Customer relationship management is a business concept as old as business itself. For a small business servicing less than a thousand or so customers, it is feasible to build and maintain customer relationships entirely through face-to-face interactions between the staff and the customers. But as a business grows in size and number of customers, building and maintaining customer relationships and managing customer information quickly become complicated tasks. Add such factors as increased competition, a smaller available share of the customer's financial resources, economic fluctuations, technological advances, employee turnover and limited resources to invest in customer relationship management and a company can easily find that it has lost the ability to positively influence customer relationships. The results are lost opportunities to improve cutomer loyalty and to promote customer growth through the purchase of additional products and services.
Maintaining control of customer relationships is possible only through consistent implementation of classic, well-proven customer bonding techniques, such as individualized customer care and communications, rewards for customer value and loyalty, special consideration for high-value customers and customized products and services.
But as a company's number of customers increases, these time-honored techniques become difficult to implement. Growth requires increasingly sophisticated technology to properly implement the best practices in customer relationship management.
It seems that one of the predominant effects the information age has had on the business world is an increased focus on the individual customer. And why not? All revenue in a company ultimately can be traced to the customer. In fact, more effectively acquiring new customers, retaining existing customers and growing all customers to maximum profitability are the most critical business issues facing today's CEOs. In the past, these issues related to individual customers were left to the marketing department. It is apparent that from now on this responsibility must be shared throughout the corporation by every person and every system that touches the customer (customer touchpoints). Sharing of this responsibility across the corporate landscape can succeed only through the efficient dissemination of strategic, customer-focused decisions and information, better known as enterprise-wide customer relationship management (ECRM).
Corporate marketing departments, paired with information technology support, have made the greatest contributions in developing customer relationship strategies that successfully leverage information. In most cases, as one would expect, database marketing concepts and approaches form the foundation for a corporation's ECRM strategy. Database marketing drove the initial design and development of data marts, or marketing data warehouses, fully focused on customer-level data and marketing communications. Marketing data marts have enabled advanced analysis of customer data to provide not only valuable customer profiles and segmentation capabilities, but also the ability to predict critical patterns of customer behavior. Now, through integration of the marketing data mart with advanced analysis techniques, marketing communications and innovative customer acquisition, retention and growth strategies, "best-of-class" database marketers have defined the basic requirements of campaign management. Database marketing campaigns have effectively lowered customer attrition and bolstered acquisition and cross-sell response rates in many companies and industries.
Database marketing strategies have offered a valuable framework for construction of an ECRM strategy. It is easy to see how database marketing concepts are critical to successful ECRM. Database marketing has brought the following benefits to many companies:
- Forming its own foundation around a centralized repository of all customer information, to which business users have desktop access.
- Making data usable through standardization across all corporate data sources.
- Directing application-specific analytical processes for targeting homogeneous customer segments.
- Incorporating business rules that link information to customer communications.
- Driving the collaboration of cross-departmental steering committees for everything from data mart design to strategy development.
- Producing strategies to launch marketing campaigns that successfully integrate technology, information and customer communications.
However, the same barriers that have been faced in the development and growth of database marketing will pose even greater obstacles to the construction of ECRM strategies. As the number of people involved grows, so does the diversity of mind-sets, the threat of legacy thinking, turf battles and the infiltration of politics. Champions at the most senior-executive level will be essential for overcoming these barriers and driving a central corporate ECRM strategy. From a systems perspective, a slightly wider scope for data sourcing and collection will not be a major issue; however, dissemination of individual customer decisions to other systems, such as call centers or Web sites, will require extensive interfacing. This means that for a corporate ECRM strategy to be effective, all customer communications need to be carefully orchestrated and interfaced.
One example of the need for interfacing of systems is the collection of data needed to "close the loop" or, in other words, to identify a connection between a customer communication and the behavior of a specific customer (or prospect). Often, the information required to test whether a specific communication has influenced the behavior of an individual customer is not fed back to the data mart. These feedback issues will become more complicated as more customer touchpoints are driven by strategic decisioning. Historically, database marketing customer touchpoints have been limited to direct mail or telemarketing. The fundamental difference in ECRM is that all customer touchpoints need to be considered.
Figure 1: Marketing campaign strategies that are not linked company wide
As shown in Figure 1, marketing campaign strategies, aimed at building customer relationships, generally have not been linked across other departments, or systems, throughout the company. For example, when the marketing department launches a customer retention program, only rarely are the customer-service department, sales groups or corporate Web site incorporated into the retention strategy. In bringing these groups into the fold, synchronization issues become apparent as the off-line, batch process of customer relationship decisioning lags behind the real-time processes predominant in customer service call centers and Web sites, both of which are linked to real-time operational systems.
In practice, the greatest hurdle in enterprise-wide synchronization of customer communication is to integrate real-time decision processing with existing real-time operational systems. Integration of real-time decisioning is especially problematic in relation to marketing segmentation.
