Summer Research Project

for Dr. Tom Koplyay

CRM

Summer 2002
Prepared by Rich Brant
University of Ottawa EMBA
Class of 2002

________________________________________________________________
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Table of Contents

Executive Summary ....................................................................................... 3

What is CRM? ................................................................................................ 5
CRM Processes .............................................................................................. 7
Its All About Creating Customer Loyalty............................................................ 8
Understanding the Value of Customer Loyalty ................................................. 9
Is Customer Loyalty Always a Good Thing? .......................................................10
What CRM is Not...........................................................................................11
Who Needs CRM? ..........................................................................................13
Why Choose to Implement a CRM Initiative? .....................................................14
Is CRM a Fad or Here to Stay? ........................................................................15
Return on Investment....................................................................................17
Reduced Costs: .........................................................................................19
Increased Sales:........................................................................................19
Why CRM Initiatives Have Such a High Failure Rate ...........................................20
Most Common Mistakes When Implementing CRM .............................................21
Implementing a Successful CRM Strategy .........................................................22
Who are the Market Leaders? .........................................................................24
eCRM ..........................................................................................................25
The Future of CRM ........................................................................................26
Conclusion ...................................................................................................30

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Executive Summary
Over the last decade, many companies have become adept at the art of customer
relationship management (CRM). Theyve collected and sifted through mountains of
data on preferences and behaviour, divided buyers into ever-finer segments, and
honed their products, services and marketing pitches. But somethings been missing
from all these efforts: the big picture.

Few companies have bothered to look

carefully at the broad context in which customers select, buy, and use products and
services. Theyve been so focused on fine-tuning their own product and/or service
that theyve failed to see how those products and services fit into the real lives of
their customers. As a result, companies have routinely missed chances to expand
sales and deepen loyalty.

Customer-oriented organizations are continually seeking ways to maximize profits

through increased customer satisfaction, higher revenue per customer and lower
costs for acquiring and servicing customers.

Concurrently they are seeking a

competitive advantage by providing employees with information to make better and

faster decisions in response to changes in the market and customer demands. Many
of these organizations have embraced a customer relationship management solution
as a highly effective way to achieve these goals.

CRM is not a product. It is not even a suite of products. CRM can be defined as a
strategy for acquiring, retaining and developing profitable customers through the
effective and efficient management of customer relationships.

CRM is a business

philosophy that touches upon many independent parts of the organization. CRM is a
theory that requires a new customer-centric business model which must be
supported by a set of applications integrating the front and back-office processes.

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These coordinated applications ensure a more satisfactory customer experience,

which has a direct link to a more profitable organization.

By implementing a CRM strategy, organizations can improve the selling, marketing

and servicing functions across all customer touch-points:

Person-to-person

Telephone and fax

Web

Direct mail

Email

The desired result of CRM is to acquire a 360o view of customer touch-point

interactions, buying behaviours, preferences or interests.

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What is CRM?
Customer Relationship Management (CRM) is about identifying, winning, retaining and expanding
customer relationships, in the most profitable way, across the complete spectrum of points of contact with
the customer-from sales force to call centre to the Internet.
Brian McBride, Vice-President and General Manager, Dell Computer Corporation Limited

The Abberdeen Group estimates that the CRM market generated $7.8 billion in
revenue in 1999 with CRM software sales making up $3.8 billion of that total. Some
think the market will grow to $9.4 billion by 2002 with CRM sales software and
customer-service software growing the fastest.

CRM Growth Forcast ($B)

15

10

0
Sales ($B)

1998

2000

2002

2003

2.2

9.4

14

Customer Relationship Management is a client-oriented business approach intended

to maximize profitability, revenue, and customer satisfaction.

In order to achieve

CRM, organizations must put into practice concerted processes and technologies that
sustain customer communications throughout all channels e.g., field sales, inside
sales, telemarketing, retail sales, resellers and selling partners, customer service and
support, field service, direct mail, e-mail, fax, and the internet.

