The CEO dilemma: competition for customer loyalty is war. Winners balance broad customer need with tight corporate focus - Roundtable - chief executive officer - related article: Who's Who

Chief Executive, The, May, 2002 by Jennifer Pellet

Getting an edge has never been so tough. As competition intensifies, segment boundaries blur and pressure on margins mounts, more and more companies are struggling to combat commoditization by enhancing customer relationships.

Yet as many of the CEOs who gathered for a roundtable sponsored by Chief Executive and Cap Gemini Ernst & Young are quick to point out, that's no easy feat. "One of the issues that flows from commoditization is how to distinguish your-self from your neighbor," says Olive Mendelow, vice chairman and COO of industrial and commercial brokerage consulting firm Binswanger/CBB in Philadelphia. "You have to attach a certain value to your brand even though it's a commoditized product that you're selling."

Increasingly, companies seeking to meet that challenge are learning to excel at integrated marketing and to reposition themselves as customer relationship managers that not only produce products and services but repackage the products and services of other providers. At the same time, customer demands are growing ever more distinct, exacerbating the difficulty of delivering a positive customer experience, points out Phil Lawrence, director of wealth management for consulting firm Cap Gemini Ernst & Young. "It's the dilemma of any, any, any," he asserts. "Any product, any device, any time, any place--that's what the typical customer wants. How do you balance these channels out--whatever your value proposition or your customer experience decision is--to make money?"

But even as CEOs debated the difficulty of catering to wide-ranging customer segments, the pitfalls of cross-selling and the tricky business of measuring the value of client relationship management, many expressed optimism about the opportunities inherent in the mission of delivering value in a multi-faceted, multifunction and multi-channel world. "What I'm seeing is the gap between provider and customer getting closer and closer," says Mike Blum, North American financial services leader for Cap Gemini Ernst & Young. "There's a better understanding of customer desires and wants than there was 10 years ago. So I think we're getting there."

Escaping Commoditization

Phil Lawrence (Cap Gemini Ernst & Young): The biggest single shaping issue that we see in the marketplace is commoditization. This has been going on for a long time, but the intensifying connectivity and intensifying communication that we're all dealing with is accelerating and exacerbating it. How do we escape commoditization?

One of the ways is through customer analysis. At the core of that there are two paths: to be a customer manager or to be a product manager. Most firms focus on being a client manager. But increasingly, firms are trying to do both. They're saying, "We need separate operational entities -- a customer management side and a manufacturing side. On the customer side we'll offer complementary products from other vendors, or -- perish the thought -- competitive products. On the manufacturing side we'll sell the product wherever we can. We can compete against our own distribution."

One of the critical issues facing firms is what it means to be a successful customer manager. I liken the competitive landscape to a World War I movie, where you know every inch of the territory and you fight for every inch, just to stay where you are. But some companies spend huge sums to think about the big question: Is there a possibility to create the killer app, the killer model that will allow me to break through and take higher amounts of share? And the other big question is, are there new down market segments that you can go for, and, if so, can you do that profitably?

I know of some [financial services] companies that say their wealth management business now starts at $100,000 of investable assets and up. The question is, what is the value proposition for each of those segments you're going for, and what are the measurement techniques that you use for going for those segments?

Companies powered by the new technology are wrestling with which models are best. Back when you got $4 per online trade, Fidelity looked to get users over to the Web. And they were successful; they got well into 90 percent trading on the Web. Then they found out that for each trade online, investors were making three calls to the service center at $14 dollars and change.

That's catastrophic success. So people are beginning to worry about how to manage multiple channels to be successful. It's a real Goldilocks problem: "What's just right? What's too little? What's too much?"

Jerry Selitto (DeepGreen Bank): The days when a company designs, manufactures, markets, distributes and services a product are over. Three of those five functions are cost centers. They do nothing to add to profitability. The Internet allows you to outsource those to a company, industry or entity that has actually converted that to a profit center.

My company, for example, took our mortgage product down into its component parts, outsourced to best-practice firms almost every single function and tied those venders together electronically. We own the glue that holds that together. Customers can come onto our site, apply for a home equity line of credit and get a decision in less than two minutes. Why is that important? Because customers who use the Internet today want to conclude a transaction, and they want to do it in a seamless, frictionless environment.