Five or six years ago, I talked about using telecommunications for direct marketing at the Direct Marketing to Business conference.

Since I knew less than my audience about direct marketing to business, I chose the only sensible alternative: I talked about what I did know – in this case, the role of telecommunications in customer service.

The tricky part in a presentation like this is convincing the audience your subject and their interests coincide. “Think of marketing as the top of a funnel,” I told them. “Product quality and customer service are the other end. So long as sales and marketing pour new customers into the top faster than the rest of your company lets them drain out, your business will grow.”

The rest of the speech talked about giving customers direct dial-up access to order-entry and order-status systems, Electronic Data Interchange, fax-on-demand, and enhancing call centers with Computer Telephone Integration. The overall message: providing these exceptional service offerings adds an edge to a company’s customer retention efforts, and since your most likely next sale comes from the customer who just bought from you, marketing needs to get heavily involved in service.

Five or six years ago these ideas were new enough that I wasn’t entirely sure they were anything more than podiumware. Now they’re not just commonplace, they’re yesterday’s news. Everyone knows the importance of service, and the value of retention has been quantified: typically, preserving a current customer has five times the value of acquiring a new one.

Some highly oversimplified history. In about the mid-’70s product was king, American product quality was awful, and Japan, having adopted Total Quality Management (TQM) practices, kicked America’s economic rear-end.

It took a decade, but America eventually improved its product quality to a point where quality no longer won the pot – it was just the ante that let you play. Service became the new differentiator – hence my speech.

You can use a differentiator to gain marketshare or support higher margins. The Japanese used quality at a competitive price to gain marketshare in every industry it attacked. The old WordPerfect used service for the same purpose. Audi now touts both product quality and service as part of its premium image, supporting higher prices.

(The technology industry is something of a paradox in this respect – we pay ever-higher fees for ever-poorer levels of service. Disagree if you like, but first consider that this one subject keeps Ed Foster busy full-time … and his Gripe Line feature elsewhere in these pages doesn’t suffer from repetition.)

To stay ahead of the pack when it comes to providing service, companies have invested heavily in technology. In addition to EDI and fax-on-demand, we’ve pressed imaging, workflow, computer telephone integration into use, along with the World Wide Web which has superseded more primitive means for providing direct access to our systems. Has the investment paid off?

Interesting question. Since our competitors have made the same investments we have, we may all have wasted our money. More likely, our measure of success is keeping our heads above water in the ocean of competition in which we’re all immersed. Such are the hazards of finding suitable performance measures.

As happened to quality, service has reached a point of diminishing returns as a differentiator, becoming just another part of the ante. The ante, of course, is important and the systems you provide that support your company’s TQM and service efforts remain vital to your company’s future.

They’re vital. They just aren’t going to be enough anymore.

As CIO, (or future CIO) you need to stay ahead of the rest of the company in thinking how to apply technology to reshape your company’s strategy. Since it’s the nature of technology to provide or enhance capabilities, you need to anticipate the capabilities your company will need to lead the pack. After you’ve perfected product quality and surrounded your products with high-quality service, what do you do next? Look for another differentiator, of course.

That’s what we’re going to explore next week.