Six Steps for Successfully Buying CRM Software

Roy Balkus, vice president of technology for Naugatuck Savings Bank, has a "huge mountain" of data on the bank's customers. "What we're doing right now is data warehousing, which gives us a lot more in terms of details as to what customers do," he said.

But eventually Balkus, who chairs America's Community Bankers' Retail Banking, Operations, Security & Technology Committee, would like to take that data to compare customers, determine their profitability, and cross-sell appropriate products to them.

The $624 million-asset bank currently does not have the technology or software to do that. Customer relationship management software "would create the ability for me to know" what products to push to which customers, he said.

CRM, at its best, organizes the different areas within a bank, including information from branches, to create a unified memory of a customer and instructions on how to treat that customer. Many banks are finding that CRM software is becoming a must-have marketing tool.

Community banks are pretty good at knowing what their customers need, but their customer service and marketing efforts are often unstructured, said Kathleen Khirallah, TowerGroup's research director of retail banking. "What a CRM system allows them to do is get it organized," she said.

While developing a CRM system in-house is not realistic for most community banks, there are a wide variety of options available in the marketplace, ranging from the simple to the intricate. Forming a strong partnership with the right outside vendor is essential to success with CRM, bankers and experts say. But navigating the seas of CRM software options can be daunting. Here are six steps banks can take to help guide their CRM software purchasing decisions.

Step 1: Assess Your Needs and Expectations

The first thing banks should do when considering CRM software is to determine the banks overall CRM strategy. Be clear about the goals of the organization, Khirallah said.

The term "CRM" can be vague and far-reaching. It can refer to methodologies, software, or Internet capabilities that help manage customer relationships in an organized way. The term is frequently used to encompass every interaction a bank has with its customers, especially all processes and procedures with the goal of customer service or sales.

The bottom line in all CRM systems is improved profitability, but banks can choose to reach that end through many different means. That could include cross-selling products, working with existing household information, managing entire relationships, growing lending, or growing deposits. "Most people want to do all of the above," said Steve Kayser, senior vice president of marketing for COCC, a community bank outsourcing , development, and consulting company.

Some experts recommend working backwards, with your goal in mind. "Before a bank considers going the CRM route, they should have a general philosophy of what they are trying to accomplish," said Rich Weissman, president and chief executive officer of The Database Marketing Agency Inc. CRM systems should help banks better penetrate existing customers, better target and market to prospects, and, "most importantly," significantly add profitability to the bank's bottom line, he said.

The biggest mistake banks make when buying CRM software, Kayser said, is not addressing the banks infrastructure first.

The bank should have the base functionality to support CRM software. This base functionality includes a certain degree of technology at the bank, but also a certain level of commitment to customer service.

There must first be an understanding of the culture-the true shift of how an institution is going to relate to customers, Kayser said.

To do this, a bank can assemble a project team. The team can consist of representatives from every area of the bank, including from senior management, lending, I.T., tellers, and personal banking.

Paul Driscoll, executive vice president of $2.3 billion-asset Beneficial Mutual Savings Bank in Philadelphia, said that when his bank begins to look into CRM software, the planning group will be a combination of people at the bank, including representatives from technology, marketing, and banking. "It will be a mesh of all that ... an enterprise-wide project," he said.

At this stage, banks should also decide who should be responsible for purchasing and implementing the CRM software. Khirallah suggested that two people at the bank, the head of business and the head of I.T., handle the project. "TowerGroup refers to this team as 'Gemini pairs,'" she said. "This project cannot be delegated solely to the I.T. group."

Step 2: Decide Which Options Are Critical

At this point, banks should decide what they absolutely must have in terms of CRM software. They should also develop a list of important, but not critical, needs, and a list of things that would be nice to have in a system, like add-ons.

There are many levels of CRM software on the market. Weissman breaks the software down into five levels, ranging from basic to advanced.

The simplest systems just keep track of basic contact information. "It's basically an elaborate, nice, telephone book," Weissman said.

The second level has the ability to track contacts. These systems take the concept of a universal telephone book and add the ability to track telephone calls, meetings, and e-mails. This and the universal telephone book are stand alone, meaning they don't integrate with other databases in the bank.

The next level brings in account data. On these systems, when a bank employee looks up a customer, he or she can not only see the customers contact info, but also can look at which accounts the customer has with the bank.

Bringing in profitability data is the next step. At this level, the CRM system moves from one that houses information to one that creates information. These systems offer "an income statement for each account that each customer has" to show the bank "how much money they are making or losing for each account," Weissman said.

The highest level is a fully integrated CRM system. That's where the CRM system is incorporated into the sales and marketing database system and allows for analysis of each customer relationship for each account. Systems at this level look at customers to determine what new products to offer them. Systems at this level also have the ability to bring in external data, such as information on demographics and business graphics.

"We are firm believers that, at a minimum, you should have a level four" system, Weissman said.

Most experts and software providers agree that the best form of CRM software is enterprise wide. Enterprise-wide CRM systems interface with all of the bank's other systems, so that the information flows through the entire organization. "If you're going to do (CRM) right, you need the whole institution to play a role," Kayser said.

Step 3: Match Your Needs With Software

After determining the bank's needs, the next step is to conduct due diligence to match those needs with appropriate vendors and services. Some vendors can match their technology with the software needs of many institutions. Other providers specialize in a certain area, which may or may not match the area of a bank's focus. Either way, banks should require all vendors being considered to demonstrate how their software can meet the bank's expectations.

"Work with a number of vendors to match your goals," Kayser said.

Banks should "cast a wide net" in this stage of the process, Khirallah said. She suggested evaluating about 10 different vendors at this point. Consulting groups can assist banks with vendor selection. Industry associations, such as America's Community Bankers, also offer resources that can help. ACBs Buyers Guide, which is available online, provides contact information on 14 providers that offer CRM services to community banks.

Step 4: Narrow Down Choices And Issue RFPs

At this point, banks should narrow down their vendor choices to about three or four. They should look for CRM software vendors with proven track records of success, Kayser said. They also should look for state-of-the-art technology.

"It's important that they deal solely with financial institutions and have a very good knowledge of what financial institutions need and of the competitive landscape," Weissman said. "They should understand things besides CRM at banks," like teller systems, help desks, and the call center side, he said.

Banks should look for vendors that focus on financial institutions of their size, Khirallah said. She also recommended that banks visit the clients of the vendors they are considering, even flying to an out-of-town bank for a day visit. Once there, Khirallah said, ask the clients a series of questions about their CRM system, including:

Was the CRM software easy to install?

What did the training entail?

Is the system working as you expected?

How is the vendor to work with?

Was the vendors pricing accurate, or were there hidden costs?

Are you happy with the system?

When issuing request for proposals, banks should be specific about what they are looking for, and make sure all questions and requests are addressed.

