Say Howdy to the World

The biggest threat to global business is the Income Statement. Think of the top line entry: Revenue. And if you’re a company doing business globally, that means global revenue. You want it. And your markets are bursting with possibility. Look at China, India, South Africa, Australia, the EU (hey, no constitution yet, but still they’re consuming frantically).

The problem is that the revenue line item is still a black box for most managers. Sure, there’s a lot of talk about global market strategies, but most of them start with lip-service to “localization” and then proceed directly to “managing customer value” — that is, firing unprofitable customers and cross-selling and upselling to the rest of them.

Sound familiar? You should also hear the ominous distant drums of the native peoples — and of your competitors — as they prepare to eat your lunch.

What’s Wrong with This Global Picture?

Global companies want to build profits by taking successful products and services and selling them internationally for a profit.

That’s not how it’s turning out. In fact, the race to be first in a market has proven expensive for many multinationals. Plus, brands that work great in the West (Tricon’s PizzaHut and KFC, Starbucks or IKEA) may not translate well to global markets. IKEA’s flat pack furniture — though attractive and cheap — is still so expensive relative to Chinese furniture prices that people will take an IKEA catalog to a local furniture maker who will then make a copy, from scratch, fully-assembled, for less than what IKEA can charge.

Of course, you can make money in the global market. The American Chamber of Commerce surveyed US businesses and discovered that three out of four are actually making money in China.

But how much of that revenue is from the rapid growth of urban middle class consumers with few branded options? Fast forward a few years and I predict the competition will heat up. China will be offering rock solid products at a great value, and with the brand equity to back up higher prices — and higher profits than many foreign firms.

If you want to find out how to drive revenues, start with the customer and make it local.

Value and Experience

Carrefour has gotten it right in China — and, in fact, they’re doing mass retailing globally much more successfully than the iconic Wal-Mart, earning twice Wal-Mart’s revenue. What Carrefour is doing right (in additional to grabbing and building as many retail outlets as it can in the big cities) is simple: They’re selling in a Chinese way to Chinese consumers. You can pull your own seafood from tanks. You can select from bins of fresh produce. It’s more like a Shanghai outdoor market than a Paris indoor one. That’s the customer experience the Chinese consumer wants. Plus, Carrefour’s produce and seafood are perceived to be higher quality and safer than other alternatives.

Carrefour leads in identifying and working within a local economy’s desired buying experience. In most markets, they offer higher perceived value (quality for the money) than their competition, and even though they are still number two in the world of retailing behind Wal-Mart, they can put equal pressure on suppliers to keep costs down.

A Strategy for Being Globally Forward

A customer strategy has to be built on a clear knowledge of the choices available to a customer. In the fast moving consumer goods market, a prospective buying can Google™ a product category and quickly get a short list of his or her top options. This is true in the West, and it will increasingly be true around the globe. (Not to beat the China drum too much, but they’ve just launched their equivalent of Internet 2, long before the US is ready to roll one out.)

With short lists in hand and wallet out, consumers will make buying decisions faster than ever, and will communicate their delight or disappointment just as fast. You can bet that Reichheld, when he wrote about the nonlinear effects of reputation The Loyalty Effect (1996) didn’t factor in the nonlinear effects of the World Wide Web — it’s not just that your reputation will be smeared a dozen times over by every disgruntled consumer, it’s also that the Web broadcasts that disgruntlement at the speed of light.

So, getting the customer relationship right is critical, in every market. This means your view of touch points should go far beyond the idea of cross-selling and upselling. In fact, most surveys now say that consumers are pushing back on cross-selling and upselling. They don’t like it.

Instead, touch points should actually convey your brand value in a way that integrates across those touch points, so that they reinforce each other in a way that is culturally credible and consistent.

In fact, one way to build brand value if you are not a big brand company, is to design your customer experience so that all your touch points convey your message, prove your loyalty to your customer, and are appropriate to the customer’s requirements. A simple message on a web site that says, “We value your privacy,” should be a credo for your call center: Don’t call people at dinnertime because we value our customers’ privacy. Unless - of course - the customer wants you to call them at dinnertime.

The key strategic points are simple: Figure out what your local customers really value and how they make purchasing decisions. Then figure out channel-neutral rules for expressing your values and ensuring a positive customer relationship. Finally, figure out how to give your customers an experience, across all channels, that is consistent, credible — and a better value than competitors.

The drill down

This may seem like obvious advice, but in fact most companies do get it wrong. Too much has been written about CRM as a “database marketing” initiative that helps create “portfolios” of profitable customers, while ignoring the negative relationship effects of database marketing and the blinders-on management style of looking just at profitable customers.

Part of the structural challenge of global companies is that they are leveraging their existing resources as a part of a “resource based strategy” (RBS), without first asking the extent to which marketing infrastructure actually scales well globally. You can get marketing intelligence in the United States using a standard set of multi-channel, multimodal tools (focus groups, online surveys, phone surveys, products development teams including customers, etc.). Will these work in India?

You can share data among your branches within a given country, but can you share that same data across any national boundary?

You can centralize your email marketing, direct mail and analytics processing. But how do you assess the results when the French hate giving personal information, the Chinese postal system often cannot find an intended recipient and analytics can’t help you deal with foreign currency exchange effects on buying patterns?

The CRM consequences are non-trivial. Every aspect of CRM, from IT and supply chain to marketing and strategy, must be reassessed in a global corporation. IT has to model customers differently across borders, and figure out how to align reporting. Marketers have to know the laws about sharing data. Sales people need to communicate sensitively. The event of strategy planning needs to become a habit of strategic thinking and measuring. Every day, your organization must get more focused on what drives market segments to buy.

Big brand companies with lots of retained earnings may be able to weather the storm as they goof. And they’ll want to weather that storm, considering that a strong Carrefour in Beijing means a much weaker K-Mart. But the cost of mistakes won’t be measured in CRM dollars spent. It will be measured in brand equity lost — and all the future lifetime customer value they had hoped to capture with a good CRM system. You might call this the Cost of Goofs Sold.

The Income Statement just hides way too much for the professional global manager. She will have to look deeper into the metrics, and wider into the markets, to find what really drives sustainable competitive advantage: A credible relationship with a loyal customer.

Paul Ward is a recognized authority on CRM, Perceived Customer Value (PCV), strategy and branding. He has been an invited speaker for the American Society of Association Executives, Cornell University and GreaterChinaCRM in Shanghai where he delivered a keynote address and for whom he is now a guru and training partner.Paul serves as the Vice President for Sponsor Relations for the CRM Association of America and on the Editorial Board for CRM Today. He is currently pursuing his global executive MBA with TRIUM, a joint degree program conferred by the London School of Economics, HEC – Paris and NYU’s Stern School of Business.You can contact Paul at paul@pkward.com. Company: pkward.com