While companies realize the value of CRM technologies, many of them use the technologies for specific purposes, such as targeting customers better and maximizing the opportunities for cross selling. Most companies, says the author, fail to set and meet a broader, more strategic goal, improving customer loyalty and creating advocacy. Only an integrated, strategic approach will unlock CRM’s full value and improve the customer’s total experience with the organization across the entire enterprise. As the author writes, “improving customer relationships and increasing loyalty aren’t simply about managing interaction with customers better, but about serving them in a fundamentally improved way.” In the articles, he outlines a road map that will help managers re-define the customer experience so that those very customers will remain loyal and think better of the company, whether they’re dealing with order fulfillment or accounts receivable.
Too often, companies use Customer Relationship Management (CRM) technologies only to target customers better and maximize the opportunities for cross selling. While these actions have immediate paybacks, they fail to meet a more strategic goal: improve customer loyalty and create advocacy. To drive loyalty, a business must take an integrated, strategic approach to CRM, one that focuses on improving the customer’s total experience with the organization across the entire enterprise, all touch points (physical and electronic), and all experiential elements (from presales activity to product/service experience to post-sales support).
CRM technology is often sold as an isolated “point solution” and implemented in and by individual company departments. This approach fails to unlock CRM’s potential to have a substantive impact on the Total Customer Experience (TCE) and drive loyalty. In this article, I will discuss the rationale for taking a more integrated approach, and identify the changes organizations must make to develop a more integrated CRM strategy.
A recent study by Insight Technology Group of Boulder, Colorado found that approximately 70 percent of companies that have implemented CRM reported that it was either a “failure” or only a “minor success.” This represents an unacceptably low level of success and enthusiasm, far too low to enable the wide-scale adoption of CRM technologies. In taking a closer look at what businesses have done in CRM, it is easy to see at least two major reasons for these disappointing early results: The yardstick companies use to measure success is too tactical and short-term, and the way in which those companies implemented CRM is too isolated or “siloed” to have a meaningful impact. The root of the problem is not with the core technology but rather in the way companies are implementing the technology.
CRM IS A STRATEGIC INITIATIVE
Making a commitment to technology-enabled CRM should be a strategic decision whose goal is to have a real impact on the way the company competes. This impact can only be realized if CRM is implemented in a strategic context, namely, where the technologies are used to support a strategic direction rather than become the strategic direction. CRM should be about managing and improving the customer’s total experience with the organization across all:
- touch points (call centre, Web, kiosks, service technicians, etc.)
- company divisions or departments
- experiential elements (presales activity, product/service experience, post-sales support, etc.)
An organization will be successful only when the Total Customer Experience is the focus of improvement. This is not to suggest that companies will dedicate the time and resources to implement a complete CRM solution that addresses all experiential elements in one large project. In fact, companies will need to start very small and expand as they go and learn. However, these incremental investments need to be expanded in a cohesive, integrated manner. The CRM mantra needs to change from “move quickly and reap early rewards” to “move quickly and work towards achieving a strategic objective.” The prevailing short-term focus emphasizes doing things in a compartmentalized manner (e.g., the call centre operations of the consumer products group) with little coordination with other elements in the Total Customer Experience. Each department implementing its own “point solution” results in a series of disjointed initiatives, each somewhat unsatisfactory in its impact on the organization.
The vast majority of CRM projects do not adopt an enterprise-wide perspective or a strategic objective. The technology is purchased and implemented on the initiative of a sales, service or marketing manager within a specific product group or department. The focus is on improving a particular process or function and is generally driven by the potential short-term tangible benefits. In research we have completed on CRM, businesses cited four primary goals of their CRM projects:
- Attract new customers
- Increase sales per customer
- Reduce costs through optimization of business processes
- Improve customer relationship/increase loyalty.
When we investigated what most businesses have done and how they measure success, the focus is on some combination of the first three objectives. The fourth objective, increased customer loyalty, is a “nice to have” rather than the reason for undertaking the CRM initiative. The vast majority of the projects are really focused on targeting customers better, cross-selling more effectively or handling customer requests more cost-efficiently. Little attention is paid to how to alter or improve the customer’s experience with the organization. This is due partially to the fact that CRM technologies are naturally about customer data and workflows, not about relationship building. Relationship building requires the creative thinking necessary to leverage the data and workflows into a better customer experience. This creative or strategic thinking is conspicuously absent from most of the CRM projects we examined.
