When major electricity provider phoned sales director Brett Arthur four times on separate days to ask him the same question, they lost him as customer. “They called me on four evenings to ask if I’d like to switch my power account to them. After the first call I told them I’d already done it. When they rang the fourth time, I took my business elsewhere.”
Ironically, as sales director for Sybrel, customer relationship management (CRM) specialist, Arthur could have taught his former electricity provider thing or two about retaining customers.
CRM is business strategy, not technology, and it is essentially about simple things. For example, when CRM systems are working well, one person will ask question of customer once, goods will be delivered when the customer expects them to be, one set of customer data will be available to everyone, and the supplier will know what’s important to individual customers.
Case studies of New Zealand companies successfully using CRM tools and processes reveal common theme: the right CRM tools paired with the right management attitudes not only help generate and retain customers, but also provide competitive advantage.
High profile companies including Sky City, Air New Zealand, the ASB Bank, JBWere, and liquor distributor Maxxium can, and will, testify to it. So why have CRM projects developed reputation for being too risky?
Part of the problem is widespread confusion over what the term really means. “Customer relationship management” or CRM is term coined by software vendors wanting businesses to invest in special software to manage customer relations. Unfortunately, it has resulted in the hi-jacking of rather commonsense concept.
For many, the term CRM will remain forever confused with information technology products and services. Yet while specialised software is useful and sometimes even necessary to execute modern CRM strategy, CRM can be successful using paper-based files, spreadsheet programme or email client.
And too many project failures have also contributed to CRM’s “bad rep”. But, CRM experts spoken to for this feature unanimously agree that failures are usually due to organisations’ inability to secure commitment and understanding from top management down to employees in contact with customers.
Four-legged stool
Geoff Cooper, director database services for direct marketing and CRM specialist AIM Proximity, likens CRM projects to four-legged stool. “The strong leg is typically the software, with the customer insight leg bit shaky. The communication leg may be weak too, depending on the ability of business to talk to its customers and get interaction and feedback going.”
The fourth leg of the stool is the CRM strategy itself; sit on the stool with this leg missing and you’ll hit the ground hard. Cooper says companies must understand CRM is about the alignment of all business processes, not just IT, sales or marketing.
Sybrel’s Arthur agrees. “It’s okay to make the marketing department key sponsor because ultimately marketing touches the customer at many points… But if you’re going to implement CRM tool, you need to implement core CRM infrastructure and culture first.”
If an organisation gets CRM right, the customer will often remain loyal despite competitive advances including better price points or deals, says Arthur. “It’s the surprise and delight factor. I don’t mind being asked intelligent questions by companies trying to find out what sort of customer I am in order to give me superior service.”
But how much do customers really want businesses to know about them?
Gayle McGregor, general manager of Carlson Marketing Group, warns some customers are not ready for the closer relationship CRM often creates. “If you push new customers to divulge information, you can alienate them. It’s better to wait until they are repeat buyers.”
New Zealanders are, she says, quite “closed” people and do not enjoy being sold to. However, they become open to CRM strategies once trust has been established. “I don’t mind giving away personal information if I can see that information being used for my benefit, and more importantly if I want relationship with company.”
Ray Kloss, marketing director with enterprise software vendor Peoplesoft, says, “The enterprise market is geared to growth and demand for pure internet-based CRM projects [those which provide browser-based access to CRM tools] is creating boom for Peoplesoft.”
According to Kloss 16 international companies across 16 different industries went with CRM strategies in Peoplesoft’s last financial quarter and each implementation was live within 12 weeks and with median number of 200 users. “Heavy interest comes from certain sectors; finance, banking, high tech manufacturing, retail, and transport.”
S’ME too?
Do small businesses have the understanding, time or money to take on CRM?
AIM Proximity’s Cooper thinks SMEs are better positioned than larger companies. “Bigger companies are hampered if they are still working in silos.” Small businesses often do CRM naturally with unsophisticated tools.
“CRM vendors are trying to simplify and shrink wrap their products and services because they want the small business market. Increasingly, SMEs can tap into that,” says Cooper.
But, he warns, “CRM is for businesses that need smart business management of individual customers, as opposed to management of volume-based business, such as supermarket.”
Michelle Sims, sales and marketing manager for Globaltech Solutions, thinks New Zealand SMEs are slow to adopt CRM products, and particularly web-based models. “The hardest thing is getting through the front door. lot of people still ask ‘what is CRM?’ and get it confused with contact management products.”
CRM uptake is higher in Australia and the UK and Sims attributes local CRM failures to businesses not getting the correct buy-in from different levels of the company.
Christina Kortesis, marketing manager for Interact Commerce in Melbourne, agrees. “Interest from New Zealand SMEs is generated mostly by desire to be more competitive. But the term CRM is thrown around too much and software is too often blamed for projects that go wrong.”
Consequently, business often tries CRM product with no idea of where it wants to go in two months, two years, or 10.
10 steps to successful CRM
Step One: Ignore the acronym
Managers should ignore the CRM label and think in terms of how to better service customers, says Peoplesoft’s Kloss. “We signed Mitsubishi dealership in Taipei whose issue was order management. While we implemented CRM tools, the acronym wasn’t mentioned.”
Businesses evaluating CRM need to ask: “Am I comfortable with the current business processes for interfacing with customers? Are they as efficient as they need to be? Do we increase customer profitability or lifestyle with what we do now?”
Step Two: Identify current CRM strengths and weaknesses
Decide whether you are happy with the return on investment from your marketing function. Look at business benchmarks like productivity and cost, and the connection between marketing and sales.
“How many marketing leads get to the sales force, what’s the closure efficiency of the sales force? Do they know the average revenue generated from particular sales representative?” says Kloss.
To decipher specific CRM needs, businesses should revisit key CRM areas – strategy, communication, software tools and knowledge and build document around the key business problems.
Step Three: Set CRM budget
Decide what it is worth to address CRM needs. For example, if an effective CRM strategy means you will achieve twice the penetration into your customer base, what dollar value does that have?
“Reps may be working new business and not farming an existing customer base. If CRM tools and processes turn that around, what might it mean in terms of changed revenue?” says Kloss.
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