Every profit-oriented company wants to know what it should do to
get the most out of its customers but is CRM the solution? asks Liz
Warren
The concept behind customer relationship management (CRM) was to be
able to identify your most profitable customers and then manage
your relationships with that select group. Typically, this was 20%
of the customer base and CRM enabled businesses to maximise their
value to you, through cross-selling, upselling and by finding ways
to ensure they remain repeat purchasers. The last couple of years,
however, has seen the CRM concept being diluted to simply mean
providing effective management of all customer interactions,
through a 'corporate memory' and software-controlled processes that
span all the different channels used to communicate with
customers.
Original CRM - concentrating on key customers - became possible
when marketing theory met database and analysis tools that allowed
companies to segment their customers and target resources and
campaigns at particular segments. New CRM - integration between
different channels - became necessary when the number of channels
to the customer increased dramatically, with the advent of call
centres, websites, email and so on. Some CRM vendors suggest there
are as many as 14 different kinds of these customer "touch
points".
"Companies need to apply science to ensure the customer experience
across all those different channels is effectively managed," says
Chris Harris, chief operating officer of CRM implementation
consultants Extraprise. So one of the guiding principles of CRM is
that solutions are customer-centred: they give a company a complete
view of all its interactions with a particular customer. To do
that, organisations need to be able to capture and provide
information at all the touch points they have with customers.
CRM solutions also need to effectively handle all the
customer-related processes that employees might want to carry out
and to be able to offer them through multiple channels. "It's about
putting the customer in charge and making yourself available
whenever and wherever they want to do business, and doing business
on their terms," explains Phil Robinson, vice-president of
international marketing at CRM vendor Siebel Systems.
Correctly applied, CRM is supposed to "improve the overall
relationship between companies and their customers, enhance
customer satisfaction and therefore grant the company the right to
cross sell and upsell," explains Robinson. Siebel claims surveys of
its own customer base show a 20% increase in employee productivity
and a 20% increase in customer satisfaction, which together
contribute to a 16% increase in revenues.
However, analysts Gartner Group suggest that more than half of CRM
projects fail. Part of the reason for this figure may be that
companies have unrealistically high expectations of what can be
achieved, fuelled by the marketing hype of CRM vendors. Some CRM
projects have also undoubtedly failed because they were driven by
the fashion and hype rather than a sound business case. However,
Harris says it's possible to undertake a rigorous analysis of an
organisation's sales and marketing operations and make a prediction
of the return on investment a particular company can expect to
see.
Even where the business case is sound, many CRM projects involve
complex customisation and integration with back-office systems.
That makes them as prone to failure as any other intricate IT
project, with a common error being scope creep. Yet Harris warns
that CRM also fails when companies get too hung up on the
technology. "It's an enabler and a significant component in the CRM
strategy, but CRM is also a huge cultural change and you need a
change management programme," he points out. He adds that CRM
projects also fail because users reject the technology. "At every
touch point, people have to be trained and buy in and have
commitment to operating in a potentially very different way," he
warns.
It's also likely that companies aren't giving projects enough time
to demonstrate the benefits: even sales and service automation
won't deliver cost savings until it's bedded in, while it will take
several months of gathering and analysing customer data - and then
mounting targeted campaigns - for the impact of analysis and
segmentation tools to be felt. Alison Smith, COO of CRM consultancy
C3@Carabiner, adds that, in many cases, companies never get round
to implementing the processes needed to carry CRM forward once the
technology has been implemented. "Companies often collect customer
data, do the analysis and get insights about customers, but then
don't do anything to change the way the business operates," she
points out.
Michael Hegarty, CRM marketing manager in Siemens Communications
professional services group, says CRM can also founder because it's
driven from one function in the company. "Many organisations have
very insular groups working to their own agenda, but CRM has to be
company wide," he points out. "It involves sorting out turf wars
before you can achieve long-term success and get people working
together." Smith agrees: "We're starting to see new senior titles,
such as CRM director, which indicate that whoever manages the CRM
project needs to deliver it across the organisation and have the
seniority to do that," she says.
Another reason why CRM doesn't deliver the expected benefits is
that it can't handle all the channels a company is using to deal
with its customers. Many traditional call centre CRM applications,
for instance, seem to have struggled to accommodate Web and email
based contact. Add-on products are now emerging to tackle areas
such as email management.
