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Expert Opinion
What is CRM?
According to CRMguru.com (Feb, 2005), "Customer Relationship Management (CRM) is a business strategy to select and manage customers to optimize long-term value. CRM requires a customer-centric business philosophy and culture to support effective marketing, sales, and service processes. CRM applications can enable effective Customer Relationship Management, provided that an enterprise has the right leadership strategy, and culture".
Kincaid (2002) presented a list of CRM misconceptions:
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Misconception
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Reality
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CRM is the Internet
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The Internet has greatly increased the opportunity and need for better information, tools, and the processes that can take advantage of them - But relationships are built on understanding and trust. People who understand the customer's perspective must be the ones who design the web experience.
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CRM is just the latest name for Direct Marketing
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Using information and automation to understand and improve customer relationships has been practiced by Direct Marketers for years. CRM is a shift in focus from marketing (communicating "to") to relationship management (communicating "with").
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CRM means recognizing a customer wherever he interacts with our company, a 360' view of the customer."
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This is a critical first step, but simple recognition isn't enough. We must learn to use the information we've collected in the past to interact effectively in each future interaction. Information about customers is critical - to increased understanding and improved service. You also need tools and training so people know what to do with it.
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CRM means scoring and measuring Customer Value
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A very important use of CRM information is to be able to identify who our best customers are. We must have ways to use this knowledge to increase the number of loyal customers and the value of each.
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CRM is sales rep productivity tools."
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Some companies still believe that the only way they can build relation ships is through the sales force so CRM must be about automating sales. The sales function is only one of those that directly touch customers and make up CRM.
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Why CRM?
The primary source of a company's revenues is usually derived by meeting the needs of its customers, and accordingly, customer satisfaction tends to be the central driver of company success. Jane Simms (2003), of Director magazine cites Frederick Reichheld, loyalty expert, and Director Emeritus of consultancy Bain & Co who demonstrated that it costs between five and nine times more to win a new customer than it does to keep an existing one. He noted that a small increase in customer retention of around five per cent could yield a profit increase of between 20 to 125 percent. According to Technology Marketing Corporation CEO Nadji Tehrani some 75 percent of all buying decisions are based on emotion, hence if customers do not sense a close affinity with a firm they are unlikely to keep purchasing from it.
CRM systems are a way of obtaining information about customers in order to implement strategies to increase their loyalty - to retain them as future repeat-customers.
It is such reasoning that has led to significant investments being made in CRM solutions; and CRM implementations often drive the redesign of business functions along with the re-engineering of work processes. CRM implementations tend to focus on gathering information from the wide range of interactions that customers experience in their dealings with companies. These interactions may be via phone calls, the web, email, letters, or personal contact. Companies are able to make use of this information as part of their marketing, sales, services and support initiatives.
Benefits
The information and data collected through CRM systems enables firms to focus on target customer segments, and allows products or services to be tailored through including those features most valued by customers. In addition peripheral features that add unnecessary costs can be excluded. CRM systems can also provide data that can be used to better inform and train employees, and this can assist managers to align incentives to encourage desired behaviour. CRM systems can help to position companies strategically to meet changing market needs and enable managers to:
- Understand customers better; by determine the value of product attributes and the cost of providing these throughout the customers' life cycle.
- Refine product and service offerings; by determining customer profiles and to use these to better define/segment customers. Products and services may thus be designed to deliver perceived value, and build long-term relationships, particularly with the most profitable customer segments.
- Inform and reward employees more effectively; through demonstrating the economics associated with certain business transactions and by encouraging employees to meet the needs of targeted customers. Employee incentives can be shaped to reinforce the behaviour needed to acquire and retain valuable customers.
- Maximise benefits derived from internal IT systems; information technology may be used to capture, and to track, valuable customer data. Customer history, preferences, service contracts, and other market information may be collated.
- Improve business strategic planning activities through better analysis of customer requirements, customer defections, lost sales, and market directions. CRM systems are valuable company assets that may be used to improve the effectiveness of serving customers and to improve the profitability of customer relationships.
Xin et al (2002) state that the customer-centric strategy associated with CRM systems is supported by an increasing list of software capabilities and technologies. Companies have been investing in CRM solutions with the objective of enhancing marketing efforts, sales, and customer profits. Gartner is cited as predicting that the worldwide market for CRM services will grow by an average of 16 percent a year to $47 billion by 2006. The Aberdeen Group was cited in The Controller's Report, (Anonymous, 2003), as stating that approximately 50 percent of small companies, i.e. those having revenues of less than US $10 million; spend US$100,000 to $250,000 on CRM implementations.
A comprehensive CRM system is not simply comprised of software implementations; rather such a system represents an integrated business process. The implementation of a CRM system may involve significant costs in terms of expenditures, time, and planning, and the reorganisation and re-engineering of current business operations is often required to capture the full potential benefit. Tehrani (2002), relates that CRM systems are more than just software systems or business processes; CRM systems represent the combination of business strategy, software, and processes that help to turn a company into a customer-centric organisation, i.e. one that really listens to what its customers are saying and then responds with what they want. There is a need to appreciate that relationships and customer satisfaction are not merely governed by sophisticated technology, but by human interactions. One to one relationship building is a key factor influencing successful CRM implementation.
The benefits of CRM systems are maximised as they are integrated with other company processes e.g. call centres, customer databases, marketing automation, and sales systems. Jane Simms (2003), writer at Director magazine quotes Frederick Reichheld, loyalty expert and a director emeritus at Bain & Co, as describing CRM systems as "[allowing] companies to gather customer data swiftly, identify the most valuable customers over time, and increase customer loyalty by providing customised products and services. It also reduces the costs of serving these customers and makes it easier to acquire similar customers down the road."
