 What
is CRM
Customer Relationship Management, or CRM, is one of the most widely-used yet misunderstood
technology terms. CRM is a catch-all term used to describe software and related
technologies that manage customer-facing business functions (most notably Sales,
Customer Service and Marketing), business processes and data. Done right, CRM allows
companies to increase their revenues and profits while lowering the cost of marketing,
selling to and servicing their customers. The payoff is clear-by better aligning
business processes and managing customer data across all customer-facing functions,
companies can build successful, profitable and long-term customer relationships.
Unfortunately, CRM has a mixed reputation. One of the most often cited statistics
about CRM is how often these solutions fail to meet their objectives. There's no
denying that getting CRM right is a challenge. A CRM strategy is about much more
than selecting the right technology. It is a business strategy that may require
you to reinvent how your company does business.
Despite the challenges, CRM cannot be avoided. Many companies, including many small
and medium businesses (SMBs), have seen tremendous success with CRM. By taking the
right steps, your company can utilize CRM to succeed-for your company, and for your
customers.
History
of CRM
The term CRM emerged in the mid-1990s, to describe how Sales, Marketing and Customer
Service technologies needed to work not just within each department but also together.
Before CRM, some companies had deployed Sales Force Automation (SFA) applications
to automate the selling process and track prospect data, but the data often didn't
leave the sales department. When a customer called to complain, the Customer Service
department would be unaware of the customer's significant interactions with Sales.
From the customer's perspective, the company was incompetent and uncoordinated.
The result-a frustrated customer departing for the competition.
Early customer-facing applications-SFA, telemarketing, marketing campaign management,
help desk and others-served individual purposes, but could not provide the integration
for companies to serve their customers with a single face. In response, CRM suites
were developed with the promise to automate all customer-facing departments and
functions. While the idea made sense, the implementation proved difficult. Many
early CRM initiatives became bogged down by companies trying to do everything at
once. There are countless stories of companies spending millions of dollars and
years of time to replace their entire sales, marketing and customer service infrastructures
and being overwhelmed by challenges, sometimes technological, often organizational.
These CRM initiatives became needlessly complex and prohibitively expensive. CRM's
promised "360 degree view of the customer" seemed unattainable.
Fortunately, times have changed.
Steps to Success
1.
Recognize the Customer's Role
The phrase "Customer Relationship Management" is backwards. Successful firms don't
succeed because they "manage" their customers. They use technology to allow the
customer to manage the relationship with them.
From a customer's perspective, the companies that they most enjoy doing business
with are those that let them choose how the relationship works. CRM isn't about
trying to control or manage the relationship with the customer so much as about
providing the customer options to choose how he or she would like to do business
with you.
Companies that have effective CRM efforts become easy to do business with. Customers
return because they want to. Beginning any CRM initiative with this mindset is critical.
2.
Build a Business Case
Where's the money? How exactly is CRM going to pay off? Will it lower the cost of
selling/marketing/servicing? How much? Will it increase the effectiveness of your
selling efforts? If so, how do you quantify this, and what is the specific financial
return you can expect? What are the specific cost savings? What's the revenue benefit?
How will it be measured and accounted for?
So-called soft metrics should not be ignored (customer satisfaction and "360-degree-view
of the customer" are good examples). These may be real but can't be accurately measured.
But for CRM to be embraced across the company, particularly in those parts that
pay for it, hard-dollar financial returns need to be demonstrated and recognized.
Some examples are in steps 5 Sales, 6 Marketing and 7 Customer Service.
What to include in a business case:
- True total cost of the project, including people costs such as training, implementation,
customization, integration and other service.
- Expected revenue gains and cost reductions, and Return on Investment (ROI) percentages
and timeframes-how will the initiative pay for itself, and how quickly?
- Total cost of the technology, and whether it will be treated as a capital investment
or an expense (see Step 9 for more)
- Specific customer metrics (satisfaction, loyalty, service cost, etc.) to be improved,
and the financial gains expected
- Timeframe for change management, the costs of user adoption and training, and expected
effect on current and future staff.
The good news for making a business case is that the ROI is significantly and realistically
there. And CRM has become ever more affordable. Even smaller businesses can now
use CRM to implement strategies that had been possible only within larger organizations.
3.
Gain Buy-in From End-Users to Executives
Like any investment CRM will only pay off if it's used. Would your company invest
in new office space if they did not expect any employees to occupy it? Of course
not. Yet far too many CRM and related technology investments have been deployed
without taking the steps to make sure they're utilized. The key to utilization is
simple: the technology helps people do their jobs. If CRM doesn't help, or worse
it hinders, it won't be used, and it won't pay off. At every stage of CRM planning
and implementation, the users of the solution must be consulted and their buy-in
assured.
This doesn't mean that you need to take your sales team off the road to deploy SFA.
It does mean that at least a few selected representatives/advocates from the sales
team should be part of the implementation team. See step 9 (Who's on the Implementation
Team) for more. Keep in mind who the application is for. Since management normally
budgets for and approves CRM, their needs are fulfilled. However, the needs of the
users in Sales, Marketing and Customer Service are given less attention, or none.
This is common with SFA deployments-see step V for more. Management needs CRM but
so does your staff, and considering those respective needs appropriately will affect
your likelihood of success.
4.
Make Every Contact Count
A common mistake is focusing exclusively on the CRM applications while ignoring
the data infrastructure that sits below them. Customer data can be found in just
about every corner of every application within a company's IT environment-and most
certainly not just within the CRM application.
