December 5, 2001

Failsafe: 10 Steps to CRM Payback

Focusing on these goals during implementation can save your organization a lot of time and money in the end

By Jay-Louise Weldon

Most organizations are making an effort to improve their customer focus. As a result, CRM has become a popular application initiative (much like ERP was in the last few years).

As is customary with such a well-publicized trend, CRM has come to mean many things to many people. The approaches to implementing CRM across organizations have varied as well. Ideally, an organization would embrace industry consultant Dick Lee's definition of CRM as the implementation of "customer-centric business strategies; which drives redefining of functional roles; which demands reengineering work processes; which is supported, not driven, by CRM technology." This definition keeps the emphasis on the customer and the business, where it belongs.

However, several common mistakes can occur when implementing CRM. By proactively avoiding these pitfalls, you can save your organization a lot of time and money.

FIND AND MAINTAIN YOUR FOCUS

A primary goal of CRM is "getting to know" your customers — that is, understand how they interact with you and why — so that you can provide targeted information and offers as well as ongoing service and support that will grow and enhance the relationships.

To achieve this goal, your organization must develop an integrated view of each customer based on all information collected as part of company operations. This information includes descriptive information (names, addresses, phone numbers, email addresses), preferences, orders, sales, service calls, and any other contacts recorded between your company and the customer.

Two things should be immediately apparent to you about this information: that it can be massive in volume and that it is collected and maintained by many different operational systems. A CRM implementation that attempts to collect and integrate all customer information is doomed; more than 70 percent of time and effort can be dedicated to data integration. Thus, to improve your project's chance of success, you need to prioritize the collection and integration of data and build your CRM solution incrementally.

For example, you may want to start with basic reference data (from a customer master file), enhance that data with purchasing history (from a purchase order or invoicing system), and only later add in information about service calls from your customer service application. Priorities can be determined by investigating which data will yield the highest business value (such as increased revenue or improved service); which data addresses current "pain" (revenue shortfall due to misapplied discounts, for example), and which data is easiest to collect and integrate.

KEEP CRM IN ITS PLACE

Telemarketers and Internet-based businesses arguably have an advantage over more established firms in that they can "start from scratch" and collect and build integrated customer databases to support CRM initiatives. Their front-office systems, whether Web- or call center-based, provide the primary source of customer information and there is less need to integrate multiple legacy systems.

However, start-ups have a tendency to squander this advantage by failing to properly design their CRM solutions. For example, they often store the data they collect from their Web activities in a single database, and then attempt to use that database for all customer-related data needs.

As data warehouse practitioners have learned, operational reporting doesn't mix well with analytic processing: When they are combined, neither function is well served. The access patterns differ between the two, thus any physical structure that favors one, hinders the other. A proper customer data architecture that separates operational from informational data can solve this problem.

BALANCE DETAIL VS. SUMMARIZATION

Companies that properly plan their CRM initiatives, including the types of analyses and customer intelligence they wish to pursue, can still fall into the trap of being too focused. As data volumes increase, the tendency is to summarize, aggregate, and codify detailed observations. Although data enhancement (by summarizing or coding) is valuable for focusing and supporting specific analyses, it can come at too high a cost if you don't retain the original detail. Questions about customer behavior and buying patterns will change over time; if details are lost, answers to these new questions will be impossible.

For example, one fast-food company made the mistake of coding its transaction data by time of day (morning, afternoon, and evening) and dropping the actual time. This approach made subsequent regrouping of data to evaluate the early morning or mid-afternoon markets impossible.

USE THE RIGHT DATA FOR THE JOB

CRM initiatives can involve a variety of analytic applications. The most familiar business implementation areas here are customer segmentation and campaign management.

The customer information required for these analyses overlaps considerably. In an attempt to minimize duplication, many firms try to satisfy every type of analysis with the same data set. This approach gives rise to a data structure that is overburdened with codes and fields required for the respective analytic views. The result is sluggish performance and unnecessarily complex query and update processes. A better architecture for your CRM environment would comprise a common warehouse of customer data that supports the creation of many different analytic data views (data marts).

STAY IN SYNC

Vendors of CRM technology products are aggressive about selling organizations on their wares. As a result, many companies select a CRM product or implement a CRM application only to find out that the selected product or application only supports a small portion of their overall CRM needs. For example, a call-center desktop product may not satisfy campaign management needs, a marketing automation system may not address customer service requests, and a customer service application may not support clients connecting via the Internet.

Technology is usually out of sync with business needs. You must clearly and intimately understand your business objectives and priorities, and with these in mind, develop your overall CRM strategy before focusing on technology.

Similarly, CRM point solutions can get out of sync. Different parts of an organization may embark on separate CRM endeavors — resulting in localized improvements but falling short of the corporation's overall CRM objectives. For example, a call-center desktop application can improve customer service and an e-commerce marketing application can better target prospects. But if they don't share integrated data, these two departments can treat customers quite differently. In contrast, a single, enterprisewide CRM strategy will make all solutions mutually compatible.

PLAN FOR TODAY, ANTICIPATE TOMORROW

Many organizations are taking their first, small steps toward CRM. In doing so, they focus on improving traditional customer interactions. For example, most companies have a help desk or customer service center to which customers are directed when they have problems or questions. In the end, these traditional interactions form the basis for these companies' CRM strategy.

It may be quite correct to give these interactions first priority, but you must be careful not to limit your CRM strategy to your current view of the world. A CRM strategy should also be sufficiently flexible to support new ways of interacting with customers — for example, via email or by live chat over the Internet. If you fail to think ahead, you could end up with an architecture or product selection that by default limits future choices or imposes a high cost in extending the solution to cover new ways of doing business.

For example, some front-office CRM products promise quick response, which is achieved by employing a proprietary data structure for customer data. However, when attempting to expand the solution with customer segmentation or campaign management tools, these proprietary structures prevent the new tools from interfacing easily with the data. Instead, they require you to either develop custom interfaces or fully replicate the data in a more open format.

BE PREPARED TO ACT

Having lots of customer data available to analyze is nirvana for most marketing and sales professionals. Thus, the ability to integrate, organize, mine, and model customer information is key to most CRM initiatives.

However, you must build an action plan into your CRM strategy and architecture as well. The ability to search, segment, and cluster customer information is important and can lead to valuable insights. But if you have no plan to convert these insights into action, your CRM efforts will fall short.

For example, you should add customer segments to the CRM database and make them available for use in call-center or online marketing. Furthermore, you should modify business processes when necessary so that call-center agents can act on the basis of previous customer interactions — for example, by offering discounts to disgruntled customers.

KEEP DECISION MAKERS ON THE SAME PAGE

As discussed earlier, integrating customer data is a major component of any CRM development. Most companies collect and maintain customer data in many different parts of the business, each in a different data format. To create a single view of the customer, this data must be gathered into an integrated database. But physical integration of this data into a central repository is not enough. You must also ensure that data definitions are consistent and clear.

These data definitions must be documented in business terms and be readily available to end users. Taking this approach will ensure that everybody is on the same page about what the data elements mean and will avoid confusion, especially during cross-functional reporting and analyses. For example, when a report contains "Revenue," does that figure include "Gross Revenue," "Revenue After Returns," and "Revenue Accrued?" What may seem intuitively obvious to a finance staffer may not be as clear to a member of the marketing team.

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