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- Posted:
- 12:02 25 Jun 2001
- Topics:
- Customer Management
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.
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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.com
www.broadvision.com
www.bluemartini.com
www.chordiant.com
www.cisco.com
www.nortelnetworks.com
www.delanotech.com
www.egain.com
www.epiphany.com
www.epicor.com
www.frontrange.com
www.onyx.com
www.oracle.com
www.peoplesoft.com
www.pivotal.com
www.rightnow.com
www.sap.com
www.siebel.com
