One out of
every two SMEs does not have an ICT strategy, according to research
by Computer Weekly in association with BT. To stand any chance of
capturing the potential improvements that a CRM system can deliver,
you’ll need to develop a solid business strategy. Sally Whittle
explores how you can devise one.
When Sony
Entertainment launched the PlayStation2 in Europe, customer service
was a number-one priority. Along with the usual marketing
campaigns, the company developed a special website for new
game-players, complete with online hints and a ‘Call Us’ button for
technical support.
“That might have
been a mistake,” admits Andy Barker, director of consumer services
with Sony Computer Entertainment. Sony’s technical support
department was bombarded with thousands of emails, ranging from
technical questions to new game ideas from ten-year-old schoolboys
in Norwich.
The support team
wasn’t able to handle the volume of messages, which led to some
genuine support queries being overlooked. The button on the website
was swiftly removed, but Sony is still keen to find new ways to
connect with customers. Says Barker: “This isn’t dog food we’re
selling here. We need to be absolutely aware of what experience the
customer has when they contact us.”
The problems
caused were temporary, and not too big a problem for a company like
Sony, but for a smaller company such a mistake could be
catastrophic. “Generally, small and medium-sized enterprises (SMEs)
have fewer customers, so losing a customer could be a really big
problem,” says John Coulthard, head of small business with
Microsoft UK. “That means customer retention and customer
acquisition need to be a core part of the SME’s business
strategy.”
Core
elements
Where do you start
when devising a customer management strategy? Coulthard advises
managers to devise a business plan covering three core elements –
opportunity, operations and finance. Opportunity is ensuring that
you have a product or service that people want to buy and
operations involves presenting the product attractively. Finance is
making sure that you can generate a profit from this business. “The
problem is that many businesses start with a good opportunity and
then focus too much on the finance side,” says Coulthard. “It’s
like juggling a knife and two balls. You’re so busy focusing on the
knife you risk dropping one of the balls.”
Customer
management incorporates every stage of the customer lifecycle, from
acquiring a customer to customer service during the transaction and
customer retention following the transaction. As a general rule of
thumb, Coulthard advises SMEs to dedicate 25% of their time, if not
resources, to customer management.
A customer
management strategy should basically look at every point of contact
between your company and the customer, and consider whether it can
be improved. “It could be as simple as getting sales staff to talk
to secretaries on a first visit to collect information like the
office fax number, or when the firm’s busy period is,” says
Coulthard. “Having that information upfront means you don’t have to
ask again, and that impresses the customer.”
In other cases, it
may involve using software to automate customer service processes
or to build customer records. Sansar Solutions, a UK-based
electrical components retailer, uses customer management software
from Netsuite to record all customer transactions in a central
web-based application.
“Basically, when
the sales team takes an order, they enter the details into the
software, and it will automatically generate a purchase order and
an invoice,” says Ash Thapar, the company’s managing director. “It
means we have one central place where all the information on
customers and orders is visible for everyone.”
Sansar buys
components from all over the world and sells them on to
semiconductor companies working in the Far East and India. Using
customer management software allows sales staff to enter and access
order and stock information from anywhere in the world. This speeds
up order fulfilment and reduces administration, freeing up time for
staff to spend with customers. “We’ve saved around £20,000 a year
because we don’t need the book-keeper,” says Thapar. “It hasn’t
necessarily increased revenue, but it has controlled costs and
allowed us to survive a really tough recession.”
Best
asset
Technology can
control costs but it must be used with care. Software may enable
your company to automate all of your customer processes, but you
should consider whether this is a good idea for your particular
business. “In many cases, personal service is the best asset an SME
has,” says Gill Hunt, managing director of consulting service
Skillfair. “People often buy from an SME because they offer a
different sort of service to the big enterprises. In that case,
using technology in the wrong place could actually harm the
business.”
As a rule, you
should examine carefully all customer processes and make sure your
technology will improve both efficiency and effectiveness for
customers. But remember that technology will not fundamentally
change your processes itself – you will likely need to invest in
both training programmes and other tools. “The most common mistake
companies make is assuming that technology can magically change the
business,” says Hunt. “Always start with the business, work on the
culture and the people, then look at the technology.”
Despite what the
salesmen tell you, customer management software can only improve
the efficiency of what you already do – it can’t make your
organisation more competitive or customer-friendly if the people
and processes aren’t in place to back it up. “You can’t do anything
with customer management software that you can’t do with a pen and
paper,” says Barnaby Harris, an IT advisor with Business Link. “It
just helps you to deliver your customer strategy more efficiently
and with fewer resources.”
With that in mind,
don’t buy software because it promises to radically improve
customer satisfaction or lower the cost of customer acquisition.
Consider what your customer management strategy is, and what goals
you want to achieve. Then look for software that will deliver those
goals.
When building a
business case for a customer management system, start by
considering the cost of the software itself. Customer management
software varies enormously in price, starting at £150 for Office
2003, which comes with business contact management features. For a
little more money you could get a separate contact management
application such as Act or Goldmine. For larger companies with 20
or more customer service staff, you may want to consider a
dedicated customer relationship management (CRM) package, which
will link into finance, logistics and other business
applications.
Calculating the cost
When calculating
the cost of customer management technology, don’t just count
licence fees. Consider whether staff will need additional training,
whether the software will need specialist installation or
maintenance, and what resources are needed to get it up and
running. For example, if you are creating an email ordering
facility, do you have the necessary staff and security systems?
At this point,
companies must have a clear idea of what benefits they hope to
achieve from the software, and how they will measure it. Customer
management is notoriously difficult to quantify, and many SMEs
operate on a hunch, says Elena Anderson, an analyst with Giga
Information Group. “The vast majority of SMEs don’t have clear
measurement metrics for customer management, much less the tools
required to measure results and diagnose issues,” she says.
There are a number
of metrics that can be used to measure the performance of customer
management initiatives, including customer retention rates, new
customer acquisition rates, customer satisfaction indexes and call
centre load, in addition to the more obvious revenue and sales
figures. Gartner Group recommends planning for monthly reviews of
customer relationships and metrics from the outset of a project.
Although this might appear cumbersome, Gartner claims that this can
lower the total cost of ownership of software packages by as much
as 25%.
Like the pills
that promise to remove pounds without dieting or exercise, CRM
technology has been touted as the cure-all for customer management.
But anyone who has ever used a call centre can testify to the
misery of dealing with an unhelpful agent who is almost certainly
using a sophisticated customer relationship management application.
“Effective customer management has to be based on a cultural
change, not technology,” says Elena Anderson. “You need to have
identified the new processes and new rules before they become a
barrier to the success of the project.”
Summary
For companies like
yours, customer management can be the key to survival. Listed below
are some tips about developing customer management strategies:
1. Don’t rely on technology to deliver a customer
management strategy for you. Remember, technology only delivers a
strategy you have already created.
2. When using customer management software, don’t
forget to include integration, operation and support costs in your
calculations.
3. Consider going it alone. If you need to
customise more than 10% of a customer management system, it may be
cheaper to build your own from the ground up.
4. Consider what information you need from
customers. It’s one thing to create a strategy to increase customer
penetration but another to execute on this. Ensure you have the
right data to deliver the strategy.
5. Don’t allow initiatives to run on and on.
Keeping projects short and snappy will ensure the closest possible
match to corporate strategy and cuts costs.
6. Remember to measure the performance of
strategies. What you don’t measure, you can’t count.
7. Deal with cultural and training issues. The
best CRM system in the world can’t compensate for poorly trained,
poorly motivated staff.
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