6.2 Strategies for managing customer information

6.2 Strategies for managing customer information

Large organizations routinely collect vast amounts of personal information about their customers through the transactions they conduct. Organizations such as financial institutions, health care providers, travel agencies, retailers, automotive manufacturers, and communication companies, among others, use this data in a variety of ways and for several reasons:

  • For targeted marketing based on individual preferences

  • To analyze customers for profitability

  • To evaluate their own service levels

Simply gathering information and storing it will not produce measurable business results; many CRM strategies have failed to achieve objectives because of difficulties in developing a strong understanding of who customers are and what they really want and applying this knowledge to customer relationship strategies and processes. (see Figure 6.2) Some companies build large multiterabyte (1000 gigabytes equals 1 terabyte) data warehouses to crunch information about their customers in an effort to determine their buying habits or product preferences. Oftentimes, correlating customer purchasing habits is not properly done-just because data can be correlated doesn't mean the relationship between one set of data and another is significant from a business viewpoint. Obviously, technology and business processes must be applied in a logical context to ensure that customer data are applied in a way to meet CRM objectives. (see Figure 6.3)

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Figure 6.2: Corporate functions and customer interactions.

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Figure 6.3: Enhancing customer service with technology.

CRM brings technology to bear on business processes to enable organizations to use historical customer transaction data to manage customer relationships better. CRM is based on a set of technology tools that allows organizations to capture, analyze, and apply large volumes of detailed customer data to achieve a fuller understanding of their customers and to make more informed business decisions. Informed business decisions are the ultimate beneficial result of successful corporate CRM strategies. Those companies that adopted formalized CRM strategies early in their corporate histories have been achieving measurable business results through CRM initiatives, but, as noted previously, others may have to totally revise their corporate cultures, even completely do away with their traditional ways of dealing with customers in their sales and marketing programs. Organizations that do not have a formal process for managing customers by monitoring and gathering historical transaction data and then analyzing this data to determine how to respond to each customer's needs will have to put major efforts and budgets into developing CRM strategies. (see Figure 6.4)

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Figure 6.4: Integrating customer knowledge with corporate functions.

6.3 Technology and business tools to support CRM

It is important to choose the right technology tools to support CRM. Direct and indirect supporting technologies include:

  • Data warehousing

  • Data mining

  • Database systems

  • Wireless communication

  • Voice-over IP

  • E-mail-based Internet communications

These tools have evolved to the point that they have made available many more channels for customer interaction and sources of data, all of which impact the call/contact center. Business tools that support CRM include:

  • Customer contact software

  • Marketing campaign programs

  • Channel integration

  • Product literature

Where legacy systems exist, the acquisition of "middleware" may be required in order to interface the legacy systems with the CRM solutions. The key challenge for the CRM project team is to select a series of tools that fit the needs of the business, to evaluate these tools, and to select the best ones. The IT department plays a very prominent role in this selection process and in the development, implementation, and support of a CRM solution and its integration with the call/contact center. The various technology tools involved should be seamlessly integrated into the IT environment. This aspect of a CRM strategy requires a formal plan to manage the selection of the tools—from data warehouse and database software to the business applications and processes.

CRM and the new marketing paradigm

CRM has several definitions within the industry, but one short definition best describes the process and the objectives: "the capability of an organization to evolve from a mass marketing model of millions to a market of one," that is, dealing with customers as if they were the only customer. This is a new way of thinking for many companies in virtually every business sector where customers often number in the thousands or millions. Managing customer relationships successfully in these large customer environments means learning about their habits and needs, anticipating future buying patterns, and finding new marketing opportunities that add value to the relationship. It also means using technologies that enable the data gathered to be useful in making better business decisions that will attract, retain, or motivate customers.

Successful companies make their customer relationships something the customer values more than anything else they could receive from the competition. How do companies do this? By examining their experiences with customers, including transactions and demographics, and every form of interaction—including a Website visit, a phone call to a call center, and a response from a direct mail campaign. Building the data and information technology architecture around customers—a customer-centric approach—ensures that they enjoy a seamless and rewarding experience when doing business with a company. This new marketing paradigm places the customer at the focal point of an organization's marketing programs.

Key elements

The two following key elements will ensure the success of a CRM strategy and meet the objectives of the organization to develop long-term customer relationships:

  • Build a system that allows tracking, capturing, and analyzing the millions of customer activities, both interactions and transactions, over a long period of time.

  • Create promotions, develop new products and services, and design communication programs that attract, reward, and retain customers. (see Figure 6.5)

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    Figure 6.5: Enhancing customer service.

CRM strategies are designed to manage all of an organization's interactions with its customers and to use information to maintain a single, long-term view of each customer across multiple channels—face-to-face or via phone, kiosk, or Website. These points of interaction, often referred to as customer touch points, may involve many types of transactions. And, of course, CRM includes customer billing, marketing, and other support functions that directly or indirectly interact with the customer. In fact, every department, division, and employee in an organization has a role to play in CRM. (see Figure 6.6)

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Figure 6.6: Getting customer feedback.