Step 5: Evaluate the Vendor Proposals

"The biggest mistake is buying CRM based on how pretty the screen is," Weissman said. "The screen should look pretty good, but what's behind the screen?" he asked. Questions toask include:

Does the system have profitability assessment and analysis?

Is it based on relationship creation, not customer or house holding?

Does it have a data warehouse for historical data?

Does it include retail and commercial?

Is it providing external data?

Is it integrating all that into a consolidated view of the customer relationship?

Is it a fully integrated system?

A strong partnership between the bank and the vendor is key, Kayser said.

Costs are big with CRM software, but the return on investment can be even bigger. There is a broad range of costs for CRM software. Cost is variable, based on the number of users and the size of a bank's database, Khirallah said.

"These are not inexpensive systems," Kayser said. Costs depend on how much software the bank wants to deploy, what pieces they select, and how much help on the implementation side is needed, he said. Costs can range from $50,000 to $250,000, and can reach up to $5 million for large banks, he said.

"It's a real wide range," Weissman said, adding that there are systems that are affordable. "We work with banks that are very small and very large. Our CRM is affordable to the small guys," he said.

In Grant Thorntons 2005 survey of community bank executives, 64 percent said updating or expanding technology to better track customer needs was important to their bank's success, yet only 33 percent were confident about their performance in that area.

Step 6: Implement the CRM System

Utilizing, not just having, a CRM system is critical, Weissman said.

"One reason projected CRM returns are not being fully realized is because over 75 percent of companies are not fully using CRM once it is implemented," according to Doing CRM Right: What It Takes to Be Successful With CRM. a 2004 study by IBM.

CRM is done right less than 15 percent of the time across the globe, according to the survey, which polled more than 370 companies across all industries.

"Differentiating steps are not the big-ticket items, such as technology implementation or customer data integration , rather, they are the human-oriented steps such as change management and process change," said the IBM survey.

"Work with someone who is going to do all the set up for you," Weissman said. A key part of CRM training is working with the bank over the long haul to leverage the potential of the system, he said.

Access is extremely important, Weissman said. "Frequently I see banks make this purchase and give only a handful of employees access. That makes no sense," he said. "You have to get this out to all the people that have direct customer contact... or what's the point of having it?"

Full-blown implementation is a fairly long, detailed system, Kayser said.

Choosing and implementing CRM software is not the last step in customer service. Community banks still need to keep constant communication open between their employees and their customers, Kayser said. Implementation training should include a mix of vendor and business unit training, Kayser added.

"This is about process. This is about workflow. This is about overall knowledge level. You need great people training, along with great skills and a great system." Kayser said.

Even With Technology, It's Still About People

Community banks should emphasize training and incentives over technology when it comes to implementing a customer relationship management solution, said a May report from Celent Communications, a Boston-based research and consulting firm serving the financial industry.

Also, "success isn't defined by deploying the software, but by customer-oriented goals," said the report, Branch Automation: The Convergence of Teller, Platform and CRM, which focused on banks with less than $1 billion in assets. "Setting a strategy, training your front-line staff, providing proper incentives, and being able to measure and reward based on those incentives drives a successful CRM implementation."

While technology shouldn't dominate the discussion, it can play a role in cutting costs, the report said. Smart client technology, for example, can improve the response time of teller workstations, allowing banks to eliminate costlier branch servers, the report said. Instead of relying on individual servers for each branch, a bank can install "smart clients" that interface directly with a centralized server.

In addition to boosting the speed at which a teller can access customer information, a smart client gives tellers offline functionality, which is not available with branch servers. If a branch server repair, "someone from I.T. must go to the branch to repair the server. This can be both costly and time consuming and can lead to extended periods of downtime at the branch," the report said.

As existing branch automation systems grow obsolete, more banks will begin to upgrade their technology with options such as smart clients, Celent said. However, "the market is warming up, but is by no means hot," the report said. As upgrades do progress, according to Celent, community banks will tend to purchase complete branch automation solutions from their core vendors. "These customers don't have the ability or budgets to undertake integration or customization projects and will prefer a single source," the report said.

© 2005 CRM Daily. All rights reserved.

The Top 10 Ways to Fail at Customer Service

After combing the company's Web site for 10 minutes to find a telephone number, you dial, only to be greeted by the company's seven-layer voice-mail system. Once you finally get a human being on the line, he or she insists that you screwed up or puts you on hold while finding someone who might be qualified to answer your questions. It's Dante's customer service hell.

 

My husband, an independent videographer, was there last week. He spent three hours on the phone with a leading video-editing software company, trying to get his new software to work. He lost three days of work while he struggled to fix the broken desktop system. Customer service reps insisted the problems were his fault. Normally a restrained man, he ended up screaming at one of them. Call it customer rage.

If you have anything to do with customer service at your midsize company, you've probably already been on the receiving end of customer rage. While no one condones such over-the-top behavior, we can all understand it as the unfortunate—and inevitable—result of poor service.

Following are our picks for the top 10 ways to fail at customer service - and what you should do instead.

1. Waste customers' time.
Last year's Customer Rage Survey asked respondents to identify what they had lost as a result of poor service. For most, the biggest complaint wasn't lost money but lost time, says Scott Broetzmann, founder of the Customer Care Alliance. Don't force customers to cool their heels while you figure out what went wrong and who's at fault. Instead, address their concerns promptly and then figure out how to do better going forward.

2. Treat your workers badly.
Give them little chance for increased responsibility or promotion. They'll be sure to take out their misery on your customers. That's why Jill Leonard Tavello, vice president of culture and communication at Stew Leonard's, spends most of her time ensuring that the Connecticut grocery chain's 2,000 employees are satisfied. "To have happy customers, you first have to have happy people," Tavello says. Among the workplace strategies the company uses: maintaining flexible schedules, recognizing high performers, promoting from within, publishing a daily companywide newsletter and encouraging community involvement. Employees provide such great service that executives from other companies worldwide travel to take Stew Leonard's customer service seminars.

3. Forget to train your frontline employees in interpersonal skills.
Everyone knows how to be friendly, right? Wrong. Many service representatives treat customers badly either because they simply don't understand basic courtesy or because they're reacting to their own high-stress jobs. "They're constantly barraged and berated by angry customers," says Jeffrey Gitomer, a Charlotte, North Carolina-based customer service trainer and the author of Customer Satisfaction Is Worthless, Customer Loyalty Is Priceless (Bard Press, 1998). By the end of the day, they're likely to vent their frustration on customers. Instruct your employees exactly how you want them to treat your customers, especially those with complaints.

4. Restrict your employees' abilities to provide high-quality customer service.
Some companies give employees the authority they need to make customers happy. "Our team members are empowered to make decisions right there on the spot—to give exchanges, refunds, to get a customer something else," says Stew Leonard's Tavello. "There are no hassles, no going through channels." Customers can return products at any time for any reason. While a few have returned gnawed turkey bones after Thanksgiving, complaining that the meat was dry, 99 percent of customers never test the company's no-hassle policy. In fact, Tavello credits the policy for creating strong customer loyalty and contributing to industry-leading sales records.