The focus of CRM projects should be on improving customer loyalty, especially in this age of deregulation, decreasing customer loyalty and increased customer choice. In fact, research conducted with CEOs indicates that improving customer relationships and increasing loyalty is the number one priority of businesses in the United States. This is because it appears that the focus on improving customer loyalty has gotten lost somewhere between the CEO’s business priority and the sales and marketing manager’s need to move quickly and justify a budget.
MOVING BEYOND BETTER CUSTOMER INTERACTION
Improving customer relationships and increasing loyalty isn’t simply about managing interaction with customers better or targeting them better. It is about serving them in a fundamentally improved way. This generally requires changes outside the sales and marketing area, in order to redefine the customer’s experience with the organization in some meaningful way.
Organizations that have taken this broader, more strategic view of leveraging CRM technology have benefited tremendously. Dell Computer’s success in building a structure that allowed its customers to build their own PC is well known. Its focus on using technology to interact and serve customers in an improved manner rather than simply interact more effectively has created a significant shift in market share and a new basis of competition. Pitney Bowes is an organization that has leveraged CRM technology as a means of serving the customer better and driving customer satisfaction. Customer loyalty and satisfaction were being severely hampered by Pitney’s inability to accurately configure its complex mailing systems to customer specification. Using CRM technologies, the organization is now able to sit down with a customer and configure, quote and order a system on a real-time basis, allowing for real-time adjustments based on pricing, availability and delivery times. Six months after the system was implemented, the number of order cancellations was down by 27 percent and order processing times were cut by 45 percent. Serving the customer in a more accurate, timely manner will drive increased loyalty and advocacy, ultimately increasing market share.
These kinds of CRM successes require strategic insight into how to serve the customer better and the involvement/commitment of senior executives to align departments and divisions with a common strategic goal. CRM needs to be about business strategy, supported by technology, not about reducing marketing costs or simply interacting more effectively.
LOYALTY IS DRIVEN BY THE TOTAL CUSTOMER EXPERIENCE
Serving the customer better does not necessarily mean serving him/her in a more expensive manner. The goal is to ensure that you have aligned your service elements with each and every customer’s need. Identifying and eliminating areas of over-serving can more than compensate for areas where your service or offering needs to be enhanced to become more competitive. Where a more expensive form of serving the customer is required, it is critical to ensure that it is done for a customer segment that the organization can afford to serve better.
The main benefit of CRM technologies is an improved understanding of customers. Unfortunately, many organizations have collected vast volumes of information that they do not understand how to use effectively. This customer information is the enabler that allows a new business strategy to be developed. A first step is to understand what the business strategy is. This will then allow you to determine what elements of the varied customer information are most critical to rolling out the strategy successfully. It is commonly recognized that 80 percent of the strategic value of customer information is in 20 percent of the data. However, the difficulty is in identifying the 20 percent that has value.
When this customer data are not used effectively, CRM initiatives can depersonalize customer service and therefore reduce loyalty. For example, one of the organizations that we have worked with is a manufacturer of industrial cable. Approximately 80 percent of its profit came from 25 large industrial accounts. One of the big issues for its customers was the length of time it took the manufacturer to generate quotes and confirmed delivery dates for non-standard (customized) cable orders. Custom orders required a flurry of phone calls, faxes and time-consuming interaction with subcontractors and component suppliers to produce an accurate price quotation and delivery commitment. This quotation process typically re q u i red four to five days, while the entire manufacturing process was only three days.
After studying the situation, the company implemented a Web-based system that allowed customers to input the specifications for custom orders on-line. The system automatically routed the special requests to the most suitable subcontractors and component providers and sent back same-day quotes on-line. Quotes were consolidated automatically and a confirmed cost and delivery schedule was generated for the end customer within 24 hours. This reduced turnaround time by 75 percent and lowered the cost for processing a custom order by 90 percent. The CRM initiative was launched with huge success for the cable manufacture r, its customers and its suppliers. Customers were being served in an improved manner. However, within six months, the volume of on-line custom orders dwindled to zero and the manufacturer suspended the CRM initiative.