The benefits of integrated data are many:
- Smarter Marketing: by using ideal customer profiles, you can target prospects
- that look like your best customers-and recognize them when they make inquiries
- Sales Effectiveness: by targeting ideal prospects and keeping the sales force focused
on the right opportunities, you can increase overall close rates as sales maximizes
their time with qualified leads (and minimizes time with unqualified suspects)
- Proactive Service: by understanding your customers' needs and preferences, not just
for what they purchase, but how they prefer to be serviced, you can both dramatically
reduce cost(s) of service while enhancing quality, gaining loyalty, and promoting
cross- and up-selling.
What's most important is to be able to utilize all customer data-not just the data
within the CRM application. This is the most critical role for the IT department-insuring
that this integration takes place right from the start of the project. CRM is not
a stovepiped application. When embraced as a business philosophy of integration,
CRM success can soar.
5.
Drive Sales Effectiveness
CRM generally applies to applications for customer-facing employees, specifically
three groups: Sales, Marketing and Customer Service. The goal of CRM is to not to
simply automate each area independently but to integrate efforts such that customer
data and processes are handled in a coordinated, consistent manner.
The specific needs of each department must be independently considered as well.
With Sales, CRM efforts must drive Sales Effectiveness, often labeled a soft metric
but is critically important to making Sales-related CRM investments pay off. Sales
Effectiveness is seen in more granular metrics, including close rate, win rate,
order size and other metrics that measure how much revenue sales brings in, not
how little sales efforts cost.
Many early SFA and CRM applications were not designed to improve Sales Effectiveness-but
for efficiency. While efficiency and lowering cost of sales has a return, it does
not directly benefit the sales force. In addition, many SFA tools offer the "benefit"
of helping Sales management track the activity of the sales force, again an organizational
benefit but not for the salesperson. If the application does not benefit the salesperson,
he or she has little to no incentive to use it. When management has forced an SFA
application upon a sales force (sometimes forcing reps to stop using personal contact
management applications that had worked well for them) based on vague promises of
helping, the application did not help and sometimes hindered sales efforts. Salespeople
refused to use the application and the investment failed.
The perception that CRM has failed is often a result of this dynamic of misguided
metrics and unrealistic expectations resulting in low (or no) utilization. It is
critical to focus on helping sales, specifically on helping them sell.
6.
Measure-and Manage-the Return on Marketing
Marketing must also benefit from CRM but in a different way than Sales does.
Marketing's biggest problem is that they are regularly asked by management to prove
that they are providing tangible value to the company. This isn't the type of intangible
value (a stronger brand, enhanced product positioning) that marketers have long
promoted as the value of marketing; rather, it requires evidence of real financial
return delivered to the corporate bottom line.
While this in no way devalues the intangible benefits of marketing, it does force
Marketing to work more closely in particular with both Sales and Customer Service
executives to determine how their expenditures and efforts are resulting in higher
sales revenue, and increased customer loyalty, profitability and lifetime value.
In particular, CRM systems should allow Marketing executives to manage the overall
marketing/mailing list, directly contribute to the lead flow into the organization,
to allow them to participate in managing that lead flow as well as the movement
to and from the 'prospect pipeline' (such as keeping potential leads 'warm' via,
regular, multi-channel communications so that Sales can focus on 'hot', ready-to-buy-now
opportunities), and to provide the product, competitive and market information that
will provide the key to success in front of the customer.
7.
Leverage the Loyalty Effect
You have probably heard "It's 10 times more expensive to get a new customer than
it is to keep an existing customer"? While it's oversimplified, it's also true.
It also points to how CRM initiatives that enhance customer service can provide
measurable value to the organization. But before implementing technology, a different
view of customer service and its value to the organization must be put in place.
Most customer service departments are treated and compensated as cost centers, not
profit centers. They are managed on metrics such as cost of service and call volume
per service rep. Management and service personnel are compensated entirely on their
ability to lower service costs. It always makes sense to both measure and manage
cost of service, but a purely cost-based approach can work at counter purposes with
the broader goals of CRM. While customer profitability is affected by both revenue
and cost factors, the larger goal of Customer Service is to increase the former,
not reduce the latter.
For Customer Service to play a larger role in CRM and work more proactively and
effectively with Sales, Marketing and other parts of the organization, a new mindset
must be in place regarding how to do three tasks: manage service, give incentives
to service personnel, and deliver supporting applications. Metrics are important,
especially the rate of cross- and upselling, which takes place on service requests
and the correlation between satisfaction and repeat business. In other words, all
functions (Sales, Marketing and Customer Service) must work together for CRM initiatives
to be successful. That success is measured by the holistic value of customer relationships,
both in revenue and profitability.
8.
Build the Team
Making the best choices requires having the right team driving the decision. You
must assemble the team before you select the technology! Many companies do the opposite
and find themselves with technology decisions that are inappropriate or unsuitable
for their business and technical requirements. This leaves a frustrated team trying
to retrofit an investment that shouldn't have been made.
Begin with leadership. A CRM project has a better chance of success with an owner
of the implementation, technology and strategy, who is the internal CRM advocate
and rallying point for organizational momentum. The leader should have a cross-functional
team that encompasses needs and perspectives from business-critical areas other
than the leader's. The team should include at least one representative from each
of the following areas:
- Sales
- Marketing
- Customer Service
- Finance or Executive Management
- I.T.
While important, leadership and team concerns shouldn't become the focus. For example,
in an SFA-centric deployment, Sales would no doubt lead the project (with support
from IT) but both Marketing and Customer Service should at least be aware of the
project at a detail level, so that they can tailor and integrate future efforts
in their departments to utilize and work with the applications and the data they
produce. Without participation across the company, the 360 degree view of the customer
will not happen.
Involvement from finance or executive management ensures financial issues are factored
into CRM decisions. This has the benefit that investments are subject to approval,
and that tangible financial benefits are agreed upon beforehand and incorporated
into the investment approval criteria. Finally, while IT rarely should be leading
the CRM process, they must be on the team. They will have to support the application
and integrate it with other business systems.
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