5. Rely on customer self-service.
Customers detest voice-response telephone systems. "Lots of studies have been conducted where people compared automated phone systems to going to the dentist," Broetzmann says. He lauds what he calls "courageous" companies like L.L. Bean for spending the money necessary to staff the order department with human beings. "Our goal is to answer every call," says Cindy Williams, an L.L. Bean customer service representative who answered the phone on the first ring. "We do have an automated system, but it would be really unusual for it to kick in." Unlike many companies for which the automated system is the first line of customer service, L.L. Bean wisely employs it only as a backup for extraordinarily busy times.

6. Respond slowly—or not at all—to e-mail requests.
Nobody likes thinking that an impassioned plea for help is heading into a black hole. In one recent speech, a United Way chapter's marketing director had this to say about trying to contact her organization before she worked there: "I sent them an e-mail asking for more information on volunteer opportunities—and they actually replied!" You can delight your customers by immediately acknowledging that you've received their e-mail inquiries, even if you can't answer their questions right away. Most will be quite satisfied if you answer within 24 hours.

7. Fail to recognize the opportunity in an unhappy customer.
Mistakes offer a good way to retain a customer for life while generating tremendous word of mouth about your excellent service, says Donna Fenn, the author of Alpha Dogs: How Your Small Business Can Become the Leader of the Pack (forthcoming from Harper Collins). Whenever you make an error, acknowledge and apologize for it immediately, Fenn says. Then solve the problem quickly and give the customer a small gift. Can't be bothered? It'll cost you: 85 percent of the respondents to the Customer Rage Survey shared their service-nightmare stories with others, and 59 percent vowed never to do business with the offending company again.

On the other hand, rapid remedies provide enormous gains. Jack Mitchell, the author of Hug Your Customer (Hyperion, 2003) and the CEO of Mitchell's and Richard's, two Connecticut clothing stores with revenues of more than $65 million, says his associates will drive to a customer's home to pick up clothing that was tailored incorrectly, retailor it that day and bring it back—and give the customer a gift as well. "We make heroes out of people who make mistakes," Mitchell says. "Customers say, 'Wow, these people at Mitchell's aren't afraid to make a mistake and fix it.'" In fact, he says, "we'll open a store early or come in on a Sunday to fix a mistake."

8. Don't bother using technology to understand who your customers are and what they need.
You wouldn't think a clothing store would need to know much about its customers—most retailers don't. But Mitchell's keeps detailed information about all its customers, from what they purchased to the names of their pets. Furthermore, the company has integrated its inventory, customer and marketing databases, so that when new apparel from a particular designer arrives, employees can call customers who love that designer's clothing. Bottom line: Consider investing in the best technology you can afford to learn about your customers. However, remember that consumers are growing increasingly wary of data-collection systems. Be sure to use the information you collect wisely and ethically.

9. Measure satisfaction to get ratings, not responses.
Most companies send out perfunctory customer satisfaction surveys. But asking customers "Are you satisfied?" or "How can we improve?" yields superficial answers, often geared solely to get high (but unreliable) ratings. Jonathan Copulsky, a principal with Deloitte Consulting in Chicago, offers these far more probing and useful questions: "What do our competitors do better than we do?" and "If we lost your business, what do you think the cause would be?"

10. Don't solve their problems.
Big surprise: Customers' No. 1 desire, according to the Customer Rage Survey, is for their products to be fixed or their service issue to be resolved. Do it. No matter what it costs. The loss of one customer—and all of the potential customers he or she vents to—will ultimately be far greater than the cost of solving one problem.

Related Links

Customer Care: The Multibillion-Dollar Sinkhole: A Case of Customer Rage Unassuaged (registration required)
http://www.ccareall.org/_vti_bin/shtml.dll/read.html

14th Annual AMA Frontiers in Services Conference
http://wpcarey.asu.edu/csl/Frontiers.cfm

Elaine Appleton Grant is a contributing writer for Momentum, the Microsoft® newsletter, magazine and Web site for midsize businesses in the United States.

CRM ROI Revisited

In the heat of the customer-relationship management (CRM) software craze, product makers Siebel, SAP and Peoplesoft sold big-ticket enterprise applications packed full of promises. Two years later, the fervor chilled as the return on investment (ROI) remained conspicuously absent. The vendors took a beating and CRM became a dirty word.

In today's complex business environment, the prognosis for CRM software is much more encouraging. While some business leaders frown on the hype associated with new ways to manage customer relations, the success rate is improving and the software has started to be viewed as more credible and reliable.

"There was plenty of hype and overselling, but today we do see more success and less overall failure," said Sheryl Kingstone, an analyst at the Yankee Group. "But there is still some disillusionment."

One reason offered for the growing popularity of current-generation CRM software is the availability of on-demand, or hosted, applications. While current CRM successes can be attributable -- at least in part -- to the rise of these leased applications, analysts are not writing off the role of the purchased variety as a player in the CRM space.

Real Cost of CRM

Contrary to a popular misconception about funding customer-management programs, CRM campaigns should not place a company in the red. The start-up expense going into a CRM program might be a bit costly. But a properly executed program also should be a revenue gainer on the other side of the rollout, according to analysts.

That financial situation should not change, whether the business uses on-demand or on-premise applications. "Installed, or on-premise, CRM is not a losing proposition," said Forrester Research analyst Elizabeth Herbert. "Although costlier on the front-end, it can save money in the long-run."

That is the message drilled home by the CRM software giants. Experts claim that the message is not just based on marketing hype to sell more software applications. It is drawn from success stories where the CRM software proved successful.

Consider Custom-Fit

Sometimes, the lack of ROI boils down to a poor corporate fit. If the CRM application is too structured, there is no room to grow. Similarly, if the CRM package is too customizable, then the cart runs ahead of the horse.

This is often a case of knowing just what the goals of CRM are. If the goals are aggressive, a more flexible package could be worth the added expenditure. But if fancy bells and whistles are not part of the plan, then companies can justify a more rigidly structured software package.

"On-premise CRM is more flexible but easier to over-customize. It requires a business and I.T. staff but benefits from economies of scale," said Herbert. "It is generally cheaper than hosted and offers greater control."

The converse is true using the same logic, she said. Companies generally find that hosted CRM is less expensive up-front and is easier to customize, but has limited options. Hosted offerings usually require only one business administrator and they have more frequent upgrades.

Hosted vs. Owned

One way to view the difference is to consider a corporate decision to obtain a vehicle. If there is a need for the vehicle, the cost is a necessity regardless of whether the company buys the vehicle and owns it, or leases the vehicle while using it.