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As an example, an enterprise might choose to build a database of its customers that

describes relationships in specific detail. This way management, salespeople, people
providing service, and perhaps even the customer directly, could access the
information, match customer needs with product plans and offerings, remind
customers of service requirements, and know what other products a customer had
purchased.

According to one industry view, CRM consists of;

1. Helping an organization recognize and target their best customers, manage

marketing campaigns with clear goals and objectives, and generate quality
leads for the sales team.

2. Helping the organization improve telesales, account and sales management,

by optimizing information shared by multiple employees, and streamlining
existing processes.

3. Identifying the most profitable customers and providing them the highest
level of service with the aim of improving customer satisfaction and
maximizing profits.

4. Giving employees the information and processes necessary to know their

customers, understand their needs, and effectively build relationships
between the company, its customer base, and distribution partners.

CRM is the so-called new way of thinking regarding the nature of relationships with
customers and is not limited to one sector or industry. It should not be viewed as a
small change in business practices, but in most cases a major leap in culture,
strategy and operations.

But is it really that new a concept?

The idea has been

around and practiced by many for a long time. Whats new is the technology that
helps organizations capture this data and consolidate it in a central warehouse to add

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intelligence to: thus the phrase Business Intelligence -turning numbers and data
into knowledge and utilizing that knowledge.

CRM Processes

When properly implemented, CRM supports a closed loop business process that
bridges operational and analytical worlds. The process has four elements: Capture,
Analyze, Plan, and Interact.

1. Capture: This phase extracts customer data from operational systems and
integrates and stores the data for future analysis.
2. Analyze: This phase allows business analysts to create reports of customer
behaviour, define customer segments, and create predictive models that
determine what recommendations or offers to make to customers.
3. Plan: This phase leverages the knowledge gained from analyzing customer
information to create rules for optimizing customer interactions. These rules
enable business users to deliver the right offer to the right customer at the
right time through the right channel.

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4. Interact: This phase involves executing the above rules in various

"touchpoint" systems, such as the Web or call centers. Here companies take
action to optimize interactions with customers across all channels. Companies
then capture the results of those interactions and repeat the cycle, refining
their plans based on previous experiences.

Its All About Creating Customer Loyalty

CRM plans were originally implemented with the idea to grow closer to the customer.
In fact, 93% of surveyed companies reported a need to increase customer loyalty or
satisfaction, 89% claimed they needed to see an increase in revenue, and 81%
claimed they needed repeat orders and larger orders from existing customers. The
promise of a CRM strategy is customer loyalty, retention, repeat business, profits,
cross-sell and up-sell opportunities. It is a means of increasing business. It is a way
to meld front and back-end systems to integrate marketing, sales and support. It
allows you to market on the spot while you are serving a customer.

By

implementing a successful CRM program, a business can increase the potential of

rewarding customer loyalty. For example, todays customers are characterized in the
following manner:

They
They
They
They
They

want
want
want
want
want

customized products
24/7 support
it yesterday
to feel like they are your top priority
the best value for their money

A successfully managed CRM implementation would be able to tackle each of the

above customer demands.

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These days customers are under increasing pressure to do things more quickly, to
cram more into each day.

Thinking broadly about the challenges customers face,

one can always find ways to make their lives easier. That, more than anything else
will earn their loyalty, regardless of a better deal they could find elsewhere.

Understanding the Value of Customer Loyalty

When organizations realize that on average, 80% of their profits come from 20% of
their customers, (80/20 rule) they will make great strides in understanding customer
profitability and how to enhance it. With a little data-mining, via a CRM package,
such an analysis could be used in the decision-making process about future
profitability of certain types of customers. This decision-making information can be
put to practical use to help acquire the most profitable customers (the 20%) and
then to serve them most profitably.

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Is Customer Loyalty Always a Good Thing?

As organizations become more and more customer focused and driven by demand,
the need to gain and retain customer loyalty is critical. Customer satisfaction is the
most effective way to achieve customer loyalty.

But is customer loyalty always a

good thing? The short answer is no. Although the main purpose of implementing a
CRM initiative is to gain and retain customer loyalty, there is certainly a downside
that must be taken into consideration.

