Magazine article Management Today

Capturing Customer's

Magazine article Management Today

Capturing Customer's

Article excerpt

The battle for customers is on. In the next big software war the front office, CRM and the customer database are the heavy artillery

I'm going to need some jargon-busting. How about 'front office' for starters?

Front office means customer interaction and transactions - as opposed to back office, the behind-the-scenes production, logistics and administration. It's a retail metaphor from the old economy: front-office bank tellers and shop assistants, versus back-office cheque processing and stock reordering. The metaphor extends to customer interaction via mail, phone or in-person sales and service. In the new e-conomy, front office can mean customers browsing on the web, and e-businesses talking to them by e-mail and chat.

And 'CRM' and 'the customer database'?

CRM is very hot right now. It stands for 'customer relationship management' -- software that lets you automate the front office and make it more efficient, just like supply chain management in the automated purchasing and logistics of the 1980s.

To do CRM, you need a customer database, with details on who your customers are, when and what they've bought, when and why they've contacted you with problems, how they've responded toads and promotions, and so on. Ideally, you'd have this data on prospects as well as customers, and on their behaviour with competitors as well as with you.

Why is CRM so hot?

Three reasons: assets, competitive opportunity and the internet.

Your customer base and customer relationships are your company's most valuable assets. They are expensive and time-consuming to build. Customers fundamentally don't like to switch, unless given compelling reasons to do so. The easiest way to maintain and grow sales is to (1) keep your current customers and (2) sell something else to them. That's why mobile phone operators, AOL and BSkyB spend so much on customer acquisition, and why analysts focus on 'lifetime customer value'. And it's why McKinsey and Goldman Sachs partners have long lines of credit at the Savoy Grill.

That's the asset reason. How about competitive opportunity?

Most businesses do a poor job of tracking and exploiting those customer assets and relationships, so there's a huge competitive opportunity if you do it well,

HSBC's First Direct spends millions on advertising, but in five years has never called me up to figure out how to increase its [20%] share of my personal banking and investment business and is unaware of my relationships with other bits of the bank. …

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