Crm Pays Dividends

Software Magazine, Feb, 2001 by Scott Nelson

CUSTOMER RESOURCE MANAGEMENT, or CRM, refers to the concept of moving ownership of the customer up to the enterprise level and away from individual departments. These departments are still responsible for customer interactions, but the enterprise is responsible for the customer. To accomplish CRM, the enterprise brings automation to each customer touch point. Initiatives in sales automation, the Internet, point-of-sale (POS), and call centers are all pieces of CRM, but they are not substitutes for it. So the question becomes, How does a firm begin, or move toward, such a large initiative?

To start, firms have to be clear on what they are trying to do with CRM. One important difference exists between CRM as a concept and all that has gone before it. Previous initiatives, such as database marketing and sales automation, were concerned with making particular efforts more effective. CRM deals with making the customer process more efficient. This is more than just semantics. This is a fundamental change in the way enterprises relate to their customers.

However, to understand it, enterprises must begin to look at their processes. This is difficult because most organizations have never done it, and also because these processes--by their very nature--are not process-oriented. Marketing has always been viewed as more art than science and, as such, has not been oriented toward studying how it is conducted. Marketers often simply do what they do. So, when technology is brought to bear on the customer process, it is often difficult to know where to start. However, CRM cannot and will not occur until an enterprise has first examined its internal processes.

Understanding the Processes

The first aspect of process is understanding how to move a prospect to a customer. Traditionally, enterprises have not fully understood how this happens. They blanketed the customers with masses of marketing material, and some of it "stuck" and drove thc customers to buy the firm's goods or services. In the future, enterprises must think through this procedure more thoroughly--not in general terms, but by product, by segment, and by channel. Thus, enterprises need to understand how many communications, what type, with what message, and at what cost it takes to drive customers "through the front doors" to make a purchase.

The second aspect of process is understanding how to handle the channels. Increasingly, CRM is becoming an issue of channel management. Enterprises know that not all customers are profitable. What they do not realize is that not all unprofitable customers are unprofitable with different channel mixes. Conversely, not all profitable customers are profitable with different channel mixes. Therefore, enterprises need to begin to manage the marketing channels--how the customer will receive information--as well as the sales channels--how the customer will buy--to maximize each customer's profitability and, eventually, the support channels.

Understanding how to move a customer over time is the third aspect of process. Customers change over time. They go from prospects, to new customers, to mature--or repeat--customers. Most enterprises stop at the crossover from prospect to customer. Increasingly, enterprises need to think about where they want their customers to be in the future. What is the mature state of these customers, and what is the long-term marketing strategy to get them there? These issues change CRM from single-event contacts to long-term optimization exercises.

The fourth, and little understood, aspect of process is understanding how to satisfy the unhappy customer. Increasingly, enterprises are realizing that every contact with the customer works to either enhance or diminish customer satisfaction. Thus, enterprises need to have a process in place, not only to try to ensure satisfied customers, but also to bring dissatisfied customers back. This is a subtle change in strategy that causes the organization to view all points of customer contact as critical to the long-term success of the enterprise. Once this process is understood, enterprises can begin to think about the technology they require to accomplish the goals of CRM.

CRM Is Iterative

Once firms start to look at process, a magical thing begins to occur. They realize that CRM is not just about the technology. Process thinking causes firms to expand their thinking to strategy, tactics, and skills sets as well. The second step, then, is to understand that CRM is a complex interplay of these five areas. The rest of the picture becomes clear when enterprises realize that these five areas are all connected (i.e., technology can drive strategy; processes impact skill sets; tactics can be developed to utilize technology). As such, the interplay of the five areas will be iterative. This means that successful CRM practitioners need to keep updating all five areas as circumstances change.

The Web presents an effective illustration of this iterative interaction. For example, an enterprise may start with a strategy to use the Web for marketing. It buys a personalization package to create a new Web site, and its clients start to use it; however, complaints come in that clients cannot receive self-service on the Web site. The enterprise adjusts its strategy to provide more support. Initial coverage is provided by a packaged "e-service" solution. Then, after six months, the package is updated to allow for live chat and e-mail response management. This enables the enterprise to serve the customer in a different way, illustrating the point that processes need to be updated (e.g., the call center operators need new skills). The enterprise will get better at CRM as it allows the five areas to work together and drive each other.