The manufacturer had discovered that its largest customers had reverted to the physical order system for placing custom orders. These orders were placed through dedicated sales representatives who “advocated” for their large customers, in order to obtain attractive pricing for custom orders. This set of informal business decision rules was not reflected in the Web-based CRM system, and it forced the company’s senior management to establish a set of business decision rules around pricing levels for large volume customers. The CRM system was adjusted to identify a customer, determine customer profitability and adjust pricing based on the extent to which the manufacturer could afford to serve the customer at low margin. Once the system was re-launched, large customers returned and over 75 percent of customer orders were received on-line. The end result is a vastly improved process that drives customer loyalty among the manufacturer’s most important customers.
A TOTAL CUSTOMER EXPERIENCE REQUIRES AN ENTERPRISE-WIDE VIEW
Customers define their loyalty to an organization according to their total experience with it. For example, their loyalty (or lack thereof) is typically with insurance company x, not with the home insurance division or auto insurance division, if they happen to deal with both. Similarly, they define loyalty by the sum of their experiences with the organization, across all touch points and across all experiential elements: presales, order and delivery process, product /service experience and post-sales support. This means that CRM initiatives whose goal is to improve loyalty must view the Total Customer Experience from a holistic perspective. Interacting with customers over the Web or a call centre in a customized manner, while doing nothing to improve their product or service experience, will have a limited impact on l o y a l t y. Similarly, utilizing the latest CRM technology in the home insurance division while the auto insurance division lags in the Dark Ages will have little impact on loyalty for customers that deal with both divisions.
As I discussed at the beginning of this article, the vast majority of organizations implement CRM initiatives in a compartmentalized, “point solution” manner, with no guiding principles or road map for showing how the initiatives will be coordinated to alter the Total Customer Experience. The right levels of the company hierarchy are not involved in any meaningful manner to ensure that this happens. CRM is viewed as a technology initiative rather than a strategic initiative supported by technology.
AN ENTERPRISE-WIDE VIEW OF CRM: A FRUSTRATING EXPERIENCE
Most businesses today find that they are far from achieving an integrated customer experience. In fact, in most cases, the data gathered and utilized in one CRM initiative are not easily shared with those conducting other CRM initiatives. Forrester Research reports that only two percent of businesses have an integrated or single view of their customer data. Research we recently conducted with businesses that implemented CRM solutions indicates that they are frustrated by their inability to:
- Integrate disparate, departmental CRM initiatives
- Achieve an integrated view of customer data
These frustrations overwhelm issues associated with “ease of use” which typically characterize emerging applications. Businesses with experience in CRM recognize that the first frustration (lack of integration) reduces their ability to redefine a Total Customer Experience, and that the second frustration (common data view) prevents them from making business decisions that optimize the benefit for the enterprise. Meeting these two objectives is critical to turning an organization’s CRM investment into a strategic initiative with significant upside, rather than a departmental tactic with limited potential for success.
AVOIDING THE SILO APPROACH
If there is one lesson that the e-business experiences of the late ’90s has taught us, it is that the costs of large projects need to be justified and that the projects themselves should proceed incrementally, based on early, proven results. Businesses will therefore need to implement CRM through relatively contained, simple and cost-effective initiatives. However, these initiatives need to be part of a broader strategic initiative that will drive customer loyalty by redefining the Total Customer Experience. There are three imperatives for ensuring that CRM investments benefit the organization:
- The CEO/COO must be completely involved and committed to a CRM vision or the redefinition of the Total Customer Experience.
- Success measures that focus on short-term milestones or evidence of redefining the TCE must become apparent (improved order turn around, fewer mishandled orders, higher degree of product/service customization or choice, etc). In the long term, the focus should shift to the benefits of redefining the TCE (higher customer satisfaction ratings, lower customer churn, higher market share, etc.)
- A CRM road map to ensure that the individual initiatives are executed in a coordinated manner needs to be developed.
The most difficult of these objectives, and the one that rarely exists, is the third, developing a CRM road map to guide individual initiatives. This road map needs to be custom-developed and must be based on a core business strategy or direction for serving the customer better. The fundamental difference between the road map approach and the common, siloed approach is that, from the customer’s perspective, each initiative is part of a complete process improvement (i.e., at least one element of the TCE is truly redefined and improved).
In order for CRM to reach its true potential, and for those implementing CRM to move beyond the “minimal success” ratings that accurately describe the rushed activities of the past three years, each organization needs to establish a strategic direction that can have a significant impact on it. A road map needs to be established that ensures that CRM investments support this direction and are integrated into something that fundamentally improves the Total Customer Experience. An organization will realize the benefit of CRM technologies only when they are used to support a strategic direction, rather than as the strategic direction itself.