1. What is CRM?
CRM stands for Customer Relationship Management. It is a strategy used to learn more
about customers' needs and behaviors in order to develop stronger relationships with
them. After all, good customer relationships are at the heart of business success. There
are many technological components to CRM, but thinking about CRM in primarily
technological terms is a mistake. The more useful way to think about CRM is as a
process that will help bring together lots of pieces of information about customers, sales,
marketing effectiveness, responsiveness and market trends.
What is the goal of CRM?
The idea of CRM is that it helps businesses use technology and human resources to gain
insight into the behavior of customers and the value of those customers. If it works as
hoped, a business can:
• provide better customer service
• make call centers more efficient
• cross sell products more effectively
• help sales staff close deals faster
• simplify marketing and sales processes
• discover new customers
• increase customer revenues
That sounds rosy. How does it happen?
It doesn't happen by simply buying software and installing it. For CRM to be truly
effective, an organization must first decide what kind of customer information it is
looking for and it must decide what it intends to do with that information. For example,
many financial institutions keep track of customers' life stages in order to market
appropriate banking products like mortgages or IRAs to them at the right time to fit their
needs.
Next, the organization must look into all of the different ways information about
customers comes into a business, where and how this data is stored and how it is
currently used. One company, for instance, may interact with customers in a myriad of
different ways including mail campaigns, Web sites, brick-and-mortar stores, call
centers, mobile sales force staff and marketing and advertising efforts. Solid CRM
systems link up each of these points. This collected data flows between operational
systems (like sales and inventory systems) and analytical systems that can help sort
through these records for patterns. Company analysts can then comb through the data
to obtain a holistic view of each customer and pinpoint areas where better services are
needed. For example, if someone has a mortgage, a business loan, an IRA and a large
commercial checking account with one bank, it behooves the bank to treat this person
well each time it has any contact with him or her.
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2. Are there any indications of the need for a CRM project?
Not really. But one way to assess the need for a CRM project is to count the channels a
customer can use to access the company. The more channels you have, the greater need
there is for the type of single centralized customer view a CRM system can provide.
How long will it take to get CRM in place?
A bit longer than many software salespeople will lead you to think. Some vendors even
claim their CRM "solutions" can be installed and working in less than a week. Packages
like those are not very helpful in the long run because they don't provide the cross-
divisional and holistic customer view needed. The time it takes to put together a well-
conceived CRM project depends on the complexity of the project and its components.
How much does CRM cost?
A recent (2001) survey of more than 1,600 business and IT professionals, conducted by
The Data Warehousing Institute found that close to 50% had CRM project budgets of
less than $500,000. That would appear to indicate that CRM doesn't have to be a
budget-buster. However, the same survey showed a handful of respondents with CRM
project budgets of over $10 million.
What are some examples of the types of data CRM projects should be
collecting?
• Responses to campaigns
• Shipping and fulfillment dates
• Sales and purchase data
• Account information
• Web registration data
• Service and support records
• Demographic data
• Web sales data
What are the keys to successful CRM implentation?
• Break your CRM project down into manageable pieces by setting up pilot
programs and short-term milestones. Starting with a pilot project that
incorporates all the necessary departments and groups that gets projects rolling
quickly but is small enough and flexible enough to allow tinkering along the way.
• Make sure your CRM plans include a scalable architecture framework.
• Don't underestimate how much data you might collect (there will be LOTS) and
make sure that if you need to expand systems you'll be able to.
• Be thoughtful about what data is collected and stored. The impulse will be to grab
and then store EVERY piece of data you can, but there is often no reason to store
data. Storing useless data wastes time and money.
• Recognize the individuality of customers and respond appropriately. A CRM
system should, for example, have built-in pricing flexibility.
Which division should run the CRM project?
The biggest returns come from aligning business, CRM and IT strategies across all
departments and not just leaving it for one group to run.
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3. What causes CRM projects to fail?
Many things. From the beginning, lack of a communication between everyone in the
customer relationship chain can lead to an incomplete picture of the customer. Poor
communication can lead to technology being implemented without proper support or
buy-in from users. For example, if the sales force isn't completely sold on the system's
benefits, they may not input the kind of demographic data that is essential to the
program's success. One Fortune 500 company is on its fourth try at a CRM
implementation, primarily because its sale force resisted all the previous efforts to share
customer data.
