Michael Porter states, "Competitive strategy is about being different. It means deliberately choosing a different set of activities to deliver a unique mix of value." Customer relationship management (CRM) is a business philosophy that aligns strategy, business culture, customer information and technology in order to manage customer interactions to the mutual benefit of the customer and the enterprise. At its highest use, it is a competitive strategy. The only long- run competitive advantage is the ability to make better customer-facing decisions and make them faster. One day, like operational excellence, rich product features, everyday low prices, high product quality and short time to market, some semblance of CRM will be ubiquitous and expected by our markets. In the meantime, each company now has the opportunity to differentiate itself through CRM while leading companies are defining what the marketplace CRM expectation is going to be.
CRM is a process that leverages customer data, marketing models and life events to improve overall customer satisfaction and gives businesses the ability to perform customer segmentation and treat each customer uniquely. CRM is a reaction to saturated marketplaces. It is also an understanding that it is more expensive to win new customers than to keep existing customers, that new customers come from competitors, that every company is in the "retail" business and that everyone in the company "sells." Companies wishing to survive must understand CRM. CRM is more important as a competitive advantage in some industries where it becomes important to use these strategies to change the perception of the enterprise in the marketplace so it is not seen as a commodity provider.
Goals of CRM include facilitation of a reasonable dialogue with customers, higher customer profitability, shared data across customer touchpoints, lower cost of customer acquisition, reduced cost of sales and reduced profitable customer turnover.
Each company must find ways to attract and retain profitable customers through the effective use of information. Leaders are able to succeed in the market without competing solely on price. Some leaders actually have some of the highest prices for their markets. How-ever, these leaders continually expand their product offerings based on their knowledge of customer interests gained through their use of data, including internally generated profile and transaction data and third-party data.
CRM as a business strategy requires that the implementing company show tangible commitment to CRM concepts such as customer satisfaction through information parity, regardless of customers' communication channel choices.
You can't improve what you can't measure, and it's simply not good enough to measure customers based on aggregate numbers. Individual forward-looking customer lifetime value metrics are essential for segmentation (see last month's column). More profitable customers and higher lifetime values are more worthy goals than simply increasing the number of customers. The CRM-ready data warehouse will have the data, the accessibility and the corporate credibility for deriving these metrics.
Many companies venturing into CRM think little of the organizational commitment to the organized use of the data beyond CRM product implementation. The customer, not the product, must become the center of the universe. Functionally siloed organizations may implement a package well; but without a refocusing through organizational structure, the goals of CRM will not be realized. Both product and new business strategy implementation must be done in synchronization across the enterprise.
The organizational structure for CRM can take many forms. There is a need to organize around the customer segment instead of the product a major shift for many businesses. Part of this shift requires that the following responsibilities, with the metrics indicated, actually be assigned:
Customer Data Stewardship: Ensuring data quality and compatibility for internally and externally generated data that is used for segmentation and promotion development.
Customer Segmentation: Measuring and grouping customers by customer profitability and other customer rankings that will be useful in supporting promotion and customer management efforts.
Targeted Promotion Generation: Generating promotions for unique segments or individuals in the customer/ prospect/suspect communities.
Promotion Effectiveness: Measuring the effectiveness of promotions quantitatively and understanding the reasons for the success or lack thereof.
Promotion Channel Management: Ensuring channels are capable of being fully utilized quickly for delivery of promotions and messages.
Customer Satisfaction Management: Speaks for itself.
Overall, the execution of the promotions to the right customers through the right channels while presenting a coordinated company image falls under a marketing executive. However, there is a huge amount of overlap and coordination required within the business team to execute an effective CRM strategy. The organizational elements of the CRM strategy are as important as the technical. Accepting CRM in its rightful place as a competitive strategy means it must be supported by organizational structure.
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