Having truly loyal customers can be detrimental over time and can even become a
trap.

The fact is todays customers, no matter how loyal they may seem, will

eventually cease to be customers.

And if the organization chooses not to compete

for new customers, while relying on their loyal clientele, they are certainly in trouble
at some point down the road.

It is of interest to note that in many instances loyal customers can mask serious
vulnerabilities and create managerial complacency.

An excellent example of this

would be General Motors Cadillac. Cadillac once set the standard of the world and
was synonymous with quality and luxury.

But over time General Motors focused

more on what its core customers wanted than it did on attracting new, younger
buyers. Their main problem was not that existing Cadillac owners jumped ship to
BMW or Mercedes, but the baby boomers never began buying them like their fathers
and grandfathers did. By focusing their attention on their loyal customers and not
focusing on new clients, their brand equity declined as did their share of the luxury
market.

Another example would be Apple computer. In 1990 they had 3.5 million users who
were as loyal as they come.

They nurtured this loyalty and gave their customers

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what they wanted. They were so focused that they did not notice their customerbase was out of the ordinary of the new users coming into the market. These new
buyers were flooding into the Wintel market.

One senior executive at Apple said

(Inside Apple) we were so completely insulated from the vast non-Apple computing
world outside.

When Apple focused all their attention to their loyal customers,

they cut themselves off from the larger population of computer buyers who drove the
growth of IBM, Gateway, Dell and Compaq.

Customer loyalty is a fabulous thing to achieve and attain, but at the same time it is
a bad strategy for any organization to leverage or rely upon. Loyalty can easily blind
a company to the need to deliver new value to customers.

There is always a

temptation to assume the loyalty instead of asking how to earn it. It becomes the
factor which brings them to accept spending less on research and development,
cutting quality corners, raising prices and still holding market share.

What CRM is Not

1. The basics of CRM are not new, in fact they are what successful businesses
have been doing for generations.

2. If understood properly, CRM is a philosophy. It is not just about the

technology or the software. Companies address CRM as an opportunity to
shift its focus from performing processes to serving customers. Successful
CRM is about putting in place the processes to build loyal and profitable
customer relationships.

3. CRM is not just about improving sales. CRM cuts across many business
processes. A company might configure its CRM system to include any of the
following functions:
Contact and opportunity management
Field service and dispatch

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Sales force automation

Marketing campaign management
Sales configuration
Telephone call centre management

4. CRM is not a statistical model. Statistical models are certainly important

tools for developing marketing strategies. Current CRM applications in fact
use many sophisticated statistical models but CRM is not one of them.

5. CRM is not about database applications. Database applications are only the
tool to help manage customer relationships more efficiently.

6. CRM is not yet a top priority of executive management. However, it is still

predominately viewed as being at a tactical implementation level.

7. CRM is not the be-all-and-end-allebusiness is. Business leaders need to

cultivate a vision of a new ebusiness enterprise relationship. CRM opens the
door but is definitely not the end.

CRM metrics--The

lifetime value of a customer. Some customers are worth more to your

company than others. The basics: multiply a customers expected number of visits times the average
amount of money spent per visit. Deduct your costs of acquiring and servicing that customer. Add in the
value of accounts this customer refers to you, and discount the sum approximately the time period youre
analyzing. The underlying principle: customers are more valuable than what they spend in any given time
periodand some customers are much more valuable.

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Who Needs CRM?

Basically any organization that has customers could benefit from using CRM
solutions. However, the industry sectors that have the highest potential to benefit
over the next five years are retail, banking and finance, with the telecommunications

CUSTOMER VALUATIONS

Differentiated
Uniform

Highly

sector coming a close second.

3. Airline

1. Gas Station

4. Computer Co.

2. Book Store

CUSTOMER NEED
Uniform

Highly
Differentiated

Companies in quadrants 2, 3 or 4 represent the best candidates for implementing a

CRM solution because their customers have highly differentiated needs, highly
differentiated valuations, or both. An airline is an excellent example of a quadrant 3
company because most air travellers needs are the same.

