What is the difference between CRM and customer loyalty improvement?

【Customer Loyalty Column: 4th】

CRM (Customer Relationship Management) is an activity that has been traditionally tackled to maintain ties with customers. In order to form customer loyalty, we introduce the issues that existing CRM activities had and the elements necessary for improving royalties.

February 10, 2016

Customer loyalty

CRM (Customer Relationship Management) and customer loyalty
In some companies, customer loyalty is expressed as "bonds with customers", and the improvement of customer loyalty is regarded as the formation and strengthening of bonds with customers.

In this way, the customer loyalty improvement activity seems to be similar to CRM (customer relationship management, which is conventionally existed within the company, "customer relation management" in literal terms).

However, in reality, many companies are felt the problem consciousness that despite already working on CRM, they are not sufficiently connected to the creation of Royal customers.

In order to succeed with improving customer loyalty, it is necessary to clarify factors that past CRM activities have not led to royalty formation, and to avoid taking the same steps.

What is CRM (Customer Relationship Management)?
When we arrange again, we can explain that CRM is an activity that leads to better relationship building and improvement of satisfaction by making detailed correspondence according to each customer's circumstances based on customer attributes and contact history.

The concept of CRM itself is customer-oriented, and it is wonderful. However, at the actual operation site, the original concept has not been realized easily. As a part of marketing, CRM activities remain "efficient" in selling and are not connected to "deepening" the relationship with customers .

Background that the concept is not realized is technically restricted, such as not being able to manage enormous amounts of customer data, but we consider that there are serious problems in "indicators controlling activities" and "viewpoints of customer information" ing. Let's explain these two issues.

CRM issues (1) Increase in LTV (lifetime sales per customer) is the final goal
The first issue of CRM's task is how to set "indicators to manage activities".

Like the relationship of human beings to each other, customers and business relationships (or bonds) is deepened in a two-way exchange is repeated that "from the customer to the company," "from the company to the customer", we are strengthening those .

However, in CRM activities, maximization of LTV (lifetime sales per customer) , which is "from customer to company" is finally set as a goal to be achieved, and customers who are "from enterprise to customer" Value provision and satisfaction creation to the company is often not managed .

For example, in "RFM analysis" which is commonly performed in CRM, in order to realize LTV maximization, with respect to each customer

Recency (When is the latest purchase date?)
Frequency (how often you are purchasing)
Monetary (how much purchasing it is cumulative)
And analyze it to realize effective communication tailored to the attributes of the customer, but we are dealing with only the flow of money from the customer to the enterprise, and it matches the money from the company to the customer Whether value is really provided or not has not been visualized.

As a result, if there is a timing where sales are desired as a company side, measures such as CRM and sending a large amount of campaign mail will be executed as "effective measures" leading to achievement of goals. In spite of the fact that such measures are actually likely to produce customers that have been damaged royalties such as "they have been bought in the campaign and bought but later regretted."

"Effective communication" in CRM activities has the danger of becoming effectively "only for companies" without effective customer perspective. In order to improve customer loyalty, we will take advantage of CRM's reflections to introduce indicators that can be managed by "status of value delivery to customers" and "state of satisfaction of customers" and manage corporate activities It is important.

Problems of CRM (2) Measures are overwhelming with campaigns
Another challenge for CRM is in "viewpoints handling customer information" collected.

CRM focuses on LTV maximization as described above, and as a result, purchasing data such as who got where, when, where and what he bought is the center. Based on this purchasing data, we try to optimize communication with customers, but in fact the handlers derived from purchasing data tend to be limited.

As a background to this , the fact that the data managed by CRM bought a certain product "is the fact that the customer bought a certain product , " Why did the customer buy this product? "" after the one, "" purchase, such examination was carried out as, in the background, such as actually what was happy to try to use the products "do not come to look is because.

Customer's purchasing data is merely a "result that has already happened" and it is necessary to work on the psychology behind those actions to examine measures to promote customers' future actions, but in CRM such customers The viewpoint of managing information is missing.

As a result, appealing messages to customers born from CRM often converge to campaign measures such as price appeal common to all people, "point-up campaign" or "coupon preferential treatment".

In particular, this trend is noticeable in Internet companies that are making progress with the use of customer data from early on, and we are also often hearing stories saying "We are caught up with all direction campaign measures in place".

Challenges of CRM activities
Activities to increase "customers gain" are essential for improving royalties
According to "Management of customer loyalty" (James L. Hesskette, Leonard A. Shreensinger, W. R. Sasser · JR, 1998, Nihon Keizai Shimbun) , customers of certain products and services The value for customers is determined by the balance between "what customers get from their products / services" and "what customers spend to get their products / services."

What the customer gets and what he / she spends each have the following elements.

【What customers get from the product / service】

"Result" obtained through products / services (eg, in the case of limousine → comfortable movement to the destination)
The quality of the process the customer gets results (eg for limousine → driver's smile or kind response)
【What the customer spends to obtain the product / service】

Selling price of products / services (example: limousine → fare paid to driver)
Cost of obtaining products / services (example: in the case of limousine → calling for dispatch request)
Considering the above, in order to raise the value offered to customers and improve their royalties, there are two ways to increase customer loyalty, (1) Increase what customers gain, and (2) Reduce what customers spend There is a direction.

In the present age where things are overflowing and the competition is intensifying, companies that can realize both (1) and (2) at the same time are getting superiority, whereas the actual CRM is the LTV It is becoming an activity to repeat the campaign measures to maximize, and it tends to be emphasized only to reduce what the customer of (2) spends.

As a result, CRM alone makes it more difficult for customers to increase their value and build a competitive advantage.

While the selling price and acquisition cost of products and services are easy to see and quantify and manage easily, the "results" that customers are seeking for products / services and the quality of the process to obtain the results are based on customer's " Psychology ", and it can not be understood simply by looking at purchasing behavior of customers.

Why do customers want products / services of their company
What do customers think about "results" that our company's existing products and services provide
Does the problem occur in the process until the customer obtains the "result"?
Even if it takes some trouble, from the viewpoint of raising royalties, it is important to ask customers about the above questions and try to capture customers including subjective and qualitative information.

Two elements necessary for improving customer value
Two points necessary for creating a Royal customer: "Indicator" and "Perspective"
In order to succeed in royalty improvement activities without taking the same steps as CRM activities, it is necessary to monitor the part overlooked by CRM, that is, "value provided from enterprise to customer" among customers and company interactions, It is necessary to understand the subjectivity of the customer and increase the value for the customer.

The following two tools are important for taking such correspondence.

Correct indicator = Introduction of royalty indicator
Correct Perspective = Understanding Customer Experience

In the next column, we will introduce details about each element.