For example, if an individual customer is placed in a specific segment, as is common practice in database marketing, that customer receives a specific message or promotion designed for that segment. Normally, customer behavior is tracked and associated with the specific message or promotion, providing the measurement needed to evaluate the effectiveness of the promotion, targeting logic and customer segmentation. The process of targeting, communication and evaluation has worked fine as long as the strategy is applied over a period of time. Customer segmentation is performed in a batch process, and measurement and evaluation usually are completed before executing any other customer decisioning or segmentation process and resulting communication.
However, things get more complicated as we move to real-time decisioning. For example, personalization and customization of content on a Web site is a real-time process. A customer may be assigned a segment code and initially presented with a page of content designed specifically for this segment. But as a Web session continues and the customer moves (behaves) in certain ways on the site, real-time decisioning may change the content that is presented to the customer based on his behavior and the content delivery strategy for the Web site. This process will change the message, information or promotion offered to this customer. Thus, he is treated differently from the other customers in his initial segment. The validity of subsequent measurement and evaluation based on segmentation will be compromised, as it will no longer be apparent what has driven the customer to behave in a certain way.
Given such opportunities for real-time decisioning, feedback or data collection mechanisms become more of an issue as ECRM strategy development brings additional customer communication channels into the mix. The full customer relationship strategy becomes both more complicated and, in theory, more effective. The expanded scope of ECRM involves departments and groups that in the past have not usually strategized together. These groups and their related systems and information have evolved independently. Although corporations are not likely to overhaul the entire corporate information infrastructure in order to institute ECRM, they should start to evolve toward ensuring that the content and data collection through all customer touchpoints are driven by one centralized system and customer relationship strategy, as shown in Figure 2.
Figure 2: Customer relationship strategy driven by one centralized system
Another aspect of ECRM is the empowerment of employees. Employees who make contact with individual customers or prospects can greatly increase the success of customer relationship strategies. The real justification for expanding to ECRM from basic database marketing practices is that it enables a company to show a unified corporate front to a customer or prospect at every touchpoint and to apply a unified corporate strategy toward that customer. For example, take a customer identified as having a high risk of defection to a competitor and determined to be of high value. Through a database marketing strategy, the customer would be offered some special consideration or sent a message to "bond" the relationship, via direct mail or telemarketing. As a proactive measure, this approach can be highly effective. But the decision to treat a high-risk, high-value customer in some unique manner should not stop with traditional direct marketing communications. For ECRM, this decision must be disseminated to other customer touchpoints, even those that are customer-initiated. Communication channels that can be leveraged include customer service representatives, collection departments, sales representatives and other human touchpoints. If employees in these areas have knowledge of the corporate CRM strategy, training on how to handle different segments of customers or prospects and the information they need to understand what types of customers or prospects they are interfacing with, they can be highly effective in implementing the strategy, contributing to lower attrition rates, accelerated customer growth and improved acquisition of high-value customers. This undoubtedly will result in higher corporate profitability.
As technology infiltrates all aspects of business, employee empowerment is not the only place where sound strategies can improve customer relationships. Customers are increasingly accepting automated and systematized communications channels. Touchpoints such as corporate Web sites, ATM machines, kiosks and help desks are normal parts of many customer-initiated business interactions. ECRM strategies must leverage these systems. A Web-site session or the 20 to 30 seconds of fully captivated attention of a banking customer waiting for cash at an ATM are opportunities to deliver individualized and targeted communications. It is technologically feasible today to identify a customer, associate a profile or segment with that customer, convey the appropriate message and collect information from that particular interaction for further analysis.
Although true CRM-driven enterprise software systems are not available, many CRM strategy management systems exist for particular components of the corporate customer communication landscape. Systems that facilitate sales automation, marketing campaign management, customizing and personalization of Web content, collections, more intelligent operation of help desks and access to customer information in call centers all currently exist. Getting them to operate on one ECRM strategy, using the same source of customer information and through the same decision process, promises to be a complicated task. Many corporations are on the right track, as shown by their concerted efforts to centralize customer information and make it accessible, use that information to better understand the customer, and create the ability to make decisions that drive certain customer communications.
Information-driven technologies and business applications relating to customer management are becoming smoothly integrated; and opportunities to nurture long-lasting, profitable customer relationships will grow. Any company whose profitability is affected by customer attrition, poor customer acquisition and sluggish customer growth should focus on determining which customer touchpoints are key for improving customer relationships and how these touchpoints can be modified to provide individualized customer communications. Database marketing strategies that have driven direct mail and tele-services are becoming the kernel for ECRM strategy development and information processing. An ECRM strategy includes not only the integration of information and customer touchpoints but, more precisely, the training and empowerment of employees and the automation of systems that facilitate customer interactions and communications. Customer relationship management is no longer just the responsibility of the marketing department; rather, it is a corporate-wide practice that needs to constantly improve the company's ability to treat customers and prospects in ways that promote loyalty and continued business.
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