John McKean, Executive Director of the Center for Information Based Competition, reveals to Consumer Focus his views on CRM and one-to-one relationships.

John McKean is Executive Director of the Center for Information Based Competition, which advances the thinking on how firms in customer-intensive industries achieve competitive advantage from applying customer information. He is called on by the world's leading firms to guide them through the tumultuous process of transforming their information legacies into customer-based information competencies for the 21st century. He is frequently invited by the world's leading firms to spearhead global customer information forums. John McKean's real world customer information work is balanced with the academic rigors of guest lecturing at MIT Sloan Graduate School, postgraduate work at Harvard University, and a Master's degree in Business and an undergraduate degree in Economics.

The phrase Customer Relationship Management (CRM) has been hard to avoid, what is your approach to it?

Beyond the hype and guru speak; the essence of CRM is simple. Customer Relationship Management can be defined as a focus on simultaneously creating customer and shareholder value. If a firm can create high, relative customer value consistently and do it efficiently, it will win most if not all battles in its marketplace. Unfortunately, there is widespread confusion on the basic mechanics of CRM.

1. A firm must first understand the specifics of what drives perceived customer value at every point in the customer interaction chain as 70% of perceived customer value is created during the interaction, not in product features or functions.

2. 90% of the competency which enables the ability to create customer value is based on a firm’s ability to apply its information.

3. World-class perceived customer value creation comes from doing the “little, human things” for customers at each stage of customer interaction.

What do you believe is the most challenging part of CRM?

The two biggest challenges for being world-class in CRM is:

1. Understand in excruciating detail how your firm actually creates the attributes of perceived value at each unique interaction point relative to competitors’ value creation.

2. Investing in the non-technological aspects of information competency to balance the investments in the technological aspects of information competency. The seven aspects of information competency are people, processes, organizational structure, culture, leadership, information, and technology. The non-technological aspects of information competency determine 90% of this competency.

What would be your single most important piece of advice to companies building customer relationships in the digital age?

Use technology to create humanity in your customer relationships. That's it. There is the essence of business.

How should companies maximize the use of the Internet in its CRM model?

Everything a firm does on the Internet...

1. Must be based on a detailed understanding of your customers needs

2. Must increase your customers' perceived relative value of your relationship

3. Must empower the customer equally and consistently at every point of interaction

4. Must increase your customer’s ability to be more efficient and therefore more cost-effective in the relationship

5. Must enable the lower cost of interaction to be deemed the most valuable in the customer’s eyes.

And strategically...

1. Embrace the Internet without requiring that your firm fully understand the future power to holds

2. Experiment, Fail, Learn for tomorrow

3. Assumed your Internet strategy will completely change the day after you establish it

4. Today, view it as the best R&D money your firm has ever spent

5. Don't under funded it

6. Don’t require it to be a money-maker today (although it can be)

7. Assume that the Internet or some derivative of it will be 90 percent of where and how you interact with your customers in the future

What do you think will be the major drivers in the future of e-commerce business?

Getting the value proposition down. If firms enter the e-commerce world without first understanding their markets' customers’ needs and then creating a unique value proposition to serve those needs, they will ultimately parish in the e-world. The world of the e-commerce eats up firms who attempt to sell commodity type product and services at non-commodity prices.

The firms who truly understand the customers and then create a unique value proposition based on those very specific customer needs were actually see an uplift in the prices they can command in the e-commerce business model.

Our research has shown that firms who attempt to sell commodity type products in an e-business environment lose 35 to 45 percent of their margin relative to a non e-business/local market environment. Those firms who have gotten their value proposition right experience up to a 200 percent increase in margins in an e-business market relative to local market pricing.

Who do you believe are the CRM leaders of today?

No firm today, in my mind, stands out as a CRM leader. We are still in the very first stages of a CRM rebirth for any firm to claim CRM leadership. CRM has existed since the beginning of civilization and has only recently died (1900’s) while even more recently (1990’s) began its slow rebirth.

I do see pockets of brilliance in many firms around the world. In fact, almost every firm has pockets of CRM brilliance just waiting to be propagated. The only thing that is holding them back in spreading this CRM brilliance is the legacy of themselves.