However a very small

percentage of customers (business travellers) account for most of the companies

profits. A computer company like Dell is a good example of a quadrant 4 company.
Customers needs are highly differentiatedeach customer wants a different
configuration for his computer system.

But so are valuationsa corporate client

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looking for thousands of workstations is obviously going to be worth more than an

individual looking to buy a computer for the home.

These days customers are demanding CRM. They are demanding what CRM helps
provide: knowledge of them that's shared by all in the company no matter how it's
received, to help you do business their way, attention to them when they want it and
how they want it, and access by them to everything they need to know about their
orders and projects with you. This is what CRM is all about.

Why Choose to Implement a CRM Initiative?

1. Because it costs 500% less to sell to an existing customer than to a new

customer

2. Because a 5% improvement in customer retention can increase profitability

by 85%

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3. Because before the internet, dissatisfied customers typically would inform

fewer than 10 people of their experience. Today, internet-enabled customers
can inform the world.

4. Because many businesses today are failing to provide effective customer

relationship management programs. These companies are not providing staff
with the necessary access to information needed to satisfy customer inquiries.
This lack of information leads to dissatisfied customers and possibly the loss
of these customers.

5. Because CRM technologies enable the organization to more efficiently deal

with customer relationships, and to manage these relationships through every
aspect of the customers life cycle.

6. Because CRM applications pave the way to increases in revenues and

enhanced profitability for the enterprise and mid-enterprises of the world.

7. Because CRM has the capacity to organize marketing materials, track

customers histories, and coordinate a companys interactions with its
customers.

8. Because CRM turns the conventional business model into an ebusiness

approach and prepares organizations for the technological advances of the
future.

Is CRM a Fad or Here to Stay?

Could CRM be just the latest fad since the 800 pound gorilla known as Enterprise
Resource Planning (ERP) took the market by storm in the late 1990s? Could CRM
just be part of a conspiracy by all the consulting firms that ran out of work after
Y2K? Industry experts seem to think there may be reason for all this scepticism. A

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survey conducted by Insight Technology found more than 2/3 of CRM projects failed
to increase revenue.

50% of the respondents claimed no increase in sales at all.

While the other half claimed sales grew by less than 10%.

The Gartner Group

estimates that 55% of CRM initiatives will fail by 2005. Realistically, if you include
all the CRM projects that never obtained top-level management approval and you
include all the organizations that dont freely speak of their CRM failures, official
failure rates would be considerably higher.

So why is everyone jumping on the CRM bandwagon?

The whole idea of CRM is just an expansion of the customer being king, which isnt
exactly a revolutionary idea. The main difference with CRM now is that technology is
available that allows the capturing of this information about customers in an new
innovative and integrated way. It allows companies to take advantage of what they
know about their customers and this goes far beyond the favourite salesman
knowing all about his customers.

CRM is obviously not the be-all-and-end-all that will solve all problems, or magically
transform customer relationships by suddenly injecting intimacy into them. For any
CRM implementation to be successful, it is necessary to bring about the necessary
behavioural and cultural changes in the organization that will allow such results to be
achieved.

Vendors of CRM software often try to sell benefits that can easily be

achieved by making appropriate changes to the business processes.

Software companies EC Soft and Chordiant recently carried out research into
managers' attitudes towards CRM. The survey indicated a long-term dedication to
utilizing CRM. While more than two thirds of organizations are planning to expand

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their existing CRM systems or develop new ones. This kind of investment indicates
more than a passing interest in the subject.

But Is CRM here to stay?

The verdict is most definitely still out on this matter.

Organizations are always

looking for new ways to increase sales and ultimately their bottom line. It could be
that CRM just happened to enter the market when organizations were at a standstill
in terms of ideas for drumming up new business and their vendor may have oversold
them on the CRM concept. However, with the right business insight and a clarity of
objectives, it is possible to derive great benefit from a CRM initiative. It can help a
business identify its most profitable customers and serve them best.

It can help

identify variables and relationships previously unknown, and build a competitive

edge.

