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Identifying Profitable Customers

See the Company as Client

The Women's Market Investment

Customer Service Issues

Customer Promotion

Customer Acquisition

The Customer Money Base

The Benefits of CRM

How to efficiently communicate with customers

Vendor Requirements

Send Out Cards

Golden rules creating successful long term customer relationships

The customer management of relationships is a combination of processes, people, and technology. Notice that technology is the last of these. Despite the fact that 74 percent of U.S. businesses spent more on CRM technology in 2001 than they did in 2000 (as much as 50 percent more), fewer than half of IT managers surveyed by Unisys Corporation report a positive return on their IT spending. The survey of IT executives at 200 businesses reports 44 percent show a positive return on IT investments, 42 percent report a level return, and 14 percent a negative return.

Don Neal, senior vice president of marketing at Rapp Collins Worldwide, may say it best: “Whereas companies have much to gain from CRM, the pitfalls of spending before planning are real and perilous. Those that apply a great deal of rigor in analyzing their CRM goals and objectives will be the most successful.”

Certainly identifying, extracting, and transforming customer data into usable information to achieve critical business objectives requires technology. But the business objectives must be defined before the search for the technological solution starts.

Strategy

Through analyst fieldwork with their clients, research and consulting firm Gartner, Inc. saw that successful enterprises have become more aware of focusing on customer satisfaction rather than technological applications. Gartner identified eight distinct layers or building blocks used by the world’s leading businesses to reach excellence in CRM.

• Vision: leadership, market position, value proposition

• Strategy: objectives, segments, effective interaction

• Valued experience for the customer

• Organizational collaboration

• Processes: customer life cycle, knowledge management

• Information: data, analysis, one view across channels

• Technology: applications, architecture, infrastructure

• Metrics: retention, satisfaction, loyalty, cost to serve

Note that they ranked CRM technology next to last. They also conclude that too many CRM initiatives suffer from an inward focus on the enterprise, whereas the point of CRM is to achieve a balance between value to shareholders or stakeholders and value to customers for a mutually beneficial relationship. Their long-range prediction reinforces the argument for getting the strategy right before searching for the technology: “Through 2005, enterprises that use a strategic CRM framework to estimate, plan and promote their CRM initiatives while building up their capabilities in small piloted steps are twice as likely to achieve planned business benefits as enterprises that pursue projects without a framework.”

Others agree the question of technology comes at the end. Professor Adrian Payne of the Cranfield School of Management in the United Kingdom puts questions about the CRM process in this order:

• Process 1: strategic development process. Where are we and what do we want to achieve? Who are the customers that we want, and how should we segment them?

• Process 2: value creation process. How should we deliver value to our customers? How should we maximize the lifetime value of the customers we want?

• Process 3: the multichannel integration process. What are the best ways for us to get to customers and for customers to get to us? What does the outstanding customer experience, deliverable at an affordable cost, look like?

• Process 4: information management process. How should we organize information on customers? How can we ‘replicate’ the mind of the customer?

• Process 5: performance assessment process. How can we create increased profits and shareholder value? How should we measure our results, set standards, and improve our performance?[

Again, the technology issue is addressed near the end, right before final performance assessment. All of what David Scholes called the “good common marketing sense” comes first

A Good Example

One of the best examples of a company moving successfully to CMR comes from a Seklemian/Newell retail client. The company has a long and profitable history of efficient database marketing that produced sales, but those activities have not moved customers up the loyalty ladder and have not resulted in increased customer retention. When the firm made the decision to develop a CMR initiative, they did not start by looking for a simple technology solution; they began by taking a careful look at the current business environment and making a business case for CMR.

The company established goals and objectives at the start based on the company’s vision, a definition of the customers the company wanted, the current experience these customers were having with the company, and the customer experience the company hoped to deliver to the specified group. A study of current business requirements, work flow, operational processes, and their interdependencies helped to create a road map. From here they could see the factors critical for success, establish the strategic imperatives, and identify the management change that would be required.

Only after the new business plan, strategy, and deliverables were confirmed did the company start to identify gaps in the functionality of its existing technology. It was a full year of such planning before the company was ready to take their CMR initiatives to customers, and another six months of small pilot tests to prove their capabilities before any enterprisewide activities were considered.

As this is written, the company is about to roll the program out on a broader scale. They are confident that these preliminary steps—the rigorous analysis of goals and objectives and understanding of the management and process change required—will assure success of their CMR initiative.

Successful CMR initiatives must start with such a thorough analysis and a clear definition of business objectives to make a strong business case for the project. This must be followed by a study of the organizational and operational changes that will be required to enable your company to empower customers. Only after this strategic CMR framework is in place is it time to look for the final technology solution.