July 23, 2001

The Customer Rules

A twofold understanding of CRM may help you court, engage, and retain new and old customers

By Karen Kazimer-Shockley & Stacy Bergert

How do you define CRM today? The term has a different meaning depending on whom you ask. Over the past few months we have heard it used to mean being nice to your customer, having a well-run call center, operating a mature Web site, integrating all data into a data warehouse, improving your sales process or cycle, and implementing a high-technology solution for managing customer interaction with the company. And yes, CRM can be all of these things, and more.

First, you should visualize CRM as a pyramid, much like Maslow's hierarchy (see Figure 1). On the base and surrounding the pyramid are your customers. Naturally, without your customers, you wouldn't have any business. Building from your customer base are your employees who interact with your customers - either face-to-face, via phone, via email, or sometimes through the automation of a Web site. In the next level - and integrated closely with your employees - are your technology systems that support the operation of your company, including the interaction of your employees and customers. And finally, at the top - the capstone of the pyramid - are the strategic business leaders of your company or industry, people who use the technology and information to determine business goals, direct and motivate employee actions, and woo customers.

The goal of any CRM plan is to treat your customers as if they are interacting with a traditional "mom-and-pop" business. "Mom" and "Pop" typically knew their clients and provided services on a personal basis. They knew which products you purchased recently, and most likely which ones you might need to purchase. They knew the neighborhood demographics and were aware of life stages such as births, marriages, and deaths that require different purchasing patterns. They knew when potential customers moved into the neighborhood and should receive an introduction to the store. Consequently, a high level of trust and personalization developed between customers and business owners.

Correspondingly, the direct relationship between CRM and business was easily visible: The more personal the service, the more sales they had. And, the more they sold, the more money they made; the more money they made, the longer they stayed in business. The investment of their time interacting with customers and getting to know them was directly related to their return on investment (ROI)

The challenge, then, is to provide the same level of personalization to all customer-to-business interactions - no matter what the size of the company nor how it interfaces with its customers. After all, in the end, the goal is to increase revenues while ultimately reducing costs.

To understand CRM further, you should realize that you have essentially two types of CRM: tactical, which keeps existing customers engaged, and strategic, which woos new and previous customers, as shown in Figure 2. Technology for the sake of technology rarely lines anyone's pockets except the software and hardware vendors. The key to successful CRM implementations is to define the business questions first, establish measures for CRM, determine the projected benefits, and then capture the actual benefits in order to change the plan appropriately.

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