The Daily Interview: Patricia Seybold on the Customer Revolution

Say what you will about the Internet, but corporate Web sites and chat rooms have empowered customers to demand better customer service, says Patricia Seybold, CEO of the Patricia Seybold Group, a consulting company, and author of The Customer Revolution.

Patricia Seybold CEO The Patricia Seybold Group

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Smart investors will take heed of those companies working harder to serve customers because these stocks are poised for strong earnings growth, Seybold says. And leading analysts and professional investors are beginning to notice market share, customer satisfaction, customer retention and other customer-centric data right along with P/Es, cash flow and other metrics, she maintains.

Here's a look into the companies that Seybold says are in tune with "the customer revolution."

TSC: Along with analyzing the standard metrics of a company and its stock, you believe investors should be paying attention to other important numbers: customer figures. What kinds of figures are you talking about, and who on Wall Street is actually doing this?

Seybold: There are a few financial analysts looking at them. They look pretty carefully at a company's customer base, the churn rate of customers, retention rate, growth rate, market share, the lifetime value of a customer. They will break out how much they've increased their revenue per customer.

The companies and the industries where the analysts tend to do this kind of number crunching are financial services, catalog marketers, telecommunications and Internet service providers. But I think it will expand beyond these industries.

Amazon(AMZN Quote), for instance, reports out many of these numbers. Part of [chairman Jeff] Bezos' acumen which I think is right-on is the fact that he is reporting and tracking very carefully his company's spending per customer, the growth of that spending per customer per quarter and his acquisition costs and retention rates.

TSC: We've been hearing a lot about customer relationship management, or CRM. But this conjures up boring notions of databases and call centers. Can CRM actually be interesting in practice?

Seybold: Absolutely. One good example is General Motors(GM Quote), which uses a CRM system to dramatically improve its interaction with customers based on trigger events, things like actively contacting customers after they've had a General Motors car for 12 months and reminding them it's time to service their car. In the past, three or four people would call a customer to remind them that their warranty is about to expire.

As a result, GM's service revenue shot up 30% and the warranty extensions went up 60%.

TSC: With all of the companies now laying off so many people, are any of them compromising customer service?

Seybold: Yes, exactly. Unfortunately, a lot of companies are doing indiscriminate belt-tightening -- layoffs across the board. Marketing and customer service are two of the first to go. The companies that are really savvy realize that customers drive earnings, both present and future.

TSC: While the Internet hasn't been lucrative in all applications, you still maintain that one of its greatest legends has been its impact on "the customer revolution." Can you explain?

Seybold: Because of the Internet, companies can now, cost-effectively, be in a relationship with every single customer. Even companies that never had direct relationships with their end customers, like the majority of manufacturers, now have customers coming to their Web sites essentially demanding information and the ability to make purchases.

TSC: Are some companies not leveraging, or otherwise not making the best possible use of, the Internet?

Seybold: Some companies are still a little bit out to lunch with what customers require and aren't even offering such basic information as where they are headquartered or where customers can get products.

Many manufacturers actually sell only a subset of their product lines online, sometimes due to conflict issues with their retailers, other times due to the misconception that the Internet is a specialty store. The Web should provide an entree into a company's entire business.

TSC: One of the dangers of all of this customer focus and Internet interaction is that it makes it easier than ever for companies to collect customer information. Are any companies concerned about privacy?

Seybold: Actually, lots of companies are collecting information about customers. It's legal in this country, but not generally so abroad. Privacy is a huge issue, and we've only really begun to see the very beginnings of customers gaining more control.

I believe that American companies are going to have to adopt European opt-in privacy standards over the next 24 months, where customers will have to actively tell a company that they want to opt into giving information about themselves, as opposed to having to opt out of such a practice.

We've already seen the backlash, with such companies as Doubleclick(DCLK Quote). They acquired a customer database and were combining customer profile information with these very detailed demographic databases, so they knew not only what you had done at a particular site but they could connect that to everything else about you.

This is a very common behind-the-scenes direct-mail marketing and advertising modus operandi in this country. It's actually illegal in other countries.

On the flip side, you look at a company like Amazon, which I believe is doing a very good job about allowing customers to see the information they have captured about you and vote on it. In fact, after having a look at all of the things that they have bought from Amazon, a number of customers are actually buying more because of that.eBay(EBAY Quote) also recently revised its privacy policy notice to make it clear that they can in fact sell customer lists if they should go out of business or buy or sell one of their stores.