As the largest health insurance provider in New York, Empire manages more than 29,000
corporate employer accounts, of which about 26,700 are small to midsize companies
employing 50 people or fewer. Empire services these "community rated" employers via
some 1,800 registered independent sales brokers. Because each customer's needs are
different, brokers must produce customized coverage estimates for each one. For
example, some companies want preferred provider plans, and some want health
maintenance plans. Each plan has different "riders," or options, attached, such as vision
care or prescription coverage.
In the past, a broker would call Empire's broker relations department, pass along the
customer's specs and then wait for Empire to calculate a price quote. The broker then
relayed the quote back to the customer, who would either accept it or ask for
modifications—in which case the broker had to contact Empire again and request a
revised quote. When a quote was finally accepted, the broker filled out and filed one set
of paperwork while the customer filled out a group application and sent it directly to
Empire. Whenever Empire revised its plan structure, brokers found themselves with
outdated enrollment forms.
The company then made 60 copies of the enrollment paperwork, filing it within 11
departments at Empire. Even then, fully 67 percent of the forms had to be returned or
double-checked by phone with the brokers because of errors or omissions.
Since they couldn't generate quotes themselves or process the paperwork, the brokers
were completely dependent on Empire's broker relations staff, who were around only
during normal business hours. As a result, it took about 27 days to shepherd a new
customer through the sales and enrollment process. Then employees had to wait another
week to 10 days to get their ID cards.
The Quest to Streamline
In late 1998, Stephen Bell, vice president of e-business operations, and Kenneth O.
Klepper, senior vice president of systems, technology and infrastructure, began
developing a "print on demand" system to reduce the vast mountains of quickly outdated
benefits brochures and contracts that sat in storage rooms.
First, Snow and his team took a hard look at the existing paper-based process. They
took over a conference room and created a color-coded map of the sales process; no one
had ever before tracked it from start to finish. "It was like a grapevine," Bell says of the
process map. "It just got bigger and bigger. For the first time, we realized that there
were 33 redundancy audit checks—where we go over information to make sure it's
correct—built into the process. We had created this nightmare."
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4. They began by eliminating all the loops and unnecessary steps, such as the need for
brokers to keep calling the company for revised quotes. "Wherever there were repeats,
we tried to eliminate them," Bell says. The team managed to cut the essential steps from
80 to 40. That was the easy part, he says; then came the daunting task of finding an
application to make the streamlined map a reality.
Because Empire's sales channel was so complex, Bell decided that Empire couldn't go
with an off-the-shelf application. And he quickly saw the value of moving the process to
the Web. Bell and Klepper hired Firepond of Waltham, Mass., to customize its proposal
configurator and develop a quote engine and group enrollment process for Empire.
Because Empire lacked in-house experience and resources for handling an
enterprisewide application, they kept the IT department close to the project so that
staffers could learn from the experience. The department also had to integrate the
application with Empire's legacy mainframes, a process that was tedious but critical,
according to Bell.
Empowered Brokers
Empire's Broker Services Application, which includes the quote engine and proposal
configurator and enables online group enrollment, went live in October 2000. The
browser-based quote engine frees brokers from having to call Empire to crunch numbers
every time they need a quote. Instead, they can now enter the relevant customer data
themselves online, and an automated formula generates a quote in a matter of seconds.
If the client isn't satisfied with a particular quote, the broker can go back online and
change the specifications. Upon making a sale, a broker no longer has to wade through
piles and piles of paper, but can go online to enroll a new account. The password-
protected system also lets agents maintain customer information online, where it's
accessible around the clock.
By Oct. 31, 2001, all of Empire's 1,800 independent brokers had registered on the site,
Bell says. When the site went live, Empire aimed for getting 15 percent of the brokers to
use its self-service functionality. As of October, more than 45 percent were regularly
generating their own quotes online.
Empire agents using the site now handle an average of 45 percent more quotes; brokers
who used to process 20 quotes a day, now handle 50. Most important, the enrollment
process that once dragged out over 27 days now takes just two to three days to
complete online.
10 Tips for implementing customer self-service
• Learn everything about your customers.
• Conduct focus groups to ensure that they want self-service.
• Define clear business goals.
• Evaluate the technology for its technical and financial merits.
