Customer Relationship Management

By definition, customer relationship management (CRM) uses technology that enables organizations to provide fast and effective customer service by developing a relationship with each customer through the effective use of customer database information systems. CRM objectives are to acquire new customers, retain the right current customers, and grow the relationship with an organization's existing customers. CRM is actually a combination of organizational strategy, information systems, and technology focused on providing better customer service. Businesses that successfully implement CRM systems follow an integrated business model that ties together technology, information systems, and business processes along the entire value chain of an organization.

CRM is a fundamental approach to doing business. As mentioned above, CRM implementations stretch beyond technology and must consider and include broader organizational requirements. The goal is to be customer-focused and customer-driven, running all aspects of the business to satisfy the customers by addressing their requirements for products and by providing high-quality, responsive customer service. Companies that adopt the CRM approach are customer-centric, rather than product-centric.

To be customer-centric, companies need a comprehensive customer database to collect and store meaningful information about individual customers or prospects. The database must be current, accessible, and actionable in order generate leads for new customers while supporting sales and the maintenance of current customer relationships. Smart organizations collect information every time a customer comes into contact with the organization. Based on what is known about the individual customer, organizations can customize market offerings, services, programs, messages, and choice of media. A customer database ideally contains the customer's history of past purchases, demographics, activities/interests/opinions, preferred media, and other useful information. Also, this database should be available to any organizational units that have contact with the customer.

CRM is further enhanced when various departments within a business (such as sales, technical support, and marketing) share the information they collect from customer interactions. Feedback from a tech-support center, for example, could be used to inform marketing staffers about specific services and features requested by customers. In this practice (called collaborative CRM), the ultimate goal is to use information collected from all departments to improve the quality of customer service, and, as a result, increase customer satisfaction and loyalty.

EVOLUTION OF CRM

CRM initially referred to technological initiatives to make call centers less expensive and more efficient. The concept of CRM evolved from there as organizations began looking at more macro-organizational changes. For instance, many organizations began asking how they could change their business processes to use the customer data that they have gathered. CRM strategies now cover customer interaction across the entire organization. Many commercial CRM software packages provide features that serve sales, marketing, event management, project management, and finance.

Since its mid-1990s beginnings, CRM has already gone through several overlapping stages. Originally focused on automation of existing marketing processes, CRM has made a major leap forward to a customer-driven, business process management orientation.

The first stage began when firms purchased and implemented single-function client/server systems to support a particular group of employees such as the sales force, the call center representatives, or the marketing department. CRM initially meant applying automation to existing marketing activities and processes. However, automating poorly performing activities or processes did little to improve the quality of the return on investment.

In the second stage, organizations demanded more cross-functional integration to create a holistic view of their customers' relationships. Also, the integrated system's goal was to provide a single face to the customer by enabling employees to work from a common set of customer information gathered from demographics, Web hits, product inquiries, sales calls, and so forth. Cross-functional integration allowed the whole organization to take responsibility for customer satisfaction and allowed for better predictive models to improve cross-selling and improved products and delivery options.

The Internet heavily influenced the third stage of CRM. In this stage, the big CRM vendors used new Internet-based systems to extend the reach of CRM to thousands of employees, distribution partners, and even the customers themselves. Also, most organizations at this stage tie together their CRM systems with their ERP (Enterprise Resource Planning) system and other organizational operational systems. By rethinking the quality and effectiveness of customer-related processes, many organizations began to eliminate unnecessary activities, improve outdated processes, and redesign systems that had failed to deliver the desired outcomes.

NEW USERS OF CRM

CRM systems in the twenty-first century are based on the things that matter most to the customer. Customers often have direct access to all of the information they need in order to do business with an organization. But because some customer relationships are not profitable, many CRM systems focus heavily on financial results. CRM systems help organizations to identify existing profitable customer segments and develop the business requirements to support sustained relationships with these profitable segments.

