Core Competency in CRM? Outsourcing customer management could cut costs

“The entrepreneur fails to place factors of production in the uses where their value is greatest.”

Keith Hammonds writing in Fast Company asks a pivotal question — “Can big companies really care about customers?” Expanding his provocative question, a more universal question should be, “do any of us really care about the customer?” And if so, the follow up should be “how can any of us better demonstrate that we care about our customers?”

Throughout a transaction cycle, many vendor-customer experiences are awful. Especially during times like these, when companies cut back on customer service to achieve cost savings, even comics like Cathy and Dilbert satirize those experiences. This is despite a truth that we all recognize. When customers have good experiences, they are more likely to be part of a mutually satisfying transaction, and possibly more importantly ensure the probability of future transactions. Those good experiences stand out even more when everyone else seems to be less focused on that experience!

Unfortunately, too often our business strategy mimics the behavior that Ronald Coase, 1991 Nobel laureate in economics, described in “The Nature of the Firm,” a book published in 1937. That reality is the quote at the start of this column. Why is this? Our customer is just a means of what we do best — make a widget or practice law, manage a warehouse or prepare a tax return. Slower times means that we return back to our basics; we should be returning back to the basics.

CRM. During the 1990s, the buzzword of customer relationship management (CRM) developed. It described an ambiguous process that involved a hefty investment in technology, hiring a consulting firm, and some business process improvement. The goal was improving the vendor's control over and understanding how the customer interacts and behaves with its people and resources. The ideal model of CRM includes every aspect of customer interaction — pre-sale, fulfillment, and post-sale.

BPO. Business process outsourcing (BPO) was another buzzword of the 1990s. With BPO, a business could focus its energies on the aspects of business that were unique to its existence while leveraging the efficiencies of another business that had perfected the production of specific business processes. The most common of these is payroll outsourcing.

Combining the two. Recently, I had an informative conversation with Amit Shankardass. Amit is responsible for business intelligence, strategic planning, product line management, and corporate marketing for ClientLogic (www.clientlogic.com). Based in Nashville, ClientLogic combines outsourced customer service, fulfillment and certain elements of marketing to create specialized service offerings for more than 250 companies worldwide. Clients include Microsoft, Earthlink, Brookstone, Logitech, Sears, Sony, HP, and National Geographic Television. The services address the need that some of us have to outsource the business process of managing our customers.

For most of us, customer management is not something we know how to do well. We know marketing, manufacturing, distribution, partnering, and even delivery of services. It stands to reason that outsourcing CRM can offer significant cost savings and allow a company to focus on its core competencies. However, the real advantage of working with an outsourcer like ClientLogic does not just come from having them handle your CRM; this model combines CRM with a call center and a fulfillment house — all on the same premises.

For many of us, cost containment has become an organizational survival imperative. We need to hunker down doing what we do best and still look for opportunities to differentiate ourselves in the market. Customer management, that valuable interaction that drives revenues to our business, is an excellent place to look for improvement with one of two goals: One possibility would be to lower the cost of managing those relationships without allowing the deterioration of the quality or service that you currently provide. Alternatively, you may want to shine in those relationships by achieving higher levels of service and quality of transaction for the same current cost.

Why not? Simply stated, most of us are reluctant to relinquish control of any of our processes, especially when it involves someone butting in to how we interact with our customers. In addition, the hard dollars of paying someone else to do these common business functions goes against our instincts as managers.

Buying customer management services. There are some attributes of successful outsourced customer management relationships.

1. Quantify your specific whys at the outset. Defining these are reassuring arguments to the emotional why nots and can provide objective measurements for the success of the outsourced relationship. Appraisal criterion should include both elements of interest to you and to your customers.

2. Choose a vendor familiar with your industry and companies your size. You are paying for expertise and knowledge; make sure that you are getting them.

3. Make sure that you are comfortable with the vendor’s level of privacy and security with your customer information. Sometimes this may mean insisting on a facility dedicated to your operation. In other instances, simply dedicating people in a physically partitioned co-location facility may be adequate.

4. Since the vendor is an extension of your business, their staff must become familiar with your product or service. In interactions with the customer, they should seem to be a virtual extension of your business, not a scripted telemarketer. This will lead to the logical breadth of opportunity of every interaction to cross sell, up sell, and right size.

5. The vendor should embrace a core value of any customer management program – valuing customer retension instead of focusing on acquisition.

6. The vendor should be committed to technology investment. Technology is an enabler that brings efficiency to the customer management process, even for the experts. In addition, a vendor has a greater breadth of transactions and a larger base of revenue to amortize upgrades over.

Outsourcing customer management is not for every business. Still, learning about ClientLogic and others providing similar services should stimulate us to demand more customer-centric sensitivity as we look to reduce cost.

CHAIM YUDKOWSKY, CPA, CITP is Chief Information Officer at Textilease Corp., a uniform and first aid services company serving the Southeast of USA.

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