When it comes to using information and technology to develop and manage customer relationships, some companies have developed impressive one-to-one marketing capabilities while others remain locked in the one-size-fits-all model of mass marketing. The difference is a corporate-wide commitment to understanding the unique needs and value of individual customers and applying that knowledge to differentiate the way customers are treated.
At a time when record numbers of corporate executives flock to conferences to learn the latest techniques for customer relationship management (CRM), the reality is that most organizations remain paralyzed in their ability to effectively use information and technology to identify, attract and retain customers.
This problem is not due to a lack of technology. An impressive array of customer management, sales management and marketing automation software is available to support essential processes for marketing, sales and customer service. However, technology alone is not the answer. All too many companies have invested millions in software that has failed to bring them any closer to their customers.
This problem is not due to a lack of information. In almost every organization, customer information is abundant. Unfortunately, the bulk of this information is scattered among numerous databases. Internal departments and external service firms each have some information; but there is no single, integrated source of information that is accessible and shared throughout the organization.
The Price of Paralysis
Developing and implementing an information-based and technology-enabled CRM strategy requires both vision and careful planning. For most organizations, putting the information, technology, process and organizational infrastructure in place to support CRM represents a major shift from a product-focused business model to a customer-focused business model. Because of this, many companies have adopted a "wait and see" approach while they analyze the "cost" of implementing CRM. What these companies should really examine is the cost of waiting.
To determine the "business case" for CRM, companies should start by answering some key questions:
- What is the cost of lost opportunities to increase revenue through repeat sales and cross-selling because essential customer information is not integrated in a central marketing database to provide a consolidated view of the business or household so these opportunities can be identified?
- What is the cost of sales leads that go cold and customer relationships that are squandered because field sales, customer service representatives even channel partners are not connected through an information backbone that enables their selling and service efforts to be coordinated and cohesive?
- What is the cost of marketing campaigns that fail to produce results because marketing managers lack the information and technology to identify opportunities and plan and manage marketing programs that deliver the right offer to the right customers at the right time?
The Cost is Real and Measurable
Numbers don't lie. It costs anywhere from five to ten times as much to acquire a new customer as it costs to retain an existing one. Research analyst Alex Brown estimates that "U.S. organizations lose one-half of their customers every five years, and a five percent incremental improvement in the customer retention rate could have the effect of doubling profits." Fredrick Reichheld of Bain & Company cites in his book, The Loyalty Effect, that customer disloyalty "stunts corporate performance by 25 to 50 percent, sometimes more." Despite these findings, companies continue to treat customers with indifference.
How do customers respond to being treated with indifference? They leave in search of a company that will take the time to understand their needs, problems and expectations and that will use this information to deliver services and product solutions tailored to their needs!
Day in and day out, companies leave thousands even millions of revenue dollars lying on the table because they don't have a central database of customer intelligence that is continually fed and refreshed by the company's people around the globe who interact with customers and prospects and learn of opportunities for new or expanded business. Recently, a senior marketing executive at a major insurance company revealed that in one year his company lost out on new contracts amounting to more than $100 million because they did not have the systems and processes in place to identify, track and act on the changing needs of policyholders.
While customer attrition and revenue loss are the two most tangible costs of inaction, what is the cost of reduced sales force productivity? What is the cost of dealer and reseller apathy?
What Companies Can Do
If information and technology paralysis is crippling your company's ability to grow and retain customers, you can't afford to wait. The problem will not go away and is likely to become more and more costly the longer companies delay taking action. Correcting the problem requires that you first objectively assess your current capabilities for developing and managing customer relationships. Next, identify the gaps between your current capabilities and those required to interact with customers on a one-to-one basis. Finally, develop an enterprise CRM blueprint that aligns your organization's information and technology infrastructure and integrates your marketing, sales and service processes.
To help you plan and implement a successful CRM strategy, consider the following recommendations:
Define your company's customer relationship management mission. Start with the end in mind. The better job you do articulating how information and technology will be used to support marketing, sales and customer service processes for customer development and relationship management, the easier it will be to determine your strategy and implementation plan.