The high failure rate may also reflect the relative immaturity of
the CRM market: despite all the hype, just 10% of companies
worldwide have implemented a solution, according to Robinson. CRM
has been most enthusiastically adopted by the deregulated telecoms
industry, where former monopoly suppliers are using it to defend
their customer base, while new entrants are using it gather the
market intelligence needed to persuade customers to move.
The financial sector - where there has been a spate of mergers over
the past decade - is also a heavy user, because it needs to gain a
consolidated picture of customers who have multiple products, to
spot opportunities for cross-sales and to provide the
infrastructure for telephone and Internet banking. In the public
sector, CRM has been taken up by local authorities moving to
citizen-centred e-government.
Yet CRM is not just for the biggest companies. "I think it goes a
long way down into the SME [small and medium enterprise] market,"
says Robinson. "If you're trying to grow your business, you need to
scale your customer relations operation." Paul Rosenblum, however,
vice president of product marketing at CRM vendor Blue Martini,
suggests the larger the company, the more compelling the case for
CRM, while small and medium-sized enterprises are likely to find
traditional CRM solutions too expensive and hard to
implement.
Equally, CRM is not for everyone. "If you're supplying vanilla
products, then cutting costs and being available is more
important," Hegarty suggests. "A company like Walmart will probably
never become CRM focused. It's more interested in location and
piling high and selling cheap." Rosenblum agrees that companies who
have very simple interactions with customers and add little value
to the transaction are not good candidates for CRM. "If you are a
commodity manufacturer and your differentiator is price, then
delivering a high level of service will just raise the cost," he
points out. "Equally if you don't have very many clients, you don't
need particularly sophisticated systems to manage them."
The CRM expert talks
Many CRM projects fail, thinks
Alison Smith, chief operations officer of CRM consultancy
C3@Carabiner, because companies see it simply as a series of
technologies and methods to be applied to various functional
departments and kept separate from other activities. But, Smith
argues, "CRM is about anything you do in a business to build
relationships with customers and it involves all aspects of the
business."
That means you will probably need to reorganise the company around
customers rather than functions - a heavyweight change management
project which will need high level sponsorship - before you start
plugging in technology to support those new processes. You also
need to drive your CRM strategy from your own business strategy,
rather than letting innovative CRM technologies push you in new
directions. "Technology can inspire strategies, but it shouldn't
drive the whole business," Smith warns.
Once you have a strategy, you then need to break it down into a
programme of bite-sized projects and start with areas which can
deliver value easily. These may not necessarily be technology
related and the programme as a whole might last five or six years.
"The risk people take is that they try to bite off a £20m project
in one go," Smith points out.
In a nutshell: CRM
Customer relationship management
(CRM) aims to help you manage the interactions with your customers
more effectively, with emphasis on identifying and nurturing your
most valuable and profitable customers. It promises to cut the cost
of serving customers while increasing their levels of satisfaction
and loyalty. The net result should be increased revenues and higher
profits.
Available types of CRM software
The software used to
underpin CRM has its roots in two separate niche markets - sales
automation and
customer service systems - which
emerged in the mid 1990s to support the standardised customer
management processes developed by corporates rolling out call
centres or with large direct sales forces. The integration of these
two areas created the first CRM suites.
More recently, new suppliers have emerged, offering automation for
the marketing department in the form of the analytical tools needed
to understand, segment and target customer groups. Many of these
vendors have since been acquired by the traditional CRM companies
as they look to develop complete CRM suites.
The latest development has been in eCRM tools: rather than
providing operational support to an organisation's employees, these
solutions are to be used directly by customers - for self-service
through a website, perhaps - and allow even small companies to
support large numbers of customers.
Leading CRM venders
www.applix.comwww.broadvision.comwww.bluemartini.comwww.chordiant.comwww.cisco.comwww.nortelnetworks.comwww.delanotech.comwww.egain.comwww.epiphany.comwww.epicor.comwww.frontrange.comwww.onyx.comwww.oracle.comwww.peoplesoft.comwww.pivotal.comwww.rightnow.comwww.sap.comwww.siebel.com