Hosted is a subscription-based pricing model," said Laurent Pacalin, vice president and general manager of Siebel CRM Products. "In effect it is renting the product, whereas on-premise is licensing, which means ownership. Whether to rent or to own is best determined by the end goal. Renting can be more expensive over time, but buying does cost more up front." Siebel offers its CRM product line in both pricing models.

Oracle , too, says there are pros and cons both to buying outright and to leasing CRM applications. Perhaps the biggest obstacle to surmount is the integration issues. "On-demand-only offerings that don't tie to other systems are just external rental CRM, and that's a dead-end," said Barbry McGann, vice president of CRM strategy at Oracle.

But on-demand competitors counter that vendor accountability is a bigger issue. "Customer success is critical in a pay-as-you-go application," said RightNow CEO and Founder Greg Gianforte. "Customers will only renew if we deliver. If you have already paid the bill with an on-premise CRM vendor, it is harder to hold them accountable later."

Time Is Money

Another crucial factor in realizing ROI is the element of time. CRM applications that do not have to be installed locally can save time. "One of the biggest advantages of hosted CRM is the faster deployment time," said Forrester's Herbert.

Certainly, time can be a deal maker or breaker in customers' eyes. Lengthy installation throughout the corporate structure could lead to obsolescence.

The time factor was a critical consideration for Home Depot's deployment options, for example. "I am concerned about the time it takes to go live with any project," said Bob DeRodes, executive vice president and CIO of Home Depot. "Sometimes it feels that by the time we get a technology down to the end-user level, it's almost obsolete."

But fast does not always win the race. Sometimes haste can produce waste.

"Quicker to deploy can mean faster to fail for firms who throw technology at broken business processes," said Forrester's Herbert.

From Ring to Bling

The problem in the early days of CRM was the operating premise. The initial goals of CRM were not properly thought out. "The whole initial concept was wrong," said RightNow's Gianforte. "The first generation was about what companies could do to the customer instead of for the customer, and that made it hard to find ROI."

In comparison, today's CRM is more customer-centric and more profitable. According to Gianforte, ROI comes from three distinct areas: increased contact-center efficiency, increased revenue and increased customer satisfaction . The first is the easiest to measure, but the last is valued higher by corporations because a repeat sale is easier to make than a first sale.

"When CRM doesn't deliver as it should, it's usually because the most important customer data tends to be in enterprise resource planning and not in the CRM," said NetSuite's CEO Zach Nelson, adding that NetSuite overcomes the issue by combining the two.

"Adding order management to the CRM is critical," he said.

Other industry experts agree with Nelson. In particular, Siebel's Pacalin said product selection should be based on a full-service game plan.

"To choose a good CRM application, look for one that covers the entire spectrum of sales: from opportunity to quote through order to cash," said Pacalin.

The Crying Game

While cost, reliability and results have changed with CRM software campaigns, the bad reputation CRM acquired earlier still lingers in some business quarters.

Tien Tzuo, senior vice president and chief marketing officer of SalesForce.com, believes that customers have been promised too much, have worked too hard and have wasted too much money to be fooled again. "This is the shameful legacy of the enterprise software industry," he said.

Some business experts suggest not dwelling on past reputations.

"Yes, CRM is still a dirty word. But when I hear things like, 'Oh, I tried that' and 'CRM doesn't work; stay away from that,' I just smile and say if you care about increasing revenue, decreasing costs and improving your customers' overall experience, then you care about CRM," said Yankee Group's Kingstone. "You cannot measure ROI in small pieces. You have to focus on the Holy Grail."

Perhaps the best advice involves doing one's homework and adequately researching CRM products, suggested NetSuite's Nelson. "Know exactly what you want to accomplish, and try several CRM products before you commit," he said.

(source: crm-daily.com)

The Cost Basics of CRM Buying

A CRM purchase should always be preceded by a needs-assessment analysis. These are complex endeavors that map out a company's pain points in its customer-service operations to determine what application or series of applications can address these problems.

After a few years of declining sales, companies are beginning to step up purchases of customer-relationship management (CRM) applications, adding new modules to preexisting applications, shifting over to the hosted method or, in the case of a newly formed company, purchasing a basic suite for the first time.

The choice for many of these firms will be Siebel, a company that still leads the CRM market, according to numerous surveys, the latest of which is from Forrester Research. SAP and Oracle are close behind.

But no matter what vendor these companies select, those responsible for purchasing the software need to heed a few cost basics to ensure their new CRM projects don't go off track. The Forrester report noted that companies will spend a total of US$13 billion on CRM initiatives in 2005, but only 25 percent of that will go toward software licensing, with the balance going toward integration , administration and maintenance.

If these numbers sound familiar, that is because they are. Almost all enterprise software projects break down along these lines, with only a small portion of the overall expenditure devoted to license fees. Of course, this is partly due to the integration and administration associated with rolling out any new system. But in some projects, these categories often turn into financial black holes.

Before You Buy

A CRM purchase should always be preceded by a needs-assessment analysis. These are complex endeavors that map out a company's pain points in its customer-service operations to determine what application or series of applications can address these problems.

Analyzing historical customer interaction and transaction data is part of that process. Such a step will ensure -- at least theoretically -- that the application purchased does not require more training than expected or will overwhelm the company's infrastructure.

Unfortunately, companies do not always do a great job of evaluating the capabilities and limitations of their existing hardware and infrastructure when planning an enterprise-software purchase.

As You Buy

Earlier this month, Oracle announced it was changing its pricing methodology for hardware containing multicore processors, a shift that some have speculated is a response to adjustments in Microsoft's and IBM's pricing.

Pricing for software and hardware is quite complex, which means it can be easy for companies to leave money on the table when negotiating a purchase. It is important for corporate negotiators to be current on industry pricing trends, including what competing firms are offering.

Also, while most companies are savvy enough to negotiate discounts, they often are caught unawares by tricky maintenance and upgrades clauses.

After You Buy

It is important to assume that additional money will have to be spent on training. A great number of CRM projects have failed to deliver return on investment because a company relied on the vendor to deliver the necessary training. While vendor training is important, it should be only a part of a comprehensive training program developed by the buying company.

Companies tend to neglect training -- especially ongoing training. One common metric -- although cases can vary according to many factors, such as the work-force size and the complexity of the system -- is that training should comprise at least 10 percent of the implementation budget.

The implementation budget itself, which covers the cost of integrating the new application with existing infrastructure, will be considerable. Another rule of thumb is that for every dollar spent on a software license, at least three should be spent on implementation and integration.

The final area to watch out for is extensive customization, which often leads to glitches and, indeed, further systems integration work.

Customer Relationship Management – Beyond the "buzz"

By Mandeep Khera, VP of Worldwide Marketing,
United Customer Management Solutions

Internet. CRM. Web. Electronic Commerce. e-CRM. If you don’t know these buzz words, you might not be very popular at parties. Sprinkle them around and you will impress quite a few people around you. CRM or Customer Relationship Management is one of the fastest growing areas – both in the "buzz world" and the real world. But, what is CRM? And, why the hype now?