Managing customer relations using proven processes and technologies can maximize the revenue opportunity from each customer and create a foundation for satisfaction that will ultimately drive loyalty independent of the channel used. CRM can enable companies to maximize profitability by using "measurements" that quantify and qualify customers, differentiating between high- and low-value customers, with the objective of managing the lifetime value of a customer.

Customer knowledge through CRM

A successful CRM strategy can provide answers to many questions that every organization typically has about its customers: (see Figure 6.7)

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Figure 6.7: Integrating customer information.

  • Who are my best customers?

  • How do I attract them?

  • How do I ensure that I'm selling them the products and services that meet their specific needs and still make a profit?

  • How do I keep them coming back?

  • How do I manage relationships with unhappy customers?

CRM places the customer at the center of the organization and involves every function and department in serving the customer. Sales, service, and support functions as well as relationships with business partners form a continuum, because this is how these corporate functions are viewed by customers. When customers make purchases from a supplier, they believe they have a relationship with the whole organization, from sales to shipping and even to the CEO.

Companies that believed technology alone would solve customer relationship problems learned the hard way that technology is only an enabler. CRM implementations based on this premise failed because they did not change the corporate culture to permit the technology to perform its primary function: developing and retaining loyal and profitable customers. Technology's role as an enabler is to support the strategies, tactics, and processes that result from a defined, enterprisewide CRM solution. The creation and execution of a successful CRM strategy depend on close examination and rationalization of the relationship between an organization's vision and business strategy. If the customer is not at the center of this vision, the vision must be reexamined and altered to be customer-centric.

Customer data

One of the common problems many organizations share is integrating customer information. When information is disparate and fragmented, it is difficult to know who the customers are and the nature of their associations or relationships. This also makes it difficult to capitalize on opportunities to increase customer service, loyalty, and profitability. For example, knowing that other family members are also customers provides an opportunity to upsell or cross sell products or services, or knowing that a customer uses several sources of interaction with a supplier may also provide opportunities to enhance the relationship.

In building toward a CRM solution, the organization must analyze how well it is aligned to deliver the following core capabilities:

  • Customer value management

  • Prospecting

  • Selling

  • Collection and use of customer intelligence

  • Customer development (upselling and cross selling)

  • Customer service and retention

Ultimately, the success or failure of CRM depends on the capability of the organization and its employees to integrate human resources, business processes, and technology to create differentiation and excellence in service to customers, and to perform all of these functions better than its competitors. The customer is in control! (see Figure 6.8)

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Figure 6.8: Customer in control.

Shifting from a product focus to a customer-centric focus

In the e-commerce business world, a customer can switch to a competitor's product with a click or two on a Web page. A customer-centric focus—the best means of building lasting customer relationships in both the traditional and new ways of doing business—has become absolutely imperative in the new business economy, but shifting to a customer-centric approach is not a straightforward process, nor is it a natural one. The reason for this is that, in general, businesses are launched on the basis of a unique product or service. Initially, the focus is on building that product or developing that service and informing the marketplace of its availability and desirability. When another company eventually begins producing and marketing a similar product, the original company loses its competitive edge.

At this point, companies adopt other strategies to regain the competitive edge they had when they had a unique product or service. They begin streamlining operations to produce the product better, faster, and cheaper. But improved performance is a short-lived advantage because the competition inevitably applies the same strategy, resulting in a leap-frogging process common to many business sectors. Customer relationships then become more important than simply building a good product or delivering good service. Building good products is often easier than building good customer relationships, and although product quality is still important, it is no longer the key to sustainable competitive advantage when the competition's products are just as good. In the long term, the organization with the best customer relationship strategy will win out. And the call/contact center has to be a primary conduit for this strategy. (see Figure 6.9)

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Figure 6.9: Maximizing the value of each customer interaction.

Becoming customer-centric—that is, shifting from marketing products to building lasting customer relationships—is, as we have said, an evolutionary process. It cannot be done overnight and usually requires a major change in corporate culture. A fully customer-centric organization has the ability to successfully manage customer knowledge. Product-focused organizations use sales data primarily to report on progress in reaching financial targets. A customer-centric organization, on the other hand, stores, analyzes, and uses sales, billing, service, support, and other data in an ongoing relationship with customers to accomplish the following objectives:

  • Forge personal relationships

  • Increase staff awareness of customer importance

  • Improve the product development process

  • Deliver value-added service better than competitors

Customer value

Transforming customer knowledge into customer value can create a significant competitive advantage. For example, when high-value customers are identified and their needs anticipated, new value is created for them where it did not exist before. Ultimately, customer-centric organizations build customer loyalty, a customer response characteristic that leads to higher profitability. There are several ways organizations can categorize customers by their "value." Tracking revenues, cost, and profitability is not the only way to assess customer value. Another, more advanced method of evaluating customer value is by assessing their value potential, which has been defined as the willingness of customers to participate in the creation of products and services, sharing with them information and other resources and sharing control over the design and production of products and services.