Using CRM as a Competitive Strategy
Customer Relationship Management serves many valuable purposes but is often dumbed-down to just being an IT tool or a contact management app. CRM is so much more than that. CRM is a strategy that fundamentally changes how a company operates and, more importantly, how they gain a significant competitive advantage.
The Three Basic Pillars of Competitive Advantage
In all sectors, there’s three basic strategies through which companies can compete with each other: operational excellence (the best performance), product leadership (the best product) or customer intimacy (the best total solution).
Operational Excellence is about delivering or providing the most reliable solution for the lowest possible cost without causing too much trouble for the client (think RyanAir). Through excellent operational processes, a company can distinguish itself from others.
Product Leadership is, simply put, having the best possible product on the market. Through constant innovation, short go-to-market times and a very strong brand image, an organisation can establish leadership in a certain category. Think Apple or Phillips.
Customer Intimacy is about delivering the best service where you constantly adapt your business based on the wants and needs of your customer. Knowledge about individual clients is key to utilizing this competitive strategy.
An Easy Way to Analyze Competitive Strategies
Using these three very basic pillars of competitive strategies, we can analyze companies by putting together a ‘competitive rose’ . This rose is a 3D-graph which represents how strong a company is in a certain field. For example, let’s compare the Audi and BMW roses.
Audi developed a strategy back in the 70’s to slowly climb up and be mentioned among the biggest and most prestigious brands in the world. They used to have a bad brand image, being easily compared to Japanese cars. From the 70’s up until now they have focused on two key pillars of the competitive strategy: the product leadership and the customer intimacy.
Audi has always pushed the use of new technologies and excellent engineering. The media honed in on their sense of detail and excellence, and thus Audi was placed among the bigger brands such as BMW (and they are even surpassing that brand image).
After a couple of years, the manufacturer attempted to sell to a new client group: young audiences. By using and expanding their knowledge of the client, they were able to successfully penetrate this target group and establish a strong brand.
BMW, on the other hand, is losing points on customer intimacy and it doesn’t look like they’re doing anything to improve it. Operational excellence is, of course, perfect (they’re German, remember?), but they are slowly losing client share because of their lack of deep customer knowledge.
Let’s take another example: Nokia and Apple.
Nokia used to be the biggest and best telecommunications company in the world. They rose during the 90’s in a climate of next to no competition. The big ones like Apple, Siemens and Philips couldn’t predict the advances in mobile phones and the only two companies who could, Ericson and Motorola, were badly organised and no match for Finnish giant Nokia.
Did you know:
“Nokia” translated from Finnish means “The Black One”
Nokia was an example of operational excellence, always one step ahead, always the latest and greatest innovations. They were also providers of the best products. Nokia was #1, no doubt about it .
But then, something went horribly wrong. With the introduction of the iPhone and other telecommunications companies moving to Android (as opposed to Symbian OS), Nokia lost their market share in just a few years.
They had lost their #1 position, they couldn’t keep up with innovations and, on top of all that, they didn’t provide what their clients wanted! They failed on all three accounts.
So Nokia did the best thing they could do: sell their handhelds section to Microsoft, back in September 2013.
This deal immediately flipped the competitive rose to their advantage. Nokia is now primarily focussing on their infrastructure division NSN. Due to their vast experience with hardware and their deep knowledge of that particular market and it’s clients, they are back in the game.
Where does CRM come in?
Short answer: customer intimacy or best total solution.
When you need deeper information about your individual clients, CRM is the tool that will help you.
In the beginning phases of building their business, most companies overlook customer intimacy. Nearly all organisations differentiate themselves through operational excellence or product leadership. And that is, of course, completely logical. The client-base of beginning companies is simply too small to take the competitive advantage through CRM.
However, most of the companies who survive the later phases do so by shifting their competitive strategy to CRM aka ‘Customer Intimacy’.
This is where knowing your customers really makes all the difference in the world. You know who they are, what they want, how they use your product or service, why they leave, why they stay and you can influence them accordingly. This is how you make the most of your client-base and how you can help the marketing, sales, accounting, support and management departments optimize their processes.
After all, CRM helps both with acquisition and retention.
Make no mistake. Although it’s important to keep pushing your product’s excellence and to keep innovating, CRM is not to be underestimated. It’s the most powerful competitive strategy you can implement.
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