The concept of managing relationships with customers is not new. Companies have been interfacing with customers since the beginning of trade. Most haven’t been very effective. Remember the ‘70s when customers had to go to the airports to buy tickets from airlines? And, when you asked why, the airlines said, "Because that’s where we keep them!" Over the years, customers grew accustomed to being treated badly and still bought from the companies that abused them. That explains some of the definitions for the word "customer". According to Webster, Customer \Cus"tom*er\ (k[u^]s"t[u^]m*[~e]r), n. means one who regularly or repeatedly makes purchases of a trader. Notice that there is no focus on meeting needs or satisfaction.

Competition, driven by the Internet and deregulation, has changed all this. The Internet has lowered the barriers for new players to enter markets and offer goods at much lower prices regardless of location. Competition has been further fueled by deregulation of the telecommunications industry. Customers now have a choice and, most importantly, they are aware of their choices. The power has shifted to the customer. The customer is truly the king!

With the intensified competition, companies realized that they need to treat their customers differently - with respect. Customers have a lot more choices and they don’t have to be loyal to any company. Companies are now desperately trying to figure out ways to manage customer relationships effectively, not only to acquire new customers but to retain their existing ones. According to a Harvard Business Review study by Reicheld & Sasser, some companies can boost profits by almost 100% by retaining just 5% of more of their customers.

CRM is not a product or service, it’s an overall business strategy that enables companies to effectively manage relationships with their customers. It provides an integrated view of a company’s customers to everyone in the organization. For example, if marketing runs an outbound campaign, all the information about the customers and the program should be retained for the sales people to follow up on, the customer service people to answer any queries, and technical support to provide any field support. The idea is to have the same information available to all in the company so customers don’t go through hoops to get their needs met. Most customers leave instead of trying to explain their problem or issue over and over to a different company representative. CRM implies that everyone in the enterprise is focused on the customer.

Implementing a CRM strategy requires three key enablers: (1) Qualified professional people, (2) Well-designed processes, and (3) Leading-edge technology. It is critical to hire professional people who are then extensively trained on dealing with customers in a professional manner. They should also know how to use the technology. Without well-designed processes, any discipline will fail to meet its objectives. CRM is no exception. Companies should define their business requirements and objectives and develop CRM processes to meet these requirements. Finally technology should include at least the following elements:

• Business Rules: Business rules are needed to ensure that any transaction with the customer is processed in an efficient manner. For example, if a company wants the most profitable and high volume customers to be serviced by experts, the business rules should clearly define what that criteria is. Based on the complexity of transactions, an organization may need hundreds of business rules.
• Data Warehousing: Managing relationships with the customers depends on customer information, which is usually in various disparate databases. Consolidating the relevant information in one place and making sure that the information interrelates is not an easy task. Once done however, data warehousing augments a company’s revenue potential and customer service. For example, a company can segment the types of customer it has in the data warehouse and launch a marketing campaign geared toward specific types of customers. Similarly, good data warehousing can help in presenting the information based on certain business rules to help in cross-selling and up-selling to customers calling for other reasons.
• Web: The most important use of the web from the CRM perspective is self-service so customers can make inquiries about their accounts any time from any where. The Web should also be used for Electronic Bill Presentment and Payment (EBPP), so customers can see what they owe and pay online if appropriate. For revenue-enhancement, companies can also provide instant messages to be used for cross-selling and up-selling services based on the profiles of customers using their Web site.
• Interactive Voice Response (IVR): An IVR system is required for customers to do self-service inquiries via the phone instead of the web.
• Reporting: Good reporting tools are necessary for both customer reports as well as internal reports.
• Call Center Technology: Some type of call center technology with PBX or VoIP (Voice over Internet Protocol) integrated with intelligent call-routing is an absolute must for an interface with the live Customer Service Representatives.
• Integration framework: A technology framework that allows all the applications and databases that have customer information to be integrated can make a big difference in implementation.

There are various solutions available for companies to implement their CRM strategy. They can buy off-the-shelf CRM packages that provide functionality at various levels. Most of these products are robust and comprehensive. However, even throwing the best technological product at the CRM problem is not going to fix the problem. Companies still need to have the right processes and integration of all legacy applications to have a successful CRM program. Alternatively, companies can create their own application and buy some technologies for certain key components like data warehousing. This solution, although attractive, usually takes much longer and is rarely more successful than buying off-the-shelf solutions. Another viable solution is outsourcing the CRM function to specialist companies. Good outsourcing companies specializing in CRM can provide turnkey solutions in a very quick timeframe. This helps companies eliminate the costs relating to their capital infrastructure for CRM and allows them to focus on their core competencies. A credible outsourcing company will guarantee results, which eliminates any risk for the companies in outsourcing.

It’s apparent that companies need to implement an effective CRM strategy in order to survive and thrive. Which solution they go with depends on the organizational culture and the company’s overall strategy. Regardless of the type of solution, companies need to look at CRM on a life-cycle basis, which goes from acquisition to retention. Telemarketing with untrained representatives, who call customers at dinnertime and are overly aggressive, is not CRM. Also, companies must allow customers to interface with them from any touch point that they are comfortable with i.e. Web, IVR, phone, or in-person meetings. Over-use of technology for the sake of technology can backfire and is potentially devastating. An appropriate combination of technology and people is the key to success. Finally, companies must remember that customer relationship management is not a cost center but a competitive differentiator.

Mr. Khera is the V.P. of Worldwide Marketing for UCMS, a leading CRM outsourcing solutions provider. For further information, you can call him at 650-610-7886, e-mail at mandeep.khera@unitedCMS.com or visit the web site at www.unitedCMS.com

Kindness Is The Killer App of CRM

By Chuck Sykes

 

Is there anything you won't do for your customers?

Certainly there is.   The low cost air carrier, Southwest Airlines, for example, won't feed you or offer reserved seating, but at the same time they have the airline industry's best cumulative customer satisfaction record.

What are they doing right?   They manage their customers' expectations and then provide fast, friendly service - all at low cost.   Sounds real basic doesn't it?   It seems refreshing to me that in these times when many think you need an acronym to describe customer service, one never enters Southwest's lexicon to get in the way of understanding. We could invent one: F2 S (Fast, Friendly, Service).   The best thing is that everyone would know what fast, friendly service means.

In all seriousness our Industry has an acronym that everyone has a definition of and yet, no one can agree on what it is, or how to successfully make it work. It's CRM (Customer Relationship Management).   CRM also has a reputation of high costs.

No matter the definition, what CRM is not, is a magic bullet that takes the place of fast, friendly, effective service.   Self-help solutions, what some people categorize as CRM, can be useful, but can they really create a positive relationship between the customer and the product?

At best, self-help solutions keep support costs low because your customers are helping themselves.   Their effort probably engenders little loyalty toward your product - just self-confidence that they "did it".   It is also likely they will fail at helping themselves and get really upset with the product and your brand.

