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PRM vs CRM: Which strategy provides the better solution for long-term profit?

November 22, 2010 by Daniel Offer

Customer Relationship Management (CRM) has become increasingly popular in recent years and many businesses funnel large proportions of their expenditure into this discipline. CRM campaigns that specifically focus on customer interaction and consumer confidence have become an integral area of operation for many businesses.

But there is another discipline that many businesses overlook and it is one that can provide improved long-term profits if implemented correctly – Product Relationship Management (PRM).

PRM’s primary focus is the product and how it will provide continuous long-term profit. Yes, a business needs to persuade consumers to make that initial purchase, but once it makes a sale a business should not be chasing customers for further business — it should make the customer do the chasing. This is where PRM has an advantage over CRM.

CRM problems: Maintaining customer contact

CRM promotes the benefit of a healthy customer base and the importance of maintaining contact with these customers. Whether this is by email, post, or phone, the emphasis is on continuous promotion. After all, if a customer bought the last product they may well show interest in other products a business has to offer.

The problem with this system is the unpredictability of human behaviour. People move house, change their email address, and get a different phone number. So as efficient as a business’s CRM may be, there is no factoring for personal detail changes by customers.

So are businesses blowing their budgets hiring CRM experts, when they should be channeling their efforts towards supplying products that offer the potential of a continuous long-term revenue stream? CRM may not be the definitive answer to long-term financial profit, but PRM may well be.

PRM: Increasing a product’s afterlife

One of the biggest advantages with adopting a PRM strategy is that is allows a product to encourage its own future sales. This could be from something as simple as new must-have product accessories. However, the most profitable and successful PRM techniques are based around products that:

  • Include perishable components that will require regular replacement.
  • Have components that are manufacturer-specific.
  • Offer regular upgrades and fixes to keep the product in top condition.
  • Have warranties requiring the use of original manufacturer parts, or the use of approved technicians for any repair work.

If a business implements PRM into its marketing strategy, it should be looking to sell products that fit one or more of the examples above and ensure that it stocks and promotes any related products that consumers will require in the future.

For example, inkjet printers need ink. Many printer models will only accept replacement ink cartridges from their respective manufacturers and this means owners of a particular printer are forced to buy specific ink cartridges. The original printer sale may not have yielded a high profit margin but the continued sale of replacement ink encourages numerous profitable future transactions.

The same applies to replacement parts for products. Many products will use unique parts that can only be supplied via a manufacturer. These will be sold at premium cost. Customers are forced to buy these products when required, especially if they wish to ensure a warranty is not invalidated.

CRM drives businesses to chase customers and keep them informed through interaction and correspondence. PRM can force customers to return to a business because they need it. This is the main difference between PRM and CRM.

Can PRM and CRM co-Exist?

The simple answer is yes. A smart business will integrate the two principles into one plan, increasing efficiency and long-term profit generation.

CRM can be used to attract new customers and keep them satisfied. PRM will supplement this strategy by ensuring those customers keep returning for future purchases and transactions. Every time a customer returns, his or her contact details can be verified and updated.

Businesses may lose contact with customers through CRM alone, but PRM can help drag them back. Lost customers become contactable once again and a new CRM process can begin. It is almost a perpetual cycle: CRM encourages a purchase, PRM encourages continued transactions, customer contact details can be confirmed, and CRM continues unhindered by a loss of contact.

 

Daniel Offer is a partner in the Facebook messaging application Chit Chat for Facebook

A Truly Remarkable Business - One Worth Talking About

September 10, 2010 by Robert Craven

Where there’s a great experience then there’s probably great care.

Just been to Dans le Noir - a truly remarkable restaurant in London (and Paris).

What makes it so special and worthy of mention?

  1. You eat and drink in the pitch darkness. And it really is dark.
  2. Serving people are blind or partially blind
  3. After the meal they tell you what you actually ate!

Just think about it.

The whole concept challenges how you ‘see’ flavours and textures and how you relate to your food. It is mind-blowing. You have to go. It is like no other restaurant. And the “blinded guides” have to care for you while you are totally outside your comfort zone.

The experience is wild and challenging. Spending a couple of hours without any sight makes you re-evaluate your fortune at being sighted, think about what it must be like to be blind, and messes with your palate. You have little idea what you are eating. Crazy. The experience lingers for days.

My point. Dans le Noir is a true experience. You don’t forget it. You tell everyone about it. Remarkable. A business.  And it increases public awareness about blindness. 

If only more businesses could offer a true experience.

Thank you!

July 06, 2010 by Robert Craven

We do not say “thank you” enough.

Therefore we take people for granted. If people feel taken for granted they become less loyal. Is that what you want?

I don’t know why people don’t say “thank you” so much these days. Maybe it just isn’t cool to be seen to be thankful.

