Idea 14 - Customer relationship management
Some ideas continue to
command respect among hardened management theorists years after they first
appeared, and some provoke snorts of derision. Customer relationship management
or CRM - around which an entire industry has been erected - gets more than its
fair share of snorts.
We all experience CRM, the bad side of it, every time we get
stuck in touch-tone hell, with a recorded voice asking us to 'please select one
of the following options' - for the fifth time. Yet the underlying idea is
perfectly logical- concentrate on your customers, learn about their needs and
behaviour, use what you learn to improve the relationship and, ultimately, sell
them more of what it is you're selling them.
Technology
Big firms have used technology to do much of this, to capture and store customer
information, to analyse it and to automate their sales and support teams. CRM
has become very closely identified with technology as a result- indeed, 'CRM
companies' are invariably software vendors. When CRM projects fail (as big IT
projects so often do) or are poorly implemented, it chips away at CRM's
reputation. And after some well-publicized and expensive project cancellations
and failures, CRM's reputation is showing the scars. Technology is supposed to
be the movie theatre, however, and not the movie itself. CRM emerged in the
1990s at a time when consumers in general were becoming better-informed, more
discriminating and less brand loyal. Retail banks and insurers were among the
first to recognize the benefits of managing their large customer bases more
effectively.
They had learned that it costs far more to recruit a new
customer than it does to keep and expand their 'share of wallet' of an existing
one. But some customers are worth more to a business than others, in line with
the 80:20 principle which suggests that 20% of clients generate 80% of the
profits. The question is: how are we going to find out which ones they are?
Technology supplied the answer, in the form of 'data
warehousing' and 'data mining'. Data warehousing is collecting and storing
information in such a way that it can be queried and analysed. Data mining is
burrowing down into this suitably warehoused information to see what comes out.
What comes out can tell a lot about a customer's lifestyle, predilections
buying habits and overall worth to the business. Once they have this
information, organizations can tailor their customer relationships and their
marketing accordingly, laced with a hefty element of
channel management.
Low-value customers can be siphoned off to a low-cost channel
such as telesales or the website, while high-value prospects may be dealt with
face-to-face. Information on customers and their relationships with different
arms of the business are then merged into one account, so that the same file is
visible to all parts of the business - to different operational divisions, to
accounts, sales or support. That means that whenever the customer contacts the
organization, and by whatever channel, everyone is singing from the same song
sheet.
Cross-selling
This centralized information can also be used to identify cross-selling
opportunities. 'She's got a current account and a mortgage with us. Let's try
selling her some insurance.' More detailed individual data analysis can reveal
other opportunities. If the bank knows that a customer's endowment policy is
about to mature, this would be a good time to suggest another investment
product - mutual funds, perhaps. Keeping track of the customer's life stages
and events that can trigger buying decisions means knowing when, ideally, to
market mortgages, a savings plan for college fees or retirement plans. In the
future, we are promised 'proactive' CRM systems that will know if and when to
offer us a discount to clinch the
deal, as we ponder over the website.
Financial services and telecommunications led the way, but
others were quick to follow, and CRM became both a buzzword and an industry.
The principal opportunity for CRM vendors was to design and sell the systems
that link and feed an organization's channels, its website, call centres
physical stores, travelling reps. The systems collect data, analyse it, store
it and deliver it to wherever it is needed.
The amount of data needed to make CRM do what it should is
considerable, which was a problem in its early days. The Internet now allows
companies to store information offsite, and Internet technology plays a much
larger part in CRM structures. The increased flexibility this brings has led to
increased acceptance by employees previously, acceptance by people in different
parts of the organization has often got in the way of successful CRM projects.
Effective CRM is a business-wide strategy. Integration across
customer-facing channels is not much use if the rest of the organization is not
delivering on its promises. Ordering goods on the net at midnight is wonderful,
but not if they take three weeks to arrive.
The future
All this technology, by its nature, is expensive and the cost of CRM used to
mean that only big companies could indulge in it. More recently, so-called
application service providers have entered the market, hosting CRM software
which they effectively 'rent' out to smaller companies. This has broadened the
market for the CRM concept.
There are plenty of companies who have good things to say
about CRM, that it resulted in double-digit revenue growth, improved
productivity and increased satisfaction. On-premise CRM continues to have a
patchy record, however, with well over half of all projects said to fail or
perform below expectations. Its champions say there can be many good reasons
for this. One of them is obvious to the customers in touch-tone hell when the
company reached for CRM, the customer was the last thing it actually thought
of.
Reference: 50 Management Ideas You Really Need to Know
Book by Edward Russell-Walling
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