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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

Continued from Page 1

TACTICAL CRM

Service and sales. You can think of tactical (or operational) CRM as those day-to-day activities surrounding the customer relationship. These actions encompass such customer-facing processes as direct mail, phone, the Internet, and field sales. How do business leaders keep their daily customer contacts differentiated in such a way that the experience ensures customer satisfaction? Looking to the CRM pyramid, we argue that you can accomplish this differentiation by the creative implementation of technology surrounding the experience between your customers and employees.

How do you know what particular CRM tactic should be employed to enable a business to maintain that friendly mom-and-pop customer personalization while maximizing the ROI? To answer this question, a decision maker should consider different initiatives of tactical CRM and determine which ones are most appropriate to the specific business.

Call center management and automation. Call center automation allows a company to realize an increase in productivity, with a fairly small percentage of investment. Typically, a nonautomated call center's highest costs are labor, followed by telecommunications, facilities, and then finally technology.

A good call center example is an appointment or advice phone line. When clients call one standard phone number, the call routes to the correct service person who inputs clients' information one time only. Once this data is in the system, it enables any service representative to pick up the customer relationship with a flawless handoff. The measurable benefits are enhanced productivity, reduced transaction times, and higher quality service at a lower cost. Another benefit is that this is a win-win situation for the customer, who spends less time on the phone supplying duplicate information and receives the requested information more quickly.

Supply chain management (SCM). Another facet of making the customer feel important is to make sure that the products the customer buys are readily available. SCM ideally divides product movement management between the suppliers and retailers. For example, if both the retailer and the supplier share the same inventory management information, the supplier knows immediately when inventories are low. They do not have to wait until the retailer notices the condition and places an order for restocking.

Overall benefits of a seamlessly integrated supply chain are:

Faster inventory fulfillment throughout the supply chain, reducing both inventory carrying costs and overall product cost base
Enhanced customer satisfaction through product availability
Flexibility of manufacturers, distributors, and retailers to design, ramp up, and retire products rapidly in response to customer and market demand.

MEASURING SUCCESS

WHAT TO CONSIDER IN YOUR ROI CALCULATIONS OF CRM

It seems that the majority of companies that invest in CRM have little or no idea of their return on investment (ROI). The simple reason for this major lapse is that they fail to create measurements of current performance or set targets of success for the new and (you hope) improved performance. Sadly, in many cases, no one is capturing the data for these measurements. In that case, the business leaders need to realize that they are incurring risk when embarking on investment in either the tactical or strategic CRM initiatives. As an aid to the leader considering such an investment, we offer the following measures for your consideration:

· To the maximum extent possible, measure costs across the breadth of the organization. It is extremely important to know, for example, that your telecommunications contract provides a fixed price for all services. In this instance, installing automated call center technology and using reduced communications costs as justification would not provide an accurate picture of ROI.

· Labor is a significant part of almost every industry's costs, yet many leaders do not include items such as training new personnel as part of the turnover calculations. You can lower retraining costs significantly if your company implements standard automation practices, such as those found in ERP software.

· Expand the use of measurements as you implement CRM processes. Examples of measurements for the current business processes might include such items as cost per lead, cost per sale, number of repeat customers, cost per customer service call, cost of processing an order, or time elapsed between order receipt and product delivery.

Sales management and sales force automation (SFA). SFA assists employees, specifically sales personnel, in providing personalized service and reduces sales labor costs by letting the salesperson focus on customers who are good candidates for sales and services. SFA can store pertinent customer information, such as when a salesperson speaks to a customer and can recall information about past purchases. This function lets the salesperson focus exactly on a particular customer's needs. Additional benefits include:

Focusing of sales efforts on the most profitable customers
Increase of information sharing among sales, marketing, and delivery departments
Reduced cost per sale.

Enterprise resource planning (ERP). ERP can benefit employees as well as the bottom line. By streamlining and integrating the ordering, organizing, and implementation of resources across all business functions, ERP allows organizations to obtain economies of scale. Additionally, it lets large businesses with disparate functions share the same control of resources and employees to use the same skills when they move throughout the organization. Specific paybacks are:

Maximum utilization of resources
Integration of all resource planning services
Standardization among business lines.

The deployment of tactical CRM technology can take you up one level of the CRM hierarchy by significantly increasing the effectiveness and efficiency of labor (via tactical technology implementation), while letting you meet customer needs as expeditiously as possible.

STRATEGIC CRM

Strategic CRM in your organization means long-term planning focused on improving the relationship with your most profitable customers to create win-win situations for your customers and your company. Furthermore, these win-win opportunities should align with your business leaders' measurements of success (typically the bottom line). Going back to the CRM pyramid, you have a strategic CRM initiative when you get beyond the technology and get into the business leaders' goals. Understanding some of the initiatives that help get you there is the next step.

Data marts. People typically think of data marts as collections of information organized around a single subject, structured such that you can make intelligent decisions and perhaps make business changes. The single subject is usually the clear indicator that what you are building is a data mart. In terms of CRM, the types of data marts an organization might structure are as follows:

Customer data mart: Provides the demographics of your customer (and potential customer) base
Customer activity data mart: Provides the buying, shopping, or browsing patterns of the customer
Product data marts: Provides product line information and performance.

Data warehouses. Data warehousing is the initiative vendors usually mean when they suggest that you obtain a 360-degree view of the customer. Business leaders often turn to data warehousing in order to get a full perspective of buying patterns and who buys which products, with goals of looking for trends in buyer activity and determining which products are successful. Data warehousing lets an organization integrate diverse, disparate bits of information dispersed among various databases and is often the result of combining multiple data mart initiatives into one architectural environment.

CROSSING BOUNDARIES

Sometimes doing business is as simple as crossing boundaries. Some factors, such as communication, belong in any business encounter with customers and can fit within any category of CRM you might segment out. This idea is important to understand and keep in mind; the reason that CRM initiatives often seem simultaneously tactical and strategic is because of what lies at the base of the CRM pyramid: your customers and employees. Every successful CRM initiative involves these components and speaks to the heart of what CRM is all about: relationships.

PULLING IT ALL TOGETHER

A company is not inherently successful without all the components of the CRM pyramid. Your customers rely on your employees for their initial interaction with your products or services. Your employees rely on technology to provide the products or services faster, cheaper, and better. The technology can be successful in the long term only with well-planned strategic business goals set by the business leaders. If you remove any of these critical pieces for even a small period, the company might be all right, but only if the competition is also struggling.

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Tactical CRM provides the business process management backbone (making current operations better and keeping your existing customers engaged and satisfied). Strategic CRM provides the means to reengineer business processes (making the company better overall) that keeps an organization always moving toward a vision of where it wants and needs to be. The name of the CRM game is keeping your company on its toes; then it can always walk away and ahead of the competition.

STACY BERGERT [bergert@fhlb-of.com] is the manager of applications development at the Federal Home Loan Bank's office of finance. She has extensive experience in information management including data modeling, data warehousing, Web technologies, COTS integration, and client/server applications.

KAREN KAZIMER-SHOCKLEY [karen.shockley@eds.com] is a senior consultant with the EDS E.Solutions product line. She has more than 25 years' experience in the IT environment, spanning mainframes, minis, client/server applications and Web-based products.

RESOURCES

Related Articles on IntelligentEnterprise.com and IntelligentCRM.com:

"The Living Transaction," May 24, 2001

"Dynamic CRM," May 7, 2001

"Through a Lens Smartly," March 27, 2001

"Custom Fit," March 8, 2001