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.”
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.”
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.”
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.
This was first published in November 2003