Get senior management on board and out front. Effective and sustained change starts at the top. The sooner the company's senior management team adopts and articulates the company's CRM vision and endorses a technology-enabled marketing strategy, the quicker this vision will be accepted throughout the organization.
Form a cross-functional project steering committee. The process of finding, growing and keeping customers is not the exclusive responsibility of the sales force. Rather, it is a collaborative task that involves people in every department who directly or indirectly interact with customers and prospects. Designing and constructing systems to support the company's marketing, selling and service processes must involve representatives from every department who will use or support the systems.
Align the information and technology strategy with the marketing, sales and service strategy. The best information and technology strategy is useless if linked to a poorly planned marketing and sales strategy. Marketing and IT must work together to ensure that the company's information systems and marketing technologies are properly aligned to achieve the company's customer development and management objectives.
Integrate marketing communications contacts. Plan marketing campaigns that integrate direct communications channels including direct mail, e-mail and customer service with indirect communications channels including print and broadcast advertising, marketing events, retail promotions and the Internet to maximize customer interaction. This synergized approach will improve response and maximize marketing ROI.
Integrate essential marketing intelligence in a central marketing database. Consolidate essential customer, sales force and sales channel information in a central data warehouse. Create separate data marts to support customer interaction operations (SFA, call center and campaign management) and business intelligence operations (query and reporting, customer segmentation and predictive modeling).
Implement new technology in phases. Implementing new software tools to automate and support marketing, sales and customer service processes requires that the user adoption process be carefully planned and managed. Roll out new technology in phases and in conjunction with the implementation of new processes. Remember that technology is only as good as the users' ability to absorb and apply it.
Teach users how to use information and technology to to improve CRM productivity. Don't underestimate the time required for user training and coaching. Developing expertise in information-based and technology-enabled marketing is an iterative process. Use a pilot approach to teach users how to use technology to automate and support everyday work tasks and repeat this exercise as needed to build user confidence.
Teach customers to provide the information you need to serve them. Customizing communications, offers and products to individual customer needs requires that customers provide the information the company needs so that the company can provide the information the customer needs. Developing and repeating this "information exchange" over time enables the company to create a customer relationship bond that is difficult to break.
Evangelize the CRM mission and strategy throughout the company. Let people know what's going on! Maintain a high profile for the project by keeping people informed about the project's status. Use the monthly staff meeting, an in-house newsletter or corporate intranet to publicize key accomplishments. Continuously educate management, staff and essential vendors on the strategic vision.
The Results Speak for Themselves
Companies that have implemented strategies which leverage information and technology to support integrated marketing, sales and service processes are recording impressive results and distancing themselves from their competitors.
One of the first companies to recognize the power of leveraging customer intelligence to maximize marketing communications and sales effectiveness was American Cyanamid, a leading manufacturer and marketer of crop protection chemical products. Since 1985, Cyanamid has used its comprehensive marketing database to track crop producer demographics and product usage practices and uses this information to deliver customized communications and product offers based on the needs and value of individual growers. This integrated customer relationship management approach has enabled the company to expand sales to existing customers, convert competitive users and drive prospective customers to retail channel partners.
Since reengineering and implementing its account management and relationship marketing system in 1996, The United Methodist Publishing House, a diversified Christian publishing company, has increased revenues, reduced marketing expenses and improved overall customer satisfaction. The organization's investment in a data warehouse to centralize business-critical customer intelligence combined with its implementation of new software to automate the campaign planning and execution process has enabled product managers to execute highly targeted catalog, direct mail and telesales programs tailored to the unique needs of church leaders, academic professionals and consumers.
And in what has emerged as one of the great customer relationship management case studies of our time, Dell Computer Corporation has developed an integrated marketing strategy that utilizes direct mail, e-mail, media advertising and the Internet in combination with personal contacts by sales representatives and special intranet web sites for large Dell accounts to keep them connected with their customers. The business impact of Dell's strategy has been measured by consistent revenue gains, increased profits and most importantly loyal customers.
When it comes to making money with information, some companies have clearly emerged as contenders while others are merely pretenders. The difference is knowing what to do and how to do it.
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