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HOME by: Christian
Sarkar Not another catch phrase! Customer Relationship Management (CRM) may be the key to your company's future. Next time you see your mom, ask her what shopping was like when you were growing up. Chances are, the grocer knew her by name, knew which products she preferred and even delivered them to your home. Back then, bankers, retailers and grocers had genuine customer relationships. Your mother shopped at her favorite store, and no one could change her mind. Those days are gone, but thanks to a slew of new products and technology, companies are beginning to implement some of these best practices from the past. Your auto dealer calls you to remind you when your car needs an oil change. Your travel agent surprises you with a low rate to your favorite holiday destination even before you thought about taking a vacation. And surely your insurance company sent your son that safe driving kit the day he turned 15. The same kind of customization is now taking hold in the business-to-business world in the form of customer relationship management (CRM). Businesses are learning that it is significantly more expensive to pursue new customers (up to 10 times more, according to a Gartner estimate) than to sell to their existing customers. The approach is simple. A company ultimately seeks close relationships with current and potential customers, building long-term profitability by gaining a greater share of a loyal customer's business. The focus in not on market share, but customer share - winning more and more of a profitable customer's business. How is this done? A company continuously expands its understanding of a customer's current and future needs, and customizes its value proposition to meet them. To achieve these goals, companies are investing in CRM technologies that can help them collect, consolidate and analyze enterprisewide customer information to build customer profiles for use by the entire organization. Historical Perspective "CRM evolved from early attempts to manage customer information," says Donna Fluss, business applications research director at the Gartner Group. "Companies [looked] for ways to automate their interaction with their customers. They started tracking inbound and outbound sales. The focus then moved to customer service and distribution, followed by marketing. Unfortunately, these different groups didn't, and many still don't, talk to each other." Confirming Fluss's assessment, a recent study of over 200 firms by the Economist Intelligence Unit (EIU) found that product and geographic divisions often compartmentalize their customer service activities, leading to inconsistent customer care. Companies are, however, working to reverse that trend, as the study also indicated that over the next five years, corporations expect a 100 percent increase in their use of CRM technologies to interact with customers. Front Office "Delivering world-class customer service often means having the right information in the right place at the right time, delivered quickly with a minimal number of keystrokes," says Fluss. Too often, companies find themselves with too many applications used all over the organization that do not contribute customer or product data to a centralized repository. According to Fluss, there is a new convergence around the customer: "Sales, marketing, service and e-commerce all work together." Fluss sees the combination of back-office and front-office functionality becoming very powerful. "For example, imagine a pharmaceutical company that has a doctor customers can consult with on the phone. We all know how hard [it is to talk with a doctor]," laughs Fluss. "But imagine what an opportunity that is [for the pharmaceutical company] to cross-sell, up-sell and merchandise a new product." Gartner's 1998-2000 Front Office Architecture model highlights her point (see figure below). The integrated components of the front office are:
Back-Office Integration Judy Hodges, cross-industry applications research manager at International Data Corporation (IDC), agrees with the model. "With an integrated CRM system, companies can extract massive quantities of data about their customers [from their customers] - learn about their preferences, figure out what campaigns are working, personalize offerings...the list goes on and on. And integration with the back office makes tremendous sense. Let's say your sales system is hooked up to your finance module - you now know what the financial status of a customer is, you know what their credit rating is, and significantly, finance now has a handle on sales projections coming down the line." The integration of front- and back-end suites has also changed the enterprise resource planning (ERP) landscape. "ERP companies are rushing to partner with, acquire or provide CRM solutions of their own," says Hodges. "Companies have been on a buying spree: Baan bought Aurum, Siebold bought Scopus, [and] Platinum bought Clientele. PeopleSoft has partnerships with Siebold and Vantive, and Oracle and SAP both are focused on their new CRM products." CRM and the Internet CRM strategies are in large part Web-enabled. "You can't have a world-class customer support function without an adequate Web component," emphasizes Gartner's Fluss. "The simplest websites make information available to customers, while moderately advanced sites allow customers to submit trouble tickets and resolve problems. The age of the passive site is [fading], and interactivity with organizations that are servicing suites, legacy systems and the contact center is now critical. Organizations that do not exploit the self-service capabilities of the Web will find themselves stuck in a losing battle against increasing calls and costs." The Web, as we all know by now, is an attention-driven business. Businesses must manage customer attention by fulfilling customer needs rather than simply streamlining customer transactions. According to a recent Forrester report, a new breed of "personalization" company has emerged in this niche market, dedicated to helping customers develop individual profiles, build preference libraries and create advanced content management strategies - ultimately leading to the creation of efficient customer self-service. According to Forrester, the cost of personalization for a company can be as high as $5.5 million, a cost that is cited as low when compared to traditional customer service channels. As a result of personalization, Cisco Systems, for example, slashed the cost of processing a customer call from $45 to $1.50 by switching from the telephone to the Web. CRM Case Studies CRM tools are being introduced across virtually all industries to reshape the way customer interactions take place. At Whirlpool, an antiquated pricing process stifled company profitability and frustrated customers. Using over 180,000 cells on a spreadsheet, one of Whirlpool's Excel-based pricing systems required different applications for each pricing component. Manual re-entry, constant repetition and 15-day pricing blackouts for price-book printing were standard procedures. Now that a CRM solution has been implemented, communication is seamless between the previously fragmented components of Whirlpool's pricing process. CRM technology has enabled staff all over Whirlpool's front-office chain - from account managers in the field to sales leaders, distribution and on-site marketing at headquarters - to leverage the company's most strategic vehicle of profitability: pricing. Working with consultants, marketing research giant ACNielsen created a state-of-the-art CRM solution to provide sales and support personnel with a consolidated database of customer information. The database contains presentations, product fact sheets and other sales materials. Account team members, whether on site or off site, can work simultaneously on the same system, assuring consistency and continuity. As a result, customers receive faster, more attentive service than before, and salespeople follow up on new leads more quickly and effectively. The system also gives managers a better understanding of client needs and identifies new selling opportunities. Visio, a business graphics software company, used a CRM solution to extend its customer center to the Internet, strengthening prospect and customer relationships. Among the benefits:
Effective CRM strategies are built on a foundation of integrated enterprise processes designed to manage, maintain, enhance and maximize profitable customer relationships. ERP vendors are beginning to move into this area, so expect to see some fireworks - both in the marketspace and marketplace. And in the meantime, maybe it's time to reevaluate your organization's front end. Related
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