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Working Paper

Creating a Superior Customer-relating Capability

George S. Day, 2003 [03-101]

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What capabilities distinguish customer relationship leaders? George Day finds that databases and software for managing customer information are necessary, but CRM initiatives based on technology alone have little chance of success. Instead, incentives, accountability, resources, shared beliefs, and openness to sharing customer information set leaders apart from the rest.

What makes some companies so much better at managing customer relationships than their competitors? Why are companies like Enterprise Rent-A-Car, Fidelity Investments, Orange Wirefree plc, Lexus, and Intuit able to stay more closely connected to their best customers than their rivals, in ways that significantly enhance their profitability?

This question was the basis of a survey of 342 senior managers in medium-to-large firms in diverse industries, supplemented by in-depth interviews with senior managers in 14 companies. The findings of both studies demonstrate that relationship leaders are able to leverage a superior customer-relating capability to offer customer value that their competitors can’t match.

The capabilities of relationship leaders were distinguished by: (1) an openness to sharing customer information, (2) a shared belief that customer retention was a priority for everyone, (3) incentives that emphasized customer retention, (4) customer-facing organizations with clear accountabilities for customer relationships, and (5) adequate resources to support CRM initiatives. The real pay-off comes when all these elements are aligned and reinforce each other. These conclusions held up in all types of markets, whether B2B or B2C, slow or fast growing, with many or few customers.

CRM technologies, including databases and software for coordinating customer contacts, did not distinguish relationship leaders from followers. This helps explain why firms are so often disappointed with CRM initiatives that are motivated to solve internal problems or neutralize a competitive advantage. Indeed, the installation of CRM technology should be the last step in the improvement process. Successful change comes from a deep understanding of customers’ needs and behaviors, followed by changes in the incentives and the organization’s structure.

George S. Day is Geoffrey T. Boisi Professor of Marketing at the Wharton School, University of Pennsylvania.

Included in the following collections:
MSI Reports 2003

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