The Transformation of CRM from Supplier-First to Customer-First (Part 1)
Belying its name, the domain of Customer Relationship Management (CRM) has never really been about looking out for the customer.
The CRM game was, and still mostly is, optimized for supplier outcomes — be it call deflection, the cost of service, sales productivity, sales effectiveness, marketing ROI, etc. It would be naive to argue that the primary focus has not been overwhelmingly on solving for the costs, revenues, and profits of the supplier.
While that is perfectly understandable in a capitalistic market, the Supplier-First or Me-First model is also a surefire way to get disrupted and lose market share.
Circa 2017, the customer is unwilling to accept relationships not optimized for her. It is the customer who is at the center of the relationship, not the supplier. We see this in every industry ranging from financial services, insurance, and telecommunications to media, manufacturing, and retail. And Supplier-First companies are getting eaten by nimbler competitors offering superior products and services for less while caring more.
The CRM of the future (not just the tech, but the strategy, culture, and the business models related to how customer relationships are monetized) has to be squarely about solving for the end customer and creating deep loyalty and emotional bonding. As supplier business outcomes increasingly get pegged to their customer outcomes, it needs the business and practice of CRM to change from a supplier-first orientation to a customer-first orientation.
But, what does customer-first really mean? It means three things.
MISSION-DRIVEN VS. MONEY DRIVEN
Customer-First companies are mission-driven and optimize everything they do for the larger mission. (As Walt Disney once said: “We make money to make movies. We do not make movies to make money.”)
In contrast, Supplier-First companies are money-driven and optimize first for short and mid-term shareholder value. But in the absence of sustained loyalty, short-term profits and growth might not be sustainable and they run the risk of losing market share to competitors who can develop deeper customer relationships.
Making money is not the wrong motive. It is just that making it the primary and dominant theme is sub-optimal in the long term even for its own sake. The little things that constitute a superior product or service come into existence only when employees care enough to make that difference.
GENUINELY CARING VS. APPEARANCE OF CARING
Customer-First companies genuinely care about customers all the way from supply chain and engineering to sales, delivery, and customer service. Supplier-First companies give an appearance of caring, but really see customers just as a means to an end. Individual departments optimize for themselves than the customer.
SOLVE FOR TRUST VS. SELF
Customer-First companies value trust more than anything else. They do everything that adds to building trust and avoid things that reduce trust even if that means making less money in the near term. While Supplier-First companies will also claim to build trust, it is mostly a warped version of reality.
Customer-First is easier said than done. It is a fundamental way of being and goes to the very heart of the culture, its founders, and CEO, and what drives them to do what they do. If you are not Customer-First by native formation or intentional design, it is very hard to get there by accident, new systems, or cosmetic changes.
How do Customer-First companies differ from Supplier-First in terms of operations? The examples below highlight the general orientation and mindset of each type at different stages of the customer lifecycle.
MARKETING AND LEAD GENERATION
Supplier-First companies engage in hyperbole that can be misleading and often “push the envelope” on the truth of their capabilities. Customer-First companies use creative storytelling techniques but take pains to not distort the truth. They would rather not win business from a customer than misrepresent what they can do.
Supplier-First companies are outbound-heavy. They spend a lot on paid media to drive demand and build their brands. Customer-First companies use word of mouth and inbound as the primary means of lead generation. They typically spend a fraction of the marketing budgets of Supplier-First companies.
SALES MANAGEMENT
Supplier-First companies see sales as transactional. Their salespeople are incentivized to close deals that capture the most value for the supplier with minimal risks and most favorable terms. Their pricing is typically nebulous so that they can take advantage of information asymmetry to maximize margins.
Customer-First companies see sales as the beginning of a relationship. They provide prospects tools to engage and understand their products and services in-depth before they make the decision to buy. They provide as much information as possible to the prospect and are upfront about current product capabilities vs. what might be delivered in the future. Their pricing and business model is structured for clarity and transparency and seeks to align value captured with value delivered.
COMMERCE AND ORDER MANAGEMENT
Supplier-First companies tend to structure their offerings and order capture processes based on supplier constraints. They are very likely to over-choice or under-choice than doing what is needed to personalize the offerings and delight the customer. Their terms are typically filled with fine-print and seek to avoid as much accountability and liability for the supplier while seeking carte blanche rights from customers on using their data.
Customer-First companies see commerce as an interactive and immersive process where the customer has control, choice, and agency to understand what he is selecting and why including adequate information and examples of the impact of these choices.
Supplier-First Companies see supply chain and order fulfillment as primarily back-office functions and solve for cost, productivity, and efficiency. Customer-First companies see supply chain and order fulfillment primarily as customer experience driven and seek to continuously innovate on providing faster, cheaper, and more convenient methods for delivery, provisioning, returns, cancellations, and customer notifications.
THE CUSTOMER EXPERIENCE
Supplier-First companies aim for a “good enough” product or service experience that checks the relevant boxes. Customer-First companies aim for delightful experiences that go above and beyond customer expectations. Every little aspect of the product or service experience is carefully crafted across every touch-point. The experience is personalized based on deep intelligence and is constantly improved on based on data.
When something breaks down and the customer is unhappy, Supplier-First companies fix the issue according to established processes and standards. Customer-First companies, on the other hand, provide their front-line employees wide discretion to do whatever is necessary to delight the customer. They see the interaction as an opportunity to deepen loyalty and win back the customer’s trust.
THE CUSTOMER DECISION JOURNEY
Supplier-First companies see customer decisions along their life cycle (Should I buy or not, Is this an acceptable price, Should I upgrade, Should I renew, Should I cancel, etc.) as functional, price, and logic based. Customer-First companies see customer decisions as driven by emotions, trust, and how they feel. They take great pains to help the organization develop empathy and are maniacally obsessed in helping customers actually realize value and experience delight.
In Part 2 of this post, I will provide examples of Supplier-First vs. Customer-First in multiple industries, and also outline what this means for the technology vendors and practitioners in the CRM Eco-System in the long-term.