The term eCRM has evolved in reflection of the influence of the Internet and e-commerce upon CRM solutions. Customer Relationship Management systems increasingly form part of wider business systems, including Enterprise Resource Planning (ERP), Supply Chain Management, (SCM) and Data Warehouses. CRM represents the 'front-end' of business operations, SCM is at the 'back-end', and ERP represents the backbone of the company's interconnecting systems.
CRM can enable enhancement of the services provided to customers at many points, and thus enable better shaping of sales and marketing initiatives in meeting the needs of customers. Cross-selling, up-selling, and customer loyalty programmes form part of the integrated suite of services offered by CRM systems. CRM systems may be linked with:
- Sales Force Automation; and
- Customer Services Support applications
The following additional capabilities may also be included:
- Contact centre enhancements e.g. customer self-service, automated email response, customer profile screen-pop;
- Customer service e.g. incident management, order management, service level agreement management, warranty management;
- Field service e.g. call handling/dispatching/ scheduling/workforce management;
- Partner relationship management;
- Employee relationship management.
So much then for the potential benefits of CRM system implementations. The reality however is that it is often reported that CRM systems do not deliver. Many studies have indicated that a large proportion of implementers are not happy with the results of their CRM implementations. Simms refers to one of the least encouraging studies by Gartner who, in a survey, found that "over 70 per cent of CRM implementations fail to live up to expectations-and that's just the companies that are being honest". With this in mind it is fairly obvious then that the actual planning and implementation of a CRM System is critical to its subsequent performance.
CRM Implementation
Three broad levels of CRM system implementations are described by Rosenberg (2004) of Call Center Magazine:
- Manual systems which simply use handbooks and no software or significant data analysis;
- Telephone system with add-on CRM applications giving limited integration capabilities;
- CRM systems with full back-end integration. These link with Enterprise Resource Planning systems and Supply Chain Management systems.
According to Rosenberg CRM systems are essentially the embodiment of how organisations wish to serve their customers; and as such should include the following features:
- A front-end for direct customer business activities i.e. order entry/tracking, billing, and handling requests for service;
- A means of recording sales and service interactions with customers;
- An information base relating to previous customer interactions for use by all staff working with customers. This information can also be used to enhance customer self-service applications;
- A tool for the analysis of customer data to facilitate the identification of new opportunities e.g. cross-selling and up selling prospects;
- A performance appraisal tool for customer service agents and sales staff;
- A marketing and sales campaign tool.
Xin et al identified the following phases associated with the implementation of CRM systems:
- Researching problems and identifying objectives;
- Establishing and communicating a customer-centric strategy;
- Planning and making preparations;
- Redesigning work processes and consolidating corporate resources;
- Choosing the right software and CRM solution;
- Finalising and continuously improving CRM implementations.
Tehrani (2002), Chairman of Technology Marketing Corporation which publishes "Customer Inter@ction Solutions" magazine, includes the following strategic steps for CRM systems implementation:
- Reflect on company core competencies; what is provided to customers and what it is that customers want;
- Consider what technology and processes are currently in place, how well they perform, what departments are affected by them, and how the platforms may be integrated to form a new solution;.
- Document both short and long term objectives;
- Seek consensus from all departments regarding what they might expect from the proposed CRM implementation;
- Reinforce that CRM systems involve company-wide changes, and ensure that managers from all departments are committed to the implementation's success;
- In the evaluation of software and services look for systems that allow flexibility in employing the desired business rules upon them, rather than being forced into adapting someone else's rules;
- Examine how the new systems are likely to impact on partners, resellers and vendors.
Robert Silverman(2001), managing director of Plural Inc., an IT consulting firm, wrote that CRM systems can be highly effective, however they must be implemented in a strategic, focused, and holistic manner. Because CRM is an extremely broad solution with a multitude of subcategories that address a range of business issues, firms may be misled into selecting solutions associated with incompletely defined problems. Silverman states that "CRM is a way of doing business, not just a technology. Successful CRM solutions align strategy, organization, business practices, and incentives around the customer, and support these areas with technology."
Successful CRM solutions base strategies around a strong understanding of the company's customers. The following steps outline suggestions towards achieving a successful CRM implementation:
- Assess customer strategy within the context of overall business strategy;
- Assess organizational readiness, including capabilities, policies, incentives and practices;
- Assess current customer experiences along all customer touch/interaction points;
- Assess customer information architecture
- Enable initial customer analysis and feedback as a key driver of other initiatives
- Identify and prioritize CRM objectives and initiatives;
- Select and implement CRM solutions in a deliberate, phased manner, with the objective of delivering early and continually increasing value;
- Identify existing and target metrics to guide and evaluate initiatives
- View CRM as an ongoing, iterative business strategy rather than a single program or group of technology projects.
CRM Data Integrity and Relationship Intelligence
Barry Solomon (2003), executive vice president of Interface Software, a developer of CRM software for management consulting firms, believes that CRM systems can capture the power of relationship intelligence i.e. the key knowledge concerning clients and that is stored in multiple databases and diverse places. By gaining efficient access to this information valuable new opportunities can be opened up. Solomon understood that some 90 percent of engagements were derived from the existing client base, yet only a fraction of the available contacts were being utilised for cross-selling and business development purposes.
While a centralised database for the sharing of information is a key component of the system, data quality is the cornerstone. Solomon reports that maintaining the integrity of data can be a large task, and accordingly CRM vendors are adding data change functionality into their systems. While data change-management features increase the reliability of the information, improved workflow processes are also required. Data stewards can be used to establish controls and to ensure that
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