Other CRM solutions send automated responses using sophisticated (read expensive) technology that categorizes the customers' needs and then sends likely answers mined from a knowledge base.   No humans required.   These solutions can be valuable in high-volume, low complexity situations.  

Businesses that opt for the niche solutions that place an emphasis on technology in place of human interaction take a chance if industry research is correct.   Gartner estimates that 60 percent of all CRM implementations fail.   This puts the blame on the people who integrated the software.   But consider this as well, Gartner predicts that in the next few years only a hand full of the dozens of CRM software vendors will be around.

Building a strong, long-lasting relationship with your customer doesn't have to be expensive, or complicated, it just needs to be done right by people who make it their business to understand and use the best technology and train their staff to delight your customers.

To get customer service done right, there are five things your support solution needs to do:

1. Understand your customers' needs and retain them in a knowledge base
2. Develop a way to maintain their satisfaction by meeting those needs
3. Watch your costs in satisfying those needs - you don't want to go out of business leaving behind a roster of formerly happy customers
4. Ensure that your   support staff is accessible and empathetic
5. Listen to your customers' concerns and opinions, as they can help you win more business

What application can do all this?   We can predict with confidence that when it comes to customer satisfaction, no one has created a CRM application that can replace a highly trained, technology-enabled person.    

If fast, friendly, effective service is the solution, the only question that remains is how do you deploy a high tech, high touch live-staffed solution that can respond to your customer needs for the lowest possible costs?

A Gartner study on contact center self-service costs versus live calls, shows that the cost of answering e-mail can vary widely, from $2.50 per transaction to more than $40 per transaction. The report advises firms to estimate costs for answering e-mail between $5 and $10 per transaction.   Chat sessions run about $7 per transaction.   In contrast, live service by phone averages $5.50 per call, and costs per call range from $2 to $12.  

We know that e-mail is a great way to lower costs, but not when multiple e-mails are involved - then voice is often the lower cost.   We also know how to drive cost down even further by outsourcing to offshore locations such as the Philippines and Central America where our experience is with a highly educated, English speaking work force.

Jupiter reports that outsourcing customer service operations to offshore contact centers will save companies up to 30 percent over the costs of handling the functions in-house.   Additionally, their research estimates that companies with large contact center operations (200 seats or more) will save almost $4 million annually by outsourcing to contact centers located abroad.   Their research also estimates that contact centers handling 300,000 inbound calls a month will save $2 million by outsourcing their support operations to a domestic provider.

We know there are many solid products emerging in the market that offer part of the customer service solution.   The focus remains on getting the basics right the first time.   Ask yourself, is your customer going to get fast, friendly, effective service?   And remember, customers place no value in the fact that you are using the hottest CRM app, they just want their needs met.

F2 S is how we define CRM at SYKES where we offer efficiencies of scale and knowledge to cost effectively deliver fast, friendly effective service at every level of the enterprise.   We bring together the basics of knowledge, performance and quality to deliver industry-leading outsourced or insourced service solutions at the lowest possible cost for the highest brand building value.

Everything You Always Knew About CRM But Never Dared To Say

For some years now I have been a very close observer of the CRM market - hype and all. Yet the more I read and see, the less I believe. To me CRM is like AIDS: nobody seems to be genuinely interested in the truth anymore; lies, politics and - above all - profits drive an insane PR machine that feeds on people and their tragedies in order to survive.

Back in 1999 the Gartner Group said that "more than 60% of all CRM initiatives fail", and I believe this figure being closer to 90% in 2001. As I am writing this, CeBIT is in full swing here in Hannover, Germany, and nearly software vendor and consultancy booth has the letters CRM written all over.

If there really are so many experts out there, why such a massive failure rate? The simple answer is that CRM is first and foremost about You! It's about rehumanizing the relationship between people, be they inside or outside the organisation. The resulting efficiencies and insights greatly contribute to a healthy bottom line, but they are usually found in places other than the call center or your direct marketing campaigns.

If you are really interested in CRM and need some helpful advice, I hope the following tips guide you in your journey towards true CRM.

CRM starts with yourself
We live in a world of quick fixes; speed rules! Deep inside we all know that these quick fixes merely address the symptoms, not the cause. So before you even start evaluating consultancies or systems, re-evaluate yourself. Do you live an energetic, healthy, holistic and sustainable life or is your tank empty, lights flashing red? Do you eat properly? Sleep well? Breathe deeply? Exercise regularly? Meditate? Spend enough time with the family? Take regular breaks?

No, this is not a fitness column, but the essential guide to successful CRM. We all seem to take our body and mind for granted, but the time has now come where we have to step back and address the real issues rather apply some Kool-Aid.

Our body and mind are of extraordinary strength and capacity, but if you continue to abuse them, don't be surprised if they give up on you, too - never mind your CRM-related projects and, dare I say, results!

Holistic is in - myopic is out
Ok, one more time: CRM is not about sales force automation, call centers, data warehousing and fancy data analysis. Sure, they form part of the IT segment of a CRM model, but they aren't the one and all. CRM is about a holistic view of the organisation and a holistic approach to business. Everything is connected, no matter how small or seemingly insignificant.

It's laudable that your call center functions well, but what's the point if the message of customer orientation and service hasn't sunk in with your shop floor staff or branch manager?

What's the point of even trying to establish customer loyalty if it's not the managers or directors who are calling the shots, but institutional investors and their seemingly insatiable greed for higher returns?

A proper CRM strategy involves everying inside your organisation: from top management's vision and guidance to relevant and efficient IT infrastructure; from the cultural and personal skills of your staff to remuneration and role responsibilities; from non-sales oriented customer service to a profitable yet socially responsible business model. Isolate IT at your own peril!

What you can get is not you see
As long as a customer's their financial status is all you go by to determine their future value (life time value), then you will never reap the full benefits CRM can bring.

You have to look beyond the obvious, because behind a financially insolvent customer may lie a son or daughter with extraordinary talent, something that -if nurtured and cared for- can be of tremendous value to your company. Just don't expect your database to spit out information like this. That's something only a real personal relationship will reveal, and relationships, as we all know, are about trust, respect and openness, not money.

Question conventional wisdom
There's a lot that needs to be said regarding conventional wisdom and AIDS, even more when it comes to CRM. "Who benefits?" is what you need to ask. Is it the vendors or the consultants, or both? Do you benefit, too, or are you left with a hefty fee and some complex software yet even less time and more stress? Proper CRM should leave you relaxed and informed, energetic and with more time than ever. If not, you are doing something wrong and should again step back and ask: "Who benefits?" You'll be surprised what you will find.

Look in places you least expect
Everything technical and procedural about CRM is known, from 1-1 marketing campaigns to database structures. So why does CRM still fail on such a massive scale? Because companies continue to squeeze every possible cent out of their customers, slash work forces and deploy technology on a massive scale in order to make CRM happen, yet don't seem to be worried at all about sky-rocketing staff turnover, ever-increasing medical costs, astronomical consultancy fees or a IT maintenance bill that equals the GDP of a small African country.

