Continue in 2 seconds

The CRM Business Cycle

By
  • Melinda Nykamp, Carla McEachern
Published
  • November 01 1999, 1:00am EST
More in

At this point, we have all seen the CRM term applied in a fairly broad context ­ from marketing software, to customer service processes, to sales and service systems infrastructures, to one-to-one architectures for the Web. In larger organizations, there may be 10, 20 or even 30 different initiatives all focused on CRM.

We believe that what is needed, and is often lacking in these initiatives, is a common understanding of the broader underlying CRM business cycle. While all of these initiatives may have merit, failure to tie them to a business purpose can lead to very short-lived success.

There is a universal, underlying cycle of activity that should drive all CRM initiatives and infrastructure development. All initiatives and infrastructure development should somehow be tied to this core cycle of activity.

As a cycle, the stages are interdependent and continuous. As you move from one stage to the next, you gain insight and understanding that enhances your subsequent efforts. You become increasingly sophisticated in your implementation of CRM processes and, over time, become increasingly profitable by doing so.

As shown in the Figure 1, for any organization, business starts with the acquisition of customers. However, any successful CRM initiative is highly dependent on a solid understanding of customers. Thus, our discussion will start there.


Figure 1: CRM Cycle

Understand and Differentiate

We cannot have a relationship with customers unless we understand them ­ what they value, what types of service are important to them, how and when they like to interact, and what they want to buy. True understanding is based on a combination of detailed analysis and interaction. Several activities are important:

  • Profiling to understand demographics, purchase patterns and channel preference.
  • Segmentation to identify logical unique groups of customers that tend to look alike and behave in a similar fashion. While the promise of "one-to-one" marketing sounds good, we have not seen many organizations that have mastered the art of treating each customer uniquely. Identification of actionable segments is a practical place to start.
  • Primary research to capture needs and attitudes.
  • Customer valuation to understand profitability, as well as lifetime value or long-term potential. Value may also be based on the customer's ability or inclination to refer other profitable customers.

Analysis and research alone, however, are insufficient. To create and foster a relationship, we have to act on what we learn about customers. Customers need to see that we are differentiating our service and communications based both on what we've learned independently and on what they've told us.
At the same time, differentiation should be based on the value customers are expected to deliver.

Develop and Customize

In the product-oriented world of yesterday, companies developed products and services and expected customers to buy them. In a customer-focused world, product and channel development have to follow the customer's lead. Organizations are increasingly developing products and services, and even new channels, based on customer needs and service expectations.

Most organizations today are not able to cost-effectively customize products for individual customers. However, products, services, channels and media can be customized based on the needs of quantitative customer segments. The extent of customization should be based on the potential value delivered by the customer segment.

Interact and Deliver

Interaction is also a critical component of a successful CRM initiative. It is important to remember that interaction doesn't just occur through marketing and sales channels and media; customers interact in many different ways with many different areas of the organization including distribution and shipping, customer service and online.

To foster relationships, organizations need to insure that:

  • All areas of the organization have easy access to relevant, actionable customer information.
  • All areas are trained how to use customer information to tailor interactions based on both customer needs and potential customer value.

With access to information and appropriate training, organizations will be prepared to steadily increase the value they deliver to customers. Delivering value is a cornerstone of the relationship. And remember, value is not just based on the price of the product or the discounts offered. In fact, customer perceptions of value are based on a number of factors including the quality of products and services, convenience, speed, ease of use, responsiveness and service excellence.

Acquire and Retain

The more we learn about customers, the easier it is to pinpoint those that are producing the greatest value for the organization. Those are the customers and customer segments that we want to clone in our prospecting and acquisition efforts. And, because we continue to learn about what is valuable to each segment, we'll be much more likely to score a "win" with the right channel, right media, right product, right offer, right timing and most relevant message.

Successful customer retention basically involves getting it "right" on an ongoing basis.

Successful customer retention is based very simply on the organization's ability to constantly deliver on three principles:

  • Maintain interaction; never stop listening.
  • Continue to deliver on the customer's definition of value.
  • Remember that customers change as they move through differing life stages; be alert for the changes and be prepared to modify the service and value proposition as they change.

And so the cycle continues. As you move from one stage to the next, you gain insight and understanding that enhances your subsequent efforts. Your development initiatives simultaneously become increasingly sophisticated as does your implementation of CRM processes.

Register or login for access to this item and much more

All Information Management content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access