It can help initiate timely product line changes based upon customer

feedback. But at the same time companies will eventually have to see some positive
results before they continue to pour money into any future CRM plans.

Return on Investment

With CRM expenditures escalating at a mind-boggling rate and no slow-down in

sight, many companies are beginning to question what they are achieving with the
investments they are makingor more precisely, their return on investment (ROI).

There is no question that making the investment and maximizing its potential will
pay off, eventually, but the question is how much and when. Recent research by IT
Pulse found that two out of three people are finding it hard to reap the rewards from

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CRM.

A Meta Group survey of large CRM projects found only 10% achieved

measurable financial results.

results.

The problem is how do you measure the financial

One thing organizations must realize is they are not going to see results

overnight, next week, or next month. It is most definitely a long-term investment

and commitment. Theres no tangible short-term benefit to this, its like brushing
your teeth or education.

But if organizations cant see the rewards from their

investments, CRM will not be around long.

A survey by the Peppers & Rogers Group indicated that 46% of firms didn't measure
ROI for CRM activities. The main reason is the complexity in obtaining meaningful
data. Of those firms that do, it is frequently measured as a percentage increase in
overall revenue (22%), while 14% measure it in terms of increased retention/lower
attrition rates.

The key concern in measuring the return, stems from an uncertain perception of
where the organization started and what the measure for customer management
performance was before these investments were made.

Without this crucial

information, many organizations will have great difficulty in obtaining the real
returns.

CRM.Talk guru Dick Lee suggests that most of the CRM ROI formulas he has seen
have been slight of hand, and ultimately has to be measured from changes in
customer behaviour.

He goes on to say that an organization needs someone

specially trained in process improvement to obtain data on how CRM is affecting their
customers.

Unfortunately this isnt something that most organizations pursue.

Therefore, until software is introduced that is proficient in measuring customer

satisfaction, customer loyalty and the like, organizations are forced to measure
increases in revenues from increased sales and reduced costs as their only gauge

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of CRM ROI. And despite previously mentioning that CRM is not just about sales, the
main objective in implementing a CRM strategy for most organizations is to increase
their bottom line.

Reduced Costs: The easiest improvements to measure are bottom-line cost

reductions in sales, marketing and customer service.

For example, sales force

automation and campaign planning tools can measurably cut the costs of acquiring
new customers and retaining old ones.

Improved access to customer information

means call centers can handle more calls per day, decrease call duration and, over
time, reduce the number of incoming callsall of which lowers expenses.

Increased Sales:
increased sales.

Its more difficult to make a case for CRM based on

Software vendors might suggest looking at metrics like sales

volume, the size and frequency of orders, and profits per customer or per market
segment.

Over time, CRM tools should also extend the length of time your

customers do business with you and reduce churn.

There are however, customer-centric companies that are tracking the benefits of
these programs and measuring their ROI in a much different way. For instance, they
might track increased customer knowledge, reduced customer attrition, increased
customer loyalty and improved customer profitability.

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Why CRM Initiatives Have Such a High Failure Rate

A majority of CRM initiatives are not successful due to common errors that can be
rectified if properly thought out and benchmarked accordingly.

Companies often

take on a CRM strategy to maximize their effectiveness and productivity while

providing greater support to the consumer.

If not done properly, costs will only

increase, and customer service will decrease. So why not CRM? Because there are
to many flaws in a system that require an incredible investment, including time,
money, and additional personnel and technology.

With an overall success rate of around 30%, choosing to invest this incredible
amount of money may prove to be a bad decision. Making the choice to wait until
other companies ride out the storm may be wise, but at the same time an
organization may be falling behind the personalization todays customers are looking
for. Furthermore, altering a companys culture, and trying to make them work as
one may prove to be a difficult challenge.

However, with todays team orientated

environments, creating a cross-functional company should not prove to be a

challenge in the face of competition.

The need for increased functionality can be

seen because most CRM initiatives include subsets of sales force automation,
marketing automation, email management and data analysis. If resistance remains
after implementation, failure may be inevitable.

With most businesses not

maintaining the quality of their data, implementing a full-blown CRM initiative may
not be the correct solution.

