Business Book Review

Saturday, November 04, 2006

Thinking Inside The Box - by Kirk Cheyfitz - KNOWING WHAT CAN BE CONTROLLED AND WHAT CAN’T

Second only to the new economy in its power to disappoint and mislead, the customer economy rose to erroneous and expensive recognition as yet another “brand new” phenomenon—another sign of relentless technological change in business—in the very late 1990s. It was as if customers had just appeared on the scene as the twentieth century was fading to black.
When all is said and done, there are only two components to any business: revenues and expenses. Revenues cannot be controlled; expenses, generally speaking, can be. Or, said another way, it is much easier for a business to know how it will spend its money, than it is to know how its customers will spend theirs. Often, managers allow themselves to be lulled into the belief that their revenues are going to do well no matter what. They allow expenses to increase in anticipation of projected higher revenues (budgeting for growth), or they let expenses overall grow faster than revenues (investing in the future), or they fail to downsize their operations when sales fall off (preserving the business). It is a manager’s priority to know what can be controlled, and to control it as closely as possible, and to understand what is beyond management control.

To increase revenue means remembering the old slogan that “customers are the boss.” It has never been truer. Successful business owners and managers have always known that the customer, not the CEO, is at the top of every organization chart. No business gets anywhere without knowing, listening to, and talking to its customers. Technology has not changed this. The underlying principles of paying attention to customers are not technological. Rather, they involve the challenges of communicating with other human beings, a traditional process that is an art, and not a science.

In his 2001 book, Good to Great, author Jim Collins found that technology, in fact, was not a significant factor in boosting companies’ performance from good to great. It wasn’t that technology had no role to play in a well-managed company; it was just that human factors were always far more important. “You can give two companies the same technology, but you won’t see the same results. Technology by itself is never a primary cause of either greatness or decline,” Collins concluded.

Customers are the only source of truly meaningful information about a company’s products and services, which products and services need improvement, what future products and services may be needed or desired, and how customers want to be approached, and through which media, to learn about a company’s products. Customer relationship management (CRM) has often been considered the state-of-the-art solution to building and improving relationships with customers. Worldwide, businesses have invested billions of dollars for advanced CRM software and hardware systems and for CRM consultants. Most of these billions, however, have failed to produce results.

What CRM failed to address was the real basics of customer relationships, which are providing products and services that meet customers’ real needs, together with a plan to make each customer contact and each transaction comfortable, easy, and rewarding for the customers. As the author points out, what is important is learning what customers really want, and then giving it to them, and to making sure they have plenty of choices—in what they buy, where they buy, how they buy, and how they pay for it all. Along with making sure customers have plenty of choices, it is also important to address them personally, talk to them honestly, and treat them well every step of the way. Discerning differences among customer groups, along with a plan to exploit those differences for greater profit, are together, the most critical part of customer relationship management.

Maintaining customer loyalty is a further critical component, for without customer loyalty, what does a customer do? They go somewhere else. “The customer is always right,” was first uttered by the now legendary John Wanamaker of Philadelphia in the l870s. This is a statement that is obviously untrue at least some of the time, but it does sums up an understanding of the customer’s supreme position in business. Paying attention to customers and giving them what they want is a critical plank in “the Box,” but it is not the entire “Box.” Business owners and managers also need to pay the right kind of attention to customers. The airline industry is frequently cited as an example. The frequent flier program of most airlines does a good job of recognizing and rewarding good customers with first-class upgrades, shorter lines, and faster baggage handling. But the airlines still deliver—on a day-to-day basis—an exasperatingly uneven level of overall customer service.


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