CRM is not only about the customer. In fact, although she should be at the heart of any company's mode of operation, she plays the least significant direct role in CRM. Superior customer management and profitable loyalty is the result of a healthy organisation that sees itself as an asset to society instead of a liability.

Again, take a step back and look in places you would normally not relate to CRM. This is where the real treasures are hidden, especially when research has revealed that it costs about $50.000 to replace an employee. Maybe that's where your CRM efforts should start.

Lateral thinking, peripheral action
CRM happens when you get a number of things on the periphery right. It happens when you don't specifically aim for it; it happens when IT is just as important as anything else; but it happens first and foremost when you are true to yourself and place long-term customer loyalty and respect over short-term profit targets.

As long as companies try to rid themselves off a headache by popping a pill, you will be the victim of the side effects. It's time you started looking at CRM with different eyes, and maybe one day there will be a 60 or even 90 percent success rather than failure rate.

What's Really CRM!

CRM is a business approach that integrates People, Processes and Technology to maximize the relations of an organization with all types of customers. The true value of CRM is to transform strategy, operational processes and business functions in order to retain customers and increase customer loyalty and profitability. Aris Pantazopoulos - Founder, CRM Today

Liz Shahnam, CRM analyst with the META Group, says CRM is "a buzzword that's really not so new. What's new is the technology is allowing us to do what we could do at the turn of the century with the neighborhood grocer. He had few enough customers and enough brainpower to keep track of everyone's preferences.

Technology has allowed us to go back to the future to this model." Properly understood, CRM is "a philosophy that puts the customer at the design point, it's getting intimate with the customer," in Shahnam's words.

The Peppers and Rogers Group surveyed a number of business leaders from companies that are at the forefront of CRM. One of the questions was "How do you define CRM?" Over half of the respondents (65 percent) said CRM is moving a company from a product-centric focus to a customer-centric one. Fifty-one percent felt CRM is using IT tools to achieve incremental business improvements, and 41 percent view CRM as making customer information available to all customer contact personnel. The survey question and its three answers raise a good point: CRM is not all things to all people. It's many different ways of arriving at the same goal: Reaching the customer and generating long-term profit from that relationship.

CRM is a comprehensive approach which provides seamless integration of every area of business that touches the customer - namely marketing, sales, customer service and field support-through the integration of people, process and technology, taking advantage of the revolutionary impact of the Internet.

Customer relationship management (CRM) is a business strategy that aims to understand, anticipate and manage the needs of an organization's current and potential customers. It is a journey of strategic, process, organizational and technical change whereby a company seeks to better manage its own enterprise around customer behaviors. It entails acquiring and deploying knowledge about one's customers and using this information across the various touch points to balance revenue and profits with maximum customer satisfaction.

Rank	Definition	Implications
1	"Customer needs"	Identifying and meeting customer needs is seen as the primary goal of relationship marketing. Despite this high ranking, customer needs tracking has the lowest level of usage among measurement tools.
2	"Partnership"	Working in partnership with suppliers and customers is the key focus, both in consumer and business-to-business markets.
3	"Increasing profits"	Maximising customer retention and value, and so driving up profitability, is the goal. This seems to reflect the popularity of the findings propounded by Frederick Reichheld that increased retention equals substantially increased profits.
4	"Loyalty"	Building loyalty with customers, usually defined as maintaining repeat sales, is the central role of relationship marketing.
5	"Value"	Managing and enhancing the value to both customer and company within the relationship.
6	"Satisfaction"	The focus on satisfaction received a relatively low level of mentions, yet this is the most popular customer measure.

(Source: Measuring and valuing customer relationships,
Business Intelligence)

Dr Robert Shaw, Shaw Consulting and author of Measuring and Valuing Customer Relationships.

The following definition of CRM is intended to be both practical, in the sense of being process-based, and actionable, in reflecting what goes on in the real world. It also focuses on the business significance of the activity.

"Customer relationship management is an interactive process for achieving the optimum balance between corporate investments and the satisfaction of customer needs to generate the maximum profit. CRM involves:

measuring both inputs across all functions including marketing,
sales and service costs and outputs in terms of customer revenue, profit and value.

acquiring and continuously updating knowledge about customer needs,
motivation and behaviour over the lifetime of the relationship.

applying customer knowledge to continuously improve
performance through a process of learning from successes and failures.

integrating the activities of marketing, sales and service to
achieve a common goal.

the implementation of appropriate systems to support customer knowledge
acquisition, sharing and the measurement of CRM effectiveness.

constantly flexing the balance between marketing, sales and service inputs
against changing customer needs to maximize profits."

CRM. What’s it all about?

After 12 years working in the Advertising/Marketing world I decided to leave and with the help of two partners (Oracle DBA and Warehousing/Applications) formed an Oracle Consultancy. On researching my designated specialist area (CRM) I found that every paper I read was full of techno-babble or over indulgent complex paragraphs trying to make a simple operation or concept sound more difficult than it actually was.

This paper is the beginning of my fight to return IT and particularly CRM back to the world of understandable English, so that people without a degree in computer science might understand it.

CRM. What’s it all about? 

The whole world’s gone CRM mad.  The problem is that not a lot of people understand what CRM can really do or how to use it. In a recent survey (eCRM in Europe: Hype or reality?), Chordiant asked 171 leading blue chip companies for their definition of CRM, the answers ranged from “Know, target, sell, service” to “Better fulfillment of individual needs by interaction and storing (customer) information”.

Although both of these answers are correct they only go part way to explaining CRM.

This document will explain the full meaning and the problems arising, from trying to implement a CRM structure into a company.

1. What is CRM?

CRM (Customer Relationship Management) has been growing steadily for the last few years and is now seen as the way forward for any business wishing to thrive in the ‘e-future’. CRM concentrates on the retention of customers by collecting all data from every interaction, every customer makes with a company from ‘all’ access points whether they are phone, mail, web or field. The company can then use this data for specific business purposes, Marketing, Service, Support or Sales whilst concentrating on a customer centric approach rather than a product centric.

Every business is different and therefore needs a different approach to CRM. Every company also has different legacy systems and has various levels of data integration within the company. This is why CRM is so hard to define as it is all things to all companies.

2. Why CRM? 

A study published in Harvard Business Review concluded: “Some companies can boost profits by almost 100% by retaining 5% more of their customers”. A similar study by PIMS revealed “that a dissatisfied customer would tell between 7-10 people whilst a satisfied customer would recommend a company to 3-4 of their friends” and a study commissioned by Ventura found that “eliminating all customer service problems could double profit growth over a five-year period”. So CRM is purely good business sense? Well it is, but it is also a means of survival. Shorter product lifecycles have robbed companies from enjoying the sustained financial benefits of being product innovators. Not only can competitors bring copycat products to market quicker, new generations of products are introduced more quickly making service and support key to the retention of existing and future customers.