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Most Common Mistakes When Implementing CRM

1. Whats in it for the Customer?

Most organizations do not bother to create a sense of enhanced value for the
customer. They expect that the CRM application will act on its own without
any change to the work environment and the organizations thought process
as a whole. As a result, organizations that act in this manner dont bother to
take the time to find out what the customers want through surveys or focus
groups.

2. Whats in it for the Organization

In one study, CRM customers found that regardless of knowing the lifetime
value of a customer, nearly one-third of them bothered considering it in their
application. Companies tend not to treat their most profitable customers any
different from their once a year customers. This could mean making a
business more lucrative and ultimately producing a very successful company.

3. Putting Answers First, Without Asking the Questions

Most organizations start a CRM initiative blindfolded with no internal
processes in place before implementation. Without a well-designed process,
no CRM strategy will produce the results that a business is looking to achieve.
It is pivotal that organizations ask the questions prior to a CRM application
and not use the tools present to find the answers during the implementation.
That way, when problems arise, a solution, or a roadmap to a solution will
have been already put in place.

4. Using Old, Incorrect or Missing Data

Companies are losing out on potential value because they are failing to track
individual customer preferences and patterns. A company may even have the
information but decide not to use it.

5. Underestimating the Commitment

Because it involves technology, most companies believe only the IT
department will have to deal with the changes necessary to make it work. In
fact, it requires an organization to go from a product-centric focus, to a

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customer-centric focus. Most companies also underestimate the training

necessary to make these changes.

Implementing a Successful CRM Strategy

A near 70% failure rate indicates there are plenty of obstacles to avoid when
implementing a CRM system. Selecting the product is essential, however it is only
one piece of the implementation puzzle. For a CRM project to be successful, it must
meet the goals of the organization without compromising productivity.

The following is a list of crucial elements that must be considered when

implementing a CRM application;

1. Review Your Process

Many project teams jump full stride into the technology before understanding
how they were selling to and servicing customers. Take the time to map out
current processes and assess their weaknessesthen look to determining
how technology could support these changes. Without identifying and fixing
process holes first, organizations will only end up doing inefficient and
ineffective things faster than they did before.

2. Involve The Users

When you rollout a CRM initiative, you are not implementing a new process,
you are replacing an old one. Employees are already doing their jobs today.
To get their buy-in for learning a new way of doing things, they need to have
input into the project from day one.
3. Secure Adequate Financing
In the last year, the average CRM initiative spent over $10,000 per user for
hardware, software, customization, training, and support. The ones that
obtained the best results spent over $18,000.

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4. Take a Phased Approach

The most successful CRM projects have a long-term strategic plan. However,
they break it up into manageable phases. This phased approach allows the
users to become familiar with a few new features over time and dramatically
increases their acceptance and productivity.
5. Obtain Top-Level Managements Support
CRM cuts across all departments of an organization.
You need senior
executive support to dismantle any internal barriers that get in the way if you
are going to make real progress.
6. Do a Test Run
To minimize surprises when you actually go into production, it is advised you
do a pilot-run. Set adequate time aside for such a test-rollout.
7. Do Vendor Reference Checks
Since you will be relying on your vendor for a significant portion of your
projects success, make sure that their commitment to your goals matches
your expectations. Talk to other customers who are months ahead of you to
verify all their promises.
8. Train Employees Appropriately
Employee training is key to the projects success. Many companies that spent
2-3 days training their employees on the use of their system, found that the
majority left training with large gaps of how the system works.
9. Provide Adequate Support
Ensure that everyone can get the help when they need it. This, in many
cases requires offering 24/7 support. Ensure that the help desk can handle
this load, or look at outsourcing this task to firms providing this service for
CRM projects.
10. Staff Appropriately
In order to obtain success, you need to make sure that you are adequately
staffed. Part time projects achieve success, part of the time.

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11. Get Expert Help

Get professional support from those who are skilled in what you are not.
Obtain a list of CRM consultants from your CRM vendor that have assisted
their prior clients.

Who are the Market Leaders?