Maybe it shows vulnerability or frailty to acknowledge that you are grateful.

Or maybe the problem is that most words lose their value and their currency with over-use ("nice", "pro-active", "strategy" to name but a few).

Turning the situation around, I am constantly aware of how certain people seem almost incapable of saying "thank you". Why would that be? Maybe they aren’t grateful(?); but their inability to acknowledge my action actually hurts me.

So, when did you last say (and mean) the words “thank you”?

Your kids, partner, staff, customers, suppliers will all appreciate a sincere "thank you".

The cynical may say that I am just trying to put a deposit in the emotional bank account (or some similar weasel words), but actually I think that it is just basic common courtesy to acknowledge when someone does something for you.

Thank you for reading my blog.

Robert Craven of The Directors' Centre

Be different: Put your customer ahead of profits

March 22, 2010 by Robert Craven

OPINION, OR MAYBE EVEN A FACT!: You must be different from the rest.

FACT: We now live in an ‘experience’ economy

In today’s world, the big budget brands are treated with suspicion.  They now need to prove themselves.  Old World marketing tried to give different personalities to what were essentially similar products.  Think of the weak, wet stuff known as lager in the Eighties.  Nowadays, customers are inclined to think that if a product looks, sounds, smells, feels and performs in roughly the same manner, then it probably is roughly the same.  So, somehow you must create that difference that separates you from all the other similar products.

OPINION, OR MAYBE EVEN A FACT!: Brand preference has always been a function of perception, but now you have to try much harder to create (and maintain) the perceived difference.

The customer’s experience should be made to be unique in tangible, physical ways.  A corollary to this is that if your service is intangible then a powerful way of branding yourself is by creating tangible (and ideally memorable) experiences.

HOW DO I DO THAT THEN?: One way to deliver the difference is through the service experience.

‘Doubting Thomas’ consumers demand tangible differences in your product or service. 

OPINION: In a world where everyone copies each other, it takes a lot to keep your experience different. 

In our novelty culture, it takes even more effort to keep the customer’s experience fresh and surprising.  How is this to be done?

Robert Craven of The Directors' Centre

Why should people buy from you? Is customer service the silver bullet?

February 23, 2010 by Robert Craven

FACT: If you are the same as the rest then why should customers bother to buy from you?

SO WHAT?: Ignore the one-liner at your peril!  Wake up and smell the coffee!

In a world where competition seems to be everywhere, you need to separate yourself from the rest. 

FACT:  If you compete on price, only the customer will win – in the end the company with the lowest prices (and biggest buying power) will get the business.  This is no place for the timid.

SO WHAT?:  If you try to be the same as the rest, a ‘me-too’ business, it is incredibly difficult to survive in the long run.  After all, the only way you can differentiate yourself if several businesses are selling the same product will be on price.  And if you differentiate yourself on price then it becomes inevitable that you enter a price war – customers will chase the cheapest prices – those businesses with the biggest market share (and economies of scale) will be able to command better prices from their suppliers.  As a result, these competitors will be able to pass on those savings to customers while maintaining healthier profit margins than their competition.  You will end up cutting your profit margins, probably until you go out of business. 

Legendary, remarkable customer service will be your secret weapon.

Robert Craven of The Directors' Centre

Shoreditch brews up a dis-loyal community

February 08, 2010 by James Ainsworth

Shoreditch’s bustling café society is thought to be the first place to offer customers a disloyalty card in order to drum up business for local independent baristas and reward customers for trying new places in the area.

The loyalty card is a well-established consumer psychology tool but the idea of collecting stamps from eight different coffee houses in order to gain a free coffee was dreamed up by award-winning barista Gwilym Davies to combat the homogenised high street coffee culture.

The reason behind teaming up with fellow independent coffee shops arose due to the overwhelming demand and lengthy queues at Mr Davies' shop on the back of winning the World Barista Championship.

Initially he tried suggesting nearby alternatives that he recommended on a whiteboard, something that might be the last thing a small retailer might want to do in a very competitive and cost-sensitive industry. But as a supportive gesture for fellow traders and to help satiate the increasing lust for good coffee, it still wasn’t enough and so the disloyalty card was born.

Speaking to the Evening Standard, Mr Davies' business partner, Jeremy Challender, said: “There are a lot more places opening, and as prices are the same, it seems a shame a lot of people haven’t experienced high quality coffee. It’s totally different to what you get in a high street chain.”

The partnership has seen eight independent coffee shops join in with the venture which, if successful, could see the consumption of 45,000 coffees and a new culture of using local coffee traders and award winning baristas that are passionate about the content of the cup they vend.

As a retailer, would you try a similar scheme with fellow businesses?

Displaying 37 to 42 of 73 results

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