6.6 Applying the CRM strategy

6.6 Applying the CRM strategy

The goal of CRM is to evolve from a marketing model that was based on a product-centric marketing structure to one based on dealing with each customer as if that customer were the only customer. Managing customer relationships successfully means learning about the habits and needs of customers, anticipating future buying patterns, and finding new opportunities to add value to the relationship.

Customer behavior patterns

In the financial sector, for example, banks-early beneficiaries of successful CRM strategies-are using data warehousing and data mining technologies to learn to anticipate their customers' needs from the millions of transactions and interactions they have with their customers. The patterns of customer behavior and attitude derived from this information enable the banks to effectively segment customers by predetermined criteria. Such detailed customer data can provide answers to the following questions:

  • Which communication channel do customers prefer?

  • What would be the risk of their leaving the bank to go to the competition?

  • What is the probability the customer will buy a service or product?

With this knowledge, the financial institution can develop marketing programs that relate logically and psychologically to each customer segment, provide valuable customer information to the call/contact center, support cross selling and customer-retention programs, and assist the staff to maximize the value of each customer's interaction.

Maximizing individual customer experiences

How does an organization manage each customer relationship individually? Several fundamental changes in business functions can be made on the way to a complete CRM solution. Marketing departments need systems that allow employees to track, capture, and analyze millions of customer activities, both interactions and transactions, over a long period of time. This knowledge helps the organization to create promotions, develop new products and services, and design communication programs that attract, reward, and retain customers. Two other fundamental concepts behind a successful CRM strategy are operational and technological excellence. Attaining leadership in these areas enables an organization to predict and maximize the value of each customer relationship.

6.7 CRM issues and tactics

Companies assessing a CRM strategy or in the process of implementation have many issues to consider. For example:

  • Deciding how and where to start

  • Minimizing costs

  • Reducing risks

  • Generating tangible returns quickly

  • Accelerating implementation and maintaining momentum

  • Minimizing disruption to the organization

  • Establishing a foundation for continuing gains

Although there is no one "right" CRM framework for every business sector, eight areas of capabilities and operations are the core components of the required infrastructure for most companies. More details about these specific areas are given in the paragraphs that follow.

CRM workshops

Holding CRM workshops can be extremely valuable in bringing together management groups to establish an in-depth understanding of the concepts, methods, and implications of the new strategies as well as conveying a common viewpoint. Senior management should play a prominent leadership role in this process by providing a supporting member to the CRM project team, as noted earlier in Stage 5. It is also very important for senior management to meet separately in the initial planning and objective-setting stages with key managers and groups to establish an understanding of why the transition to CRM is needed as well as to examine the implications and opportunities for each group's area of responsibility. The leadership role remains critical throughout the implementation process, both to provide a compelling vision, driven by senior management, of where the company is going and to instill a sense of urgency and commitment to the changes that are needed.

Exact transaction analysis

The next step in developing a CRM program retraces the retail sector's original roots, when neighborhood store owners knew their customers and took special care to serve their interests and needs. The megastore and a reduction in customer service came next. But now CRM technology is allowing retailers to rebuild customer relationships and keep customers coming back, the same way the neighborhood store did in a bygone era. Over the past decade, CRM has evolved from being a relatively small part of marketing operations at a few forward-thinking retailers to becoming a core corporate strategy of many retail businesses as well as of businesses in other major sectors. Customer purchase history and demographic information are now used not just in marketing programs, but in every facet of a retail business, including real estate sales and acquisitions, store locations, e-commerce, and merchandise selection. Despite its detractors and the failure of poorly designed and/or poorly implemented CRM projects, there are numerous testimonials to the success of the effective application of CRM strategies in organizations from every major business sector.

As the term exact transaction analysis implies, it is a process of analyzing every customer transaction exactly. It is the ultimate method of deriving the full benefit of CRM, because CRM can only be successful if an organization has the capability to interact with each and every customer on an individual level. Only when a complete, one-on-one relationship is achieved can an organization realize the goal of lifelong, profitable customer relationships. Access to extremely detailed customer information, down to the level of individual transactions, is the key to the full realization of CRM's potential.

Relationship technologies

Four factors are key elements in the application of relationship technology to managing customer relationships:

  • Selecting the technologies that will meet customer needs

  • Teaming up with the right partners to implement them

  • Applying relationship technologies to customer transactions

  • Implementing a CRM strategy in stages

Relationship technologies make customer transactions more personal, more individual, and more exact. More than ever, they have become important elements in the way an organization manages its customer relations. A well-defined customer relationship management (CRM) solution, based on a data warehousing system, enables businesses to capture and analyze customer interactions and transactions and reduce customer churn, which may be defined as the constant and continual movement of customers from one organization to another.

Properly aligned with customer needs, CRM can also help companies better understand customer requirements and changes in buying patterns and lifestyle and build long-term relationships of value to them. Various customer surveys have shown that people want businesses to keep in touch with them, to be responsive to their purchasing needs, even to anticipate these needs. In short, they expect a relationship that has value. This relationship may well begin with the call/contact center, and it is important that every customer contact point—a phone call, a click on a Website, a response to a direct mail campaign—be used to establish and maintain this relationship. Organizations that achieve high ratings for customer relationships are those that make the relationship of value to the customer. This factor has become a significant differentiator among organizations.

Privacy

Another element of customer relationships that has become a significant issue in the consumer marketplace is privacy of personal information. As organizations build large data warehouses of customer demographic and transactional information, protecting the privacy of this information becomes very important in developing and retaining customers and in fostering customer-centric relationships. In short, customers expect organizations to respect their privacy. If they do not, customers can use their purchasing power to register their dissatisfaction, or in some jurisdictions where there are legal statutes in place to protect privacy, they can resort to the law.

A rationale for CRM

Clearly, transforming customer information into customer value can create a significant competitive advantage. High-value customers are identified, their needs anticipated, and new value created for them where it did not exist before. The end result for a customer-centric organization is customer loyalty, which translates into higher profitability. Product-centric values—delivering functionality and quality on time and on budget—should be augmented, not replaced, by a CRM solution. In a customer-centric organization, the traditional product-centric values become more meaningful when supported by effective CRM strategies.

The importance of assessing the company's current capabilities and plotting the many dimensions of the business along the continuum from product-centricity to customer-centricity cannot be overstressed. Comparing corporate attributes with what is happening in the marketplace should also be a part of this assessment. This process will enable the organization to benefit from the potential of CRM processes and technologies by building on an objective assessment of the company's customer-oriented capabilities, based on a defined set of projects, including investment estimates and business cases.