Although conclusive numbers could not be obtained on who owns what share of the
overall CRM market, the numbers below represent the results of a survey conducted
by The Data Warehousing Institute in 2000 of 1670 individuals who occupy various
roles and levels in their respective organizations.

They were asked who provided

their CRM software.

%age of Respondents
31

Oracle

22

Siebel

14

IBM

11

SAP

Peoplesoft

6
6
5
4
3
3
3

C larify
Broadvision
e.piphany
NC R
Baan
Xchange applications
Broadbase

18

Other

10

20

*note: respondents could select more than one vendor

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30

40

In the growing segment of CRM professional services, market leaders include

Andersen Consulting, Cambridge Technology Partners, CSC, Deloitte Consulting,
EDS/Centrobe, eLoyalty, Ernst & Young, IBM Global Services, KPMG, and Price
Waterhouse Coopers.

eCRM

its not e-Business its Me-Business!

--- your customer

With the internet, the emergence of the ecustomer has ushered in the new age of
Customer Relationship Management known as eCRM.

This is where traditional

barriers between front office and back office operations go away, and customers
need only go to one place, the internet, for information. It capitalizes on automated
knowledge capture and delivers accurate, real-time data.

eCRM can provide an

entire company with the instantaneous information and processes necessary to

develop rewarding, personalized online relationships with customers.

CRM relies on client-server technologies and integration with legacy systems,

so

deployment is expensive. Because eCRM is based on a new generation of interactive

technologies, integration happens at the user level and deployment is rapid. While
many companies are still struggling with measuring the value of their eCRM
initiatives, most experts agree that eCRM can not only can be easier to implement
than traditional CRM, but if done right, it can provide a ROIsome claim in as little

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as 90 days. Compare that to CRM program implementations that can take months,
quarters, even years to generate a payback.

For brick and mortar companies relying on existing operations for customer
interaction, a CRM system may be sufficient.

But for ebusinesses that need rapid

deployment, real-time information, and the ability to deliver top-notch online service
to stay ahead of their competition, an eCRM solution is imperative.

The Future of CRM

"CRM is how we do business today, and I don't think

the term CRM is going to be as predominant several
years from now, I think it's going to be a lot more
routine, and simply what we need to do." CRM Guru-Dick Lee

The future of CRM, as I see it, will shift from CRM to CMRCustomer Managed
Relationships.

This will be a very different focus where the customer is totally in

control of the relationship. The customers will tell organization how and where they
want to be contacted, which products they are interested in, and which ones they are
not interested in. Organizations will need to listen. They will need to hear what they
have to say to be able to respond to what they are saying.

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The Components of CMR

1. To Actively Seek Customers Investment in our Relationship.

There is a

great book by Seth Godin called Permission Marketing. It is a different way of

looking at customer communication.

The idea is that organizations get the

customers attention through traditional interruption marketing techniques; ads,

radio, TV, etc. Once theyve gotten their attention, they need to give them an
incentive to volunteer their permission to continue the dialog, to obtain
permission to continue to educate them. Then, finally leverage that permission
to modify behaviour.

To ultimately sell more products and solidify the

relationship. This is going to be driven by the customer.

2. The Customers are Going to Manage the Contacts. The customers will give
the organization permission for when and where they want to be contacted. If
they give them this information, then the contacts with them are first of all
anticipated and expected. Secondly, they are personal, they know who you are
talking to, they know what they are interested in.

Thirdly, the contacts are

relevant to that customer. This is very different from cold calls and interruption
marketing. Therefore, the goal with CMR is that any contact should be designed
to take the customers from one level, strangers, to another level, friends, from
friends to customers and from customers to loyal customers.

The customers

preferences have to be actively sought. The corporate culture has to be retooled

so that they understand that they have to actively seek the customers
preferences.

The customers preferences are then used to manage those

relationships.

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3. Customer Knowledge will be the Lifeblood of Your Business Organizations

must understand who their customers are. What this means is to come up with
some definition of a customer. This is sometimes very difficult for organizations
to pinpoint.