Banks, for instance, are able to deploy technology solutions that may have artificial intelligence (AI) capabilities. These AI characteristics allow the banks to set dynamic limits for certain programs (such as overdraft protection programs), and enable the bank to offer different services to customers based on their usage and past history of repayment. At the same time, using these types of CRM solutions, financial institutions are able to provide cost effective alternatives for current non-buyers or low-margin customers.

Banking giant Chase has taken advantage of CRM by grouping and analyzing data pulled from the bank's tellers, ATM machines, Web site, and telephone service reps. Chase can pinpoint which of millions of customers in its huge network of banks have wealth potential, and subsequently provide better customer service for them. With these types of CRM programs, Chase improves its sales and services by integrating and mining customer information.

The scope of CRM technology grows in importance when companies complete mergers and acquisitions. Researchers say that merged companies need a centralized CRM system to capitalize on the strengths of the combined entity. CRM systems also enable the organization to provide consistent, high levels of client care. CRM systems in these companies will help to ensure revenue growth and consistent client service.

THE FUTURE OF CRM

In 2008, it was reported that 67 percent of CRM implementations result in a successful return on investment (ROI). The reason for this is that CRM is being treated as a formally constructive corporate initiative, rather than an ad hoc operation as it was in its earliest incarnation.

When queried in 2005, 60 percent of midsize businesses planned to adopt or expand their CRM usage in the next two years, according to the Gartner Group. That fast rate of adoption has continued. AMI-Partners Research predicted that global CRM market will increase at an average annual rate of 13 percent through 2012. AMI-Partners credited this growth to the large number of CRM vendors who are offering more targeted solutions with a wide range of prices and more accountability. DataMonitor expects the CRM market profits to nearly double from $3.6 billion to $6.6 billion during the same time period.

DataMonitor and KensingtonHouse credit the growing acceptance of the SaaS (Software as a Service) delivery model as a key driver behind CRM growth. DataMonitor also found that vertical sectors such as health care and life sciences have a growing interest in CRM, and these verticals are being targeted by niche vendors. At the same time, smaller companies are deploying more CRM technologies. Companies with fewer than one thousand employees will make up 42 percent of the market by 2012, DataMonitor predicts.

ASPECTS TO CONSIDER FOR CRM

CRM marketers focus on customer retention, loyalty, and profitability. To do this, they focus on the following initiatives: increasing attention on data analysis, enhancing the customer experience, providing more personalization and customization, and increasing mobile marketing. Many companies with a core CRM system will add more functionality before 2010 to reach these goals. The areas targeted for expansion include: sales force collaboration, lead generation management, sales analytics/forecasting, sales knowledge management, CRM/sales process integration, and incentive management.

PROBLEMS WITH CRM

In a study, Forrester Research found that companies give customers an average of 3.5 ways to reach them. But often, that information isn't linked. Data on purchases that shoppers make at a company's retail store resides in one database, information on Web site activity lives in another, and customer-service reps in a company's telephone help center might not have real-time access to either one. Also, not all customers want a relationship with the company; some may resent the organization collecting information about them and storing it in a database.

However, several hurdles of CRM deployment have been crossed. Cost has decreased with the advent of packaged applications that take a considerable amount of risk out of any CRM implementation. Development and testing time is reduced and, as a result, costs are typically lower. With standardized CRM building blocks, packaged applications enable companies to focus on the business value and making sure their CRM systems meet their business needs. These packaged applications are implemented faster and enable companies to more quickly reach their ROI.

HOW TO SUCCEED WITH CRM

CRM projects require careful planning and implementation. To be successful, CRM involves major cultural and organizational changes that often are met with much resistance. CRM should be enterprise-wide in scale and scope. However, it is usually better to take an incremental approach starting with a CRM pilot. Once the pilot succeeds, introducing one CRM application at a time is recommended. Also, it is important to be skeptical of vendor claims and to know that user expectations for CRM are often unreasonable.

SEE ALSO Marketing Communication; Strategy Implementation

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