Martha Rogers and Don Peppers, the duo who coined the term customer relationship management and wrote the definitive book on CRM in 1993, are back with a new acronym-and a new book due out in June from Doubleday. BtoB recently sat down with Rogers, founding partner of the Peppers & Rogers Group, a management consultancy that is now part of Carlson Marketing Group, to discuss the topic of the new book, "Return on Customer." Rogers believes ROC is critical to the future of every company and warns that those that do not take it into account risk much more than a bad quarterly earnings report.
BtoB: What is return on customer?
Rogers: It's a managerial philosophy that will guide a company to make its decisions every day. There's only one source of revenue ever for any company of any kind, and that is customers. They are the scarce resource.
Wall Street is measuring and holding companies to whether they made their numbers this quarter. But what if we could and did penalize a company for all the future value they had to use up in order to make that number? Instead of just understanding what our current revenues are, we need to understand-by using return on customer-what the true cost of current revenues would be.
BtoB: Is return on customer more important than ROI?
Rogers: I don't think it's more important. It's a way to think about how to measure what both the short term and long term are, so that one of them isn't everything and the other one nothing. That drives either stupid behavior, or unethical behavior or criminal behavior. Very rarely does it drive brilliant behavior. What return on customer will do is drive behavior that balances the two.
One of the first things that we realized has to happen is that return on customer won't work except in a company that is behaving in the best interest of [both] its customers and shareholders.
BtoB:How would a b-to-b marketer implement return on customer?
Rogers: How much money we made with the customer company last year is important, but how much more did we make last year than the year before might be important. How entangled are they with us in terms of something that would be really costly for them to pull out and go start with somebody else? What share of their business do we have? How many of their people are on a first-name basis with our people? That's before we get into any industry-specific variables.
However, the calculation part is not the hardest part. The hardest part is making the [necessary] changes within the organization.
BtoB:Are some companies implementing ROC now?
Rogers: There are some companies that have put it into place without thinking of it as ROC. Dell [Computer Corp.] is one example.
A retail consultant was doing some mystery shopping for a computer manufacturer not named Dell. He was calling each of [the major computer companies] and saying: "I'm opening an Allstate Insurance office in San Francisco. We're going to need 64 computers, and we're going to need these configurations, and could somebody get back to me." They basically wanted to see what the response time was.
One of them had "someone we can put you through to right now." Another took 48 hours to respond. Another took six hours to respond. Then he gets to Dell and [the phone representative] says, "Just a moment. I'll put you right through to the Allstate customer manager. This person says, "Oh, this will be your third office in San Francisco. You've got 72 computers at the such-and-such street office with these configurations. Shall I get one of those office managers on the line for you so that we can talk about how their configurations have worked for them?"
We talk about share of customer. Michael Dell calls that market share, but in his definition each customer is a market. I don't care what he calls it. He's doing this stuff.