• Does it match your customer base? Will it boost profitability?
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5. • Work as a team. Have customer support, IT and other departments involved every
step of the way.
• Offer training to employees.
• Expect this to be an iterative process that requires making changes as you learn
more about your customers.
• Develop an effective way to measure results.
• Underpromise and Overdeliver.
Intelligent agent
A program that automatically performs a service, such as gathering specific
information, or that personalizes information on a Web site based on a user’s
registration information and usage analysis.
Enterprise relationship management
The practice of analyzing customer data from sales, marketing, service, finance and
manufacturing databases in order to relate efficiently to customers.
Data warehouse
A database that stores large amounts of historical business data.
Data mining
The practice of extracting data from a data warehouse in order to analyze patterns,
trends and relationships.
Michael D. Johnson, a D. Maynard Phelps Collegiate Professor of Business
Administration and a Professor of Marketing at the University of Michigan Business
School answers a few questions regarding Customer Relationship Management.
Question:
Given that CRM software integration is key, what role do you think that business
managers and IT should play? In other words, do you think that business managers
should lead the efforts strongly relying on IT? I think in some companies, IT is
leading these efforts. It seems to me that this is a strategic error.
Reply:
Clearly IT is a critical player and an important voice in CRM software integration.
But I strongly believe in the value of having a general manager lead such efforts.
Organizations need the cross-functional perspective of the general manager to get
the most of their CRM efforts. Consider what happens once CRM software is
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6. installed. It creates a flood of information. To use this information, organizations
must learn how to use the information to develop and prioritize tailored customer
offerings. They also have to learn to execute these tailored customer offerings
through front-line service people. Ultimately, it is in these latter phases where
companies get bogged down and where the biggest CRM bottlenecks occur. Thus I
find it critical that the users of the software have a large voice when integrating
CRM. The general manager’s job is to get systems and people to work together.
This underscores the need for general management leadership in the CRM
integration process.
Question:
What is the future of CRM using the Web?
Reply:
I wish I had a crystal ball, but I don’t. Certainly the technological aspects of using
CRM via the Web will continue to change and evolve. I know the big players in this
field are working hard to develop technological improvements. What has been
relatively limited and remote access to CRM systems via the Web will become much
more dynamic and indistinguishable from dedicated CRM access going forward. The
more interesting question is, I believe, “what is the future of the Web using CRM?”
That is, how will the Web fit into an organization’s overall customer orientation and
relationship management? Here the future is a bit clearer. The past two years have
reinforced the need to integrate one’s web activities within an existing product-
service offering and distribution system. Customers will continue to use multiple
touch-points. Consider that 95% of Charles Schwab customers use all three
possible channels (branch offices, the telephone and the Internet) to interact with
the company. The integration of Web activities into an existing multi-channel
operation leverages an existing brand name, purchasing power, and distribution
efficiencies. CRM systems play a critical role in this multi-channel strategy by
providing employees, primarily front-line service employees, with a seamless flow
of information from multiple channels.
Companies must tweak their operations to realize future CRM benefits
CRM software is on its way to reaching a saturation point—those who are likely to
invest in CRM already have. According to recent research by Cambridge, Mass.-
based Forrester Research, as the CRM market returns to modest growth over the
next few years, companies will change the way they collect and manage customer
data in order to realize the full potential of CRM.
Forrester estimates that CRM revenues will grow from $42.8 billion in 2002 to
$73.8 billion in 2007, a compound annual growth rate of 11.5 percent
(characterized by Forrester as “modest”). Marketing automation software will make
the most gains, growing at a 14.5 percent clip from 2002-04 and then rising to 17
percent thereafter.
August 7, 2002 - CXO Media
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7. If a company is just starting with a CRM project, what should they do?
If you're just starting out, you want to build you're requirements first. Define the
problem, understand what's going to solve that problem and understand the
functionality of that solution.
In other words, in order to increase your number of marketing campaigns this
year, you are going to need individual customer profiles. That's just one example,
but once you understand that it's a requirement, you can find the technologies that
support that particular functionality. That's the right way to do it: the requirement,
the functionality, then the tool.
Babies need about a year to gain the coordination and strength to take their first
steps. A less heartwarming but similarly anticipated moment for business
executives comes when their CRM initiatives begin to pay off.
