Many managers think that the way to capture value through relationship marketing is to focus on the ‘good’ customers and get rid of the ‘bad’ ones. But there is a lot more to best practice relationship management than maximizing revenues on individual customers and minimizing costs to serve.
Many managers think that the way to capture value through relationship marketing is to focus on the “good” customers and get rid of the “bad” ones. But there is a lot more to best practice relationship management than maximizing revenues on individual customers and minimizing costs to serve.
As it happens, there are three important ways in which the current practice of customer relationship management (CRM) fails. First, companies forget that their relationships are not just with consumers, but with people who live rich and complicated lives. Second, because relationships come in different shapes and sizes, companies need to be cognizant of the requirements of diverse types of relationships beyond the loyalty ideal. Finally, companies don’t recognize that relationships are two-sided and that these relationships evolve with each interaction. These three failings, illustrated with examples, led to the identification of three principles: Get to know customers as people; think beyond loyalty; and take responsibility for relationships that are two-way.
This article provides guidelines for companies that want to improve the overall value of their customer relationships. First, companies should catalog and analyze the types of customer relationships they have, then develop a portfolio of relationships, optimizing those they have and identifying which new ones to focus on. Companies then need to determine which metrics to use to track the health and performance of those relationships, adjusting as they go. For most companies, the transition to a relationship-based approach will require a significant shift in mindset and practice. Managers will need to expand the type of data collected by their CRM systems, customize CRM solutions to the specific types of relationships the company is managing and retrain customer-facing employees to be sensitive to the relational clues they receive and send.