead, companies have consistently abused the system and by bombarding it with multiple offers like cross selling and upselling (selling two or more of the same product to existing customers).

Do they ask customers whether they want to be subjected to such ridiculous attacks? Is there any interaction here between the customers and the company?

The problem customers have is not with relationships. The problem starts with experiences and the core value proposition of the company and its products. Is it good enough, is it worth the money? Often, your own executives do not believe in justifying your company's prices. This is the crisis in customer strategy.

Customer strategy is not the responsibility of one department of the company. Our clients always say, "we are all responsible for the customer". But when the company's top three customers leave, who will get fired? The salesman. What they fail to realise is that CRM is not a nice statement or a poster that is not executed.

CRM can be used effectively in the business process outsourcing (BPO) industry. But it isn't. Let met explain. We were doing a customer satisfaction audit for a large airline in the US.

Even this airline, like every airline that has a good customer segmentation, had classified its frequent fliers under platinum, gold, silver and bronze categories. We went to the platinum customer call centre line for passengers who were flying over 75,000 miles. These customers were by far the most profitable, dedicated and the ideal ones.

When I looked at the system, I was surprised to see that if these customers were on hold for more than 59 minutes, their calls were cut off automatically. I asked, who is going to be on hold for that long? I was wrong.

I looked at the system and 400 people were waiting. At the end of our meeting we showed them the results. We said, it seems like you have a configuration error in your system since you hang up automatically on people.

The person in charge said it was no mistake; that was how how they managed the system. Every week, after checking the load on the system, if they had too many callers, they cut them off in 30 minutes. If they had fewer callers, they were cut off after 59 minutes of listening to the music. We asked, how could he do it? What if those being cut off were the most profitable customers of the company?

The call centre head said his main concern was the average handling time per customer (wait time plus talk time). If he answered 400 callers after 59 minutes of holding time, he would not get his bonus.

So, to manage the load he hung up on the callers and nobody was the wiser. "It's not in the numbers. The moment we pick up the phone after 59 minutes of waiting time, the average handling time goes for a toss," he said.

This was a case of a company mismanaging its customers. But often, companies hire out these activities to BPOs and BPOs have received a lot of flak. BPOs need to maximise the return on costs. So, instead of focusing on quality, they focus on quantity and productivity. The above example indicates how absurd the system had become.

In our interviews with customer care executives, two-thirds have told us that they do not have the tools or the authority to solve customer problems. Many of these people work for the top banks and telecommunication companies of the world.

If customer care executives are paid on the basis of productivity, that's what they give you, just like a salesman who would give you more customers. But are these customers of the quality that a company should seek? Customer care executives are not given guidelines on such issues. So they do the best they can. BPO executives need to be provided with ethics and training guidelines, quality monitoring and compensation planning. If you starve the BPO and put it on an aggressive incentive plan, its people will not give you anything better.

The mistake BPOs make is of focusing just on customer relationships and not the experience the customer has with them. Lack of innovation in this area is a big mistake. But a greater risk associated with that is commoditisation.

That is the No. 1 enemy. The way to tackle commoditisation is not by reducing costs, because you cannot outsave your competition. There is a limit to how much you can bring down costs. On the other hand, there is no limit to growth and innovation.

Today, companies have cut costs by outsourcing processes to BPOs. Where will the growth and innovation come from? Sure, you can go out and make acquisitions. But acquisitions are an unnatural growth strategy with at best, a 50 per cent chance of success.

Many Indian BPOs have to deal with the worst customers and the worst situations. This is because the Americans and the British are trying to increase their employee morale by offshoring the worst cases to India. But Indian BPOs, too, are not focusing on the quality aspects of their work, as they should have been.They do not try to understand their customers, and they are not adding value to the processes they have been assigned. Instead, they adopt a narrow, cost-oriented approach.

Cost is not a value proposition that can last for too long. That's because, on the one hand, BPOs have to deal with, say, the vice-president of purchasing from the client's end, who treats them like a commodity.

On the other hand, BPOs that need more people to grow are poaching employees from competitors. And when BPO companies steal employees from the competition, it's obviously for a higher salary. Every year, the client will ask for greater discounts, while employee salaries will grow.

There's a problem waiting to happen. The BPOs are all working on serving non-core activities; they are aiding their own commoditisation by not offering a single value-adding proposition apart from lower costs. The joke in the US is that India is selling warm bodies and headsets."