According to a May 2001 study by the Cutter Consortium, an Arlington, Mass.-
based business advisory group, 66 percent of CRM programs are less than 12
months old. Only 11 percent of companies surveyed have had CRM initiatives in
place for more than two years.
“That’s not really enough time to get a good feel for these applications,” says Curt
Hall, a senior consultant at the Cutter Consortium. “Count on a year to see any
ROI.”
CRM is sometimes broken down into two classes—operational and analytical.
Operational CRM includes visible customer interactions, such as adding product
FAQs or chat capability to a website. Analytical CRM involves compiling customer
data, collected through operational CRM, breaking it down to identify trends and
pumping that customer information back into the operational arm. Hall says
companies moved first on operational CRM by investing in sales force automation
and customer service programs that integrated Web channels with offline channels.
“They think that’s where they’re going to see the immediate payoff,” Hall says.
“Those are the units that make initial contact with the customer. Companies are
trying to get a bigger picture and deeper understanding of what’s going on. And
that means blending the operational side with the analytical side.”
The Cutter Consortium survey also found that 40 percent of respondents were
“satisfied” with their CRM efforts. On the other extreme, just 6 percent said they
were disappointed.
“They’re not all exactly dissatisfied, but they’re not all jumping up and down
either,” Hall says.
Stamford, Conn.-based Gartner Group says that multichannel service and customer
self-service technologies will not only improve customer loyalty, but also lower
service costs.
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8. Esteban Kolsky, senior research analyst at Gartner Group, says the trends in the
industry are moving toward automated chat and e-mail applications. Enhancing
those features with natural language software, he says, will speed up customer
service calls and reduce the costs of handling e-mail and chat inquiries.
On average, the cost of handling a customer over the phone is $6 per call. An
efficient chat application reduces that cost to about $3. Good e-mail applications
trim the cost even further to $1. According to Kolsky, however, those cases are few
and far between. The analyst says inefficient e-mail or chat can raise costs per call
to levels higher than phone assistance—up to $40 per e-mail and $8 per chat
session in some cases. The bottom line, says Gartner, is that well-executed CRM
should lower services costs by 6 percent over the next four years.
Gartner predicts that the worldwide CRM software revenues will drop 8 percent
from 2000 levels, to $3.6 billion in 2001 (2000 revenues were $3.9 billion, 89
percent above 1999 revenues.). Growth will remain flat for 2002, before rising to
10 percent for 2003 at $4.03 billion.
Over the next five years, all CRM software and new license revenue will show a
compound annual growth rate (CAGR) of 5.6 percent worldwide. While North
America will show a CAGR of only 0.9 percent, Japan’s CAGR over the same period
will be 30 percent. Other regions break down this way: Latin America, 18 percent;
Asia-Pacific, 15 percent; Europe, 8.5 percent.
An Executive's Guide to CRM
http://www.psgroup.com/freereport/imedia/report.asp
This lengthy and detailed guide offers a short history of CRM, an overview of
concepts and objectives, and an illustration of the applications of CRM. (free
registration required)
CRM Research Center
http://www.cio.com/research/crm/index.html
This CRM based Research Center, provides a slew of resources including recent
articles on strategy, implementation information and case studies.
CRM Forum
http://www.crm-forum.com/index.html
This is an online customer relationship management resource center based in
Edinburgh, U.K. Links include press releases, case studies and links to vendors. The
CRM-Forum provides services to visitors to the site; associate members of the CRM-
Forum (free); and corporate members of the CRM-Forum.
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9. CRMGuru.com
http://www.crmguru.com/gurus/index.html
This site offers access to CRM analysts for questions and discussion forums as well
as a CRM newsletter, called CRM.Insight.
retailindustry.about.com
http://retailindustry.about.com/cs/loyaltycrm/
Articles are organized by topic (customer data mining, customer equity, customer
relationships, privacy and etiquette, to name a few). You'll also find a
comprehensive vendor directory with one-liners that decode the marketing gibberish
into plain English that explains what each vendor does.
searchCRM.com
http://searchcrm.techtarget.com/
techtarget.com's Customer Relationship Management-specific site. Includes links to
tips and tutorials, interactive forums, downloads and chats with leading experts.
* Taken from Darwin Pyblications
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