Customer - a party involved in the external acquisition of the companys goods

and/or services, of interest to the company. It may be the bill payer, a supplier, an
individual or an organization.
DELL has done a very good job of understanding who their customers are.
Harvard Business Review had a great story in March/April 1998. They did a very
interesting thing. Michael Dell decided he (DELL) was going to get right in the
middle of the suppliers and his customers and would understand who his (best)
customers were.

They did a study of profitability and determined the value of

their customers. At the time of this article, Mr. Dell spent 60-80% of his time
calling his best customers. I cant imagine too many CEOs who spend their time
calling their best customers.

Virtual
Integration

Suppliers

4. Aim to Understand Customer Relationships.

Customers

Like customers, relationships

are not an easy thing to understand.

Relationships The type of involvement a party has with an organization or with

another party. i.e. employees, households, organizational hierarchy, extended
relationships
Today the focus is on customers. Some are looking at households. In the future
organizations will need to look beyond the household and go to the extended
relationships to be able to understand who is relating to whom and what to do if I

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do this, am I going to affect any other relationships in the household or this

extended household.

This is a very interesting problem and difficult one for

technology to handle.

5. The Plans of Today Position You to Deliver Tomorrow. What this means is
organizations better have some kind of a vision, some kind of business strategy.
i.e. what does it mean to become customer focused? Customer information is a
strategic resource that must be integrated and shared throughout the extended
enterprise.

This means that a number of things have to change, its not just

about technology.

The whole organization has to change and become more

focused on sharing data and using data throughout the organization.

Customer View

No Customer View

Product options, pricing and billing

tailored to customers desire and
value
Type of service / type of treatment
shared across all service points
Common
customer
information
shared across service centres

Unidentified relationships prevent

recognition of complete customer /
product relationships
Unidentified
relationships
cause
mistreatment of VIP customers
Customers must contact multiple call
centres to effect changes across all
products owned

Most organizations are focused around the product. This needs to be changed.
One way of overcoming some of the organizational issues is to come up with
some kind of strategic operations. Take customer management and put in into
the strategic operations. This way customers from different lines of business are
joined together rather than managed individually.

The bottom line is that in order for organizations to remain profitable and
competitive in the future, they need to capitalize on the customers they have at

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their disposal now. Customers are the lifeblood of any organization. They must
be nurtured. You must listen to what they are telling you.

Neither CRM or CMR should make up a complete strategy for any organization
but it must be a component of any companys competitive strategy. It will not go
away.

Like quality and process efficiencies, they will gradually cease to be a

source of competitive advantage because everyone will be doing it. It will get to
the point where every company will have to have either a strong CRM or CMR
initiative in place just to stay in business.

Conclusion

The popularity of CRM is due to the fact that better customer relationship
management is advantageous for both the customer and the enterprise. The enduser clearly enjoys a great advantage from increased CRM. Better service is not only
satisfying, but has tremendous value attached to it.

The total value of a product

with customer service is significantly higher than of the product alone.

On the other hand, the enterprise implementing CRM is not doing it for altruistic
reasons. Companies have come to realize that their customers are their real asset.
The benefits when CRM is adopted are very significant. Industry statistics show that
45% of customers who walk away from a relationship with a vendor do because of
poor customer service.

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Statistics show that 80% of a companys revenue is derived from repeat customers.
A company that possesses customer knowledge and the software to leverage this
information, has the advantages to:

Increase customer retention

Identify most profitable customers and treat them accordingly (80/20 rule)
Reduce marketing costs
Obtain qualified leads
Increase sales by taking advantage of new cross-sell/up-sell opportunities
Obtain a higher ROI by increasing profits per sale
Streamline the sales cycle
Eliminate redundant functions
Improve understanding of customer needs
Leverage previous contacts from other customers
Estimate future sales, marketing, and service activities
Increase the bottom line

For CRM to have a considerable impact on any organization, enterprise-wide

communication and commitment are required.

To stay competitive, there is no

question businesses could benefit from CRM technology. But they must be willing to
invest 100% from the beginning and avoid all the mistakes of their predecessors.

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