3.  Do I implement a CRM strategy successfully into my company?

Legacy systems, integration of existing data to all areas of your business and company directive are vital components to CRM. All companies have over the last ten years acquired various financial, marketing, sales and service applications. All of your employees are confident within these applications and a radical change would mean re-training and the possible loss of valuable business. These entire legacy systems should, as much as possible, be taken into consideration when looking at a CRM vendor. Before they can be looked at, the integration and migration of all existing data into a single database should be undertaken allowing all of your company access to the same centrally stored data. In the Chordiant survey (eCRM in Europe: Hype or reality?), they estimated that 84% of the companies asked had not integrated their departments, thus creating double entry data and time-consuming extraction situations. Most departments over the last five years have undergone piecemeal installations, and an overall IT plan for the company has not been taken into consideration.

Both of these are technology driven problems, but the biggest problem facing CRM installation is company directive. The directive for a CRM system should become holistic (A company ethos), from product to customer centric. This has to come from the top right down to the bottom of any company wishing to undergo the transformation.

A single poorly trained or rude telephone operative can have as bad an effect on new business as a poor meeting between senior heads of different companies. A bad feeling for a company can come from anywhere at anytime and can impact future business.

4. Should I implement CRM into my company?

The obvious answer to this is yes. It will help you run your business, cut costs and keep customers. eLoyalty found (The customer Relationship Revolution - A methodology for creating golden customers) through the analysis of cost of customer acquisition vs. the cost of retention that it can cost four to seven times more to replace a current customer than it does to keep one. So the question isn’t ‘Should I?’ but ‘When do I? All of the problems from point 3. should be taken into view when thinking about implementing CRM and only when you feel you have integrated all departments, have a good understanding of you legacy applications and have your company directive in place should you consider implementing CRM.

5. What problems will I face?

The answer to this is dependent upon how deeply into CRM you want to go. Let me explain. True CRM is the collection and distribution of ‘all’ data to ‘all’ areas of your business. The data can then help you market your company, create individual universes for web users, help cross/up sell to existing customers, understand your customer better so that you can give customers better service, allows your customer to interact with you by whatever means they are happiest, reduces campaign time and wastage, allows self service via the web etc, etc, etc. The roles for the data are endless. But some companies may have no need to provide service via their web site, have no need for a call center as they deal with only a few companies or already have a marketing suite in place and wish to scale up from it.

Every role created by placing a CRM system into a company needs sound business acumen; otherwise you will be collecting data for data’s sake and could run into the problem of having a different company voice from different interaction points, offering different marketing objectives, costs or service. This runs the risk of creating more problems than solving and in some cases magnifying customer confusion.

6. Which CRM vendor should I use?

There are many. There are CRM vendors who supply small to middle sized businesses with out of the box CRM solutions like Frontrange Solutions, Quadstone, Epicor and large players like Siebel, Clarify, Oracle and eLoyalty who provide more scalability and integration within their CRM applications. There are also many small companies who provide bolt-on CRM, Blue Sky, Map Info, and Capscan. These companies provide small ready-made functions to do specific tasks like trace the users of your web site (Blue Sky), tell you where customers live (Map Info) or postcode/address check your database (Capscan). Alliances are also interesting with Peoplesoft buying Vantive, Nortel buying Clarify and collaborations such as Siebel and IBM. A large business may want the security and scalability of a big player where as a smaller company may only need certain applications and would rather the personal touch of a small company. The choices are many, which is why a company strategy is so important.

When Cap Gemini were approached to find a CRM System for Liverpool Victoria Friendly Society in 1997 they looked at over a hundred companies, and they knew what they wanted! The pink pill syndrome (short term fix) has been around for a long time in IT, CRM is one area where it is highly advisable not to take it. Again, create your company strategy, look at your integration and legacy systems, work out what extra you will need business and technology wise to fulfill your strategy and then look at the cost, scalability, service and partners, etc of the company and the CRM application/s they are offering.

Technology is the final part of the jigsaw and can easily be brought by a  fool with money.

7. What does a CRM system look like?

I have produced a diagram that goes some way to show how a CRM system works (see fig 1). Obviously only certain companies can facilitate the entire model and each area of the model has many applications. The Marketing area for instance uses campaign creation, analysis tools, predictive tools, segmentation charts, customer behavior models, propensity scores, profitability values etc. Call centers can be just that or they can be web enabled allowing self service facilities, cross and up selling opportunities, history of past contacts, value of the customer to your business via a points system (This can be implemented by your marketing division).

New data mining tools are being created every day leading to more and more uses for CRM. To show all of the possibilities of a large working system would take a very large piece of paper. My diagram concentrates on the flow and storage of data within a company structure.

8. How does it work?

The customer interacts with your company via e-mail, telephone, web or face-to-face, through your company’s Back Office, Sales team, Marketing division etc. As the interaction progresses to a sale, service query or quote the information from that interaction is stored and fed through middleware into a database. This data can then be used to create data marts, warehouses etc and drawn upon by sales, service, marketing or business to add a greater functionality to those departments i.e: Management may see from querying the data that a certain product line is failing, and therefore either drop the price or withdraw the model. Marketing may see that a certain product has been brought by 40% of a certain target market and decide to advertise it strongly at the other 60% instead of your entire customer database. By sending it to only some of their customers they reduce the cost and length of campaign and can possibly have two or more marketing drives where they normally, cost prohibiting, could have produced only one. Sales may see that a customer brought a certain laptop and no printer and the next time there is interaction with that customer, suggest they purchase a printer at a discounted price. The uses of centralized customer data are endless.

Unlike most CRM diagrams my diagram has no arrows showing data flow. This is because the data is fluid. The transfer and update of data is continuous with all areas talking to each other all of the time.

Conclusion.

It is obvious that to survive and compete in a new world business structure the retention of customers will be key.

1.The cost of keeping them is less than replacing.

2. Selling to them efficiently creates loyalty and therefore more business.

3. The analysis of data from customer interaction allows for target marketing, better servicing and better support creating lower overheads.

4. A happy customer will tell 3-4 potential clients again creating new business.

With industry analysts estimating that 71% of repeat purchases are made out of indifference not out of loyalty (eLoyalty. The Customer Relationship Revolution) there is huge potential for new revenue.

On the down side, (why is there always a down side?) a company’s business infrastructure and business methods have to be reviewed along with their existing IT infrastructure before CRM should be considered. The choice of which CRM vendor and whose interface is sexiest, is less important than getting your company data integrated and the company strategy implemented.

The pink pill offered by some CRM consultancies are just that and should be avoided, but with the profits available from a CRM company strategy and system the time and effort taken implementing it properly will be worth it both now and in the next future.

The customer is always right. You just don’t know what right is yet.