5 Reasons Why CRM Is Important for Small Businesses

Customer relationship management (CRM) enables small business

owners to tackle operational challenges, including sales decline, high
client attrition, and misalignment between corporate revenue targets
and salespeoples commission policies. If you are a small business
owner, there are several ways a client tracking tool can positively affect
your bottom line; check out our top five.

1. Client Management

You can use a CRM tool to get more visibility into your client base,
ponder the tactics needed for long-term profitability, and formulate
better plans that impel your staff to break new operational ground. For
example, if the software reveals that 80 percent of your customers are
in the pharmaceutical sector, you could hire more salespeople with a
medical or pharmacological background, or implement a training
program to elevate your sales staffs awareness of the pharmaceutical
industry.

2. Profitability Tracking

This tool can also ease up the work of your accountants. They no longer
need to worry about tracking every cent of revenue and focusing on
shipping costs, product discounts, and client returns. The software
helps give a small business a speedy bookkeeping system and more
accurate financial reporting, which are important processes in the
corporate value chain. When corporate strategists talk about value
chain, they are referring to the collection of tasks and tools that enable
a business to grow sales, run efficient operations, and post positive
results at the end of the year.

Related: 5 Questions to Ask Customers on Your First Day in Business

3. Regulatory Compliance

An effective client policy enables small business owners to automate

some business processes that were previously manual. This is a winning
approach in the long term, especially when it helps you comply with
federal and state laws and industry standards. For example, you may
not need to hire a team of compliance analysts to perform regulatory
checks if you apply the correct settings to a CRM tool. You can instruct
the tool to flag a high-risk client or generate the relevant
documentation based on the clients risk score.

4. Sales Strategy

As a small business owner, the last thing you want is to lose income by
targeting the wrong customer segment, an indication for slender
margins down the road. Client administration programs can provide you
valuable intelligence about long-term sales trends, helping you adjust
the existing corporate sales strategy and results tactics. For example, a
five year analysis of your janitorial services companys sales data
shows that income from car manufacturers is in decline, while revenue
derived from the higher education sector is on the rise. Based on these
results, you may decide to target universities and colleges more
aggressively and gradually pull back from the auto sector.

5. Customer Service Improvement

CRM can improve a companys customer service practices, helping

employees respond to clients queries quickly and effectively. For
example, an entrepreneur can track customers complaints and see
where and why the company is not performing well. The software can
also provide insights into clients order trends, ensuring that personnel
never mess up any order related questions in the future.

Client management applications can give a small business operational

superiority in key areas. This tool enables your company to understand
what it takes to build an effective customer outreach policy and boost
sales. Before selecting a customer tracking program, make sure it fits
your companys operating processes, industry, revenue cycle, and
customer base.

Objective

The objective of CRM is to enable a business to learn who its customers

are and what value they can bring to the business, in order to increase
the business' profit margin.

Benefit
By understanding customers' needs and adjusting your operations to
meet those needs, you enhance your relationship with customers and
increase their loyalty.

Customer Service

CRM helps a company offer better customer service, which in turn

supports increased revenue.

Strategies

CRM strategies might include identifying customers who are most likely
to respond to cross-selling or up-selling products. Another aspect might
involve targeting marketing efforts for a specific product toward a
specific segment of customers.

Insight

"If you are losing customers to a competitor, thats a clear indication

that you should improve your understanding of your customers," says
"CIO" magazine.

1. Web Marketing- With the growing popularity of web, customers

are tending towards web marketing or web shopping. This helps
both customers and suppliers to transact in a real time
environment irrespective of their locations. Some of the major
advantages of Web Marketing are listed below:

It is relatively very inexpensive as it reduces the cost for

physically reaching to the target customers for interaction.

Suppliers can reach to more number of customers in lesser

amount of time.

The online marketing campaigns can be easily tracked,

traced, calculated and tested.

The selection process of any product or brand is simplified

due to proven online research and analysis techniques.

Online marketing campaigns are more promotional as

compared to manual campaigns.
2. Email Marketing- Email marketing has turned out to be more
efficacious and inexpensive as compared to mail or phone based
marketing strategies. Email marketing is direct marketing which is
data driven and leads to more accurate customer response and
effective fulfillment of customer needs. More attractive features
include newsletters, sending of eCoupons, eCards, provision of
saving events into calendars etc.

3. Analyzing customers buying behavior online- A CRM system

provides a platform to analyze the customers buying behavior
online. This interactive strategy provides great accuracy with high
speed which includes profiling services furnishing elaborated bits
of information regarding customers purchasing habits or behavior.
Individualized analysis of this behavior also helps to identify to
which product or brand the customers are more tended. For
example an online selling website www.xyz.com can analyze the
customers buying behavior by installing an in-house service with
the help of a full-fledged CRM that checks what all products are
being purchased by a particular customer and under which
specific group they fall. This is achieved by personalized analyzing
the buying history of customers in the past which predicts the
future business with those customers also. This accomplishes to
build a long-term relationship with customers by properly
canvassing customer needs and resulting in customer satisfaction.
Analyzing this particular buying behavior of customers online also
helps to fix or change of marketing techniques or strategies to
mould the system according to the future perspectives.

4. Forecasting future marketing strategies- Down the line

marketing strategies keeps on changing according to the
emotional behavioral change of customers. CRM market
forecasting techniques help to understand this change through
regression and statistical analysis of customer behavior online.
These are some complex but more accurate analysis techniques
provided by CRM system which are proved to be one of best
marketing strategies. This innovative approach is carried out with
greater risks but is believed to outturn astonishing rewards.

5. Building business impact models- It is important for an

organization to have check on marketing performance regularly so
that the techniques never deteriorate and always match to yield
greater results. These CRM oriented models help in delivering
 accurate measurement of marketing performance throughout the
organization and to do better every time.

B
Understanding the customer life cycle and calculating CLV

Introduction to the customer life cyle and models to calculate the

customer lifetime value (CLV).
Jim Sterne

The customer life cycle comes from the practice of CRM where
its traditionally used to map the different stages a customer
goes through from considering a product, service or solution to
the actual buy and, at least as important , the post-purchase
stages (where customer retention, loyalty and advocacy come
in). It gets increasingly used in different business functions,
including marketing and the management/optimization of the
customer experience.

The Customer Lifetime Value (CLV) is a prediction of the total value

(mostly expressed in net profit) generated by a customer in the future
across the entire customer life cycle. CLV also comes from a CRM and
database marketing background. However, its used more often in
customer-centric and integrated marketing and in a customer
experience context, whereby the focus is on long-term customer
relationships, as is the case in the end-to-end customer experience.

Using the customer life cycle and customer lifetime value offers several
benefits, among others regarding budgeting, segmentation,
prioritization and different circumstances where the health of the
organization can be forecasted and improved. No wonder its also high
on the agenda of C-level executives and that the CLV is one of the
domains where predictive analytics play an increasing role. Last, but
not least, CLV and the customer life cycle play a role in marketing ROI
as youll read below.

The classic view on the customer life cycle in a digital context

There are different stages in the customer life cycle and there are
various methods to define them. One approach is that of Jim Sterne and
Matt Cutler, as published in 2000 in a paper called E-Metrics, Business
Metrics For The New Economy (PDF opens). There are also different
ways of calculating the customer lifetime value (CLV). An introduction.

In the mentioned paper, Sterne and Cutler divided the phases of the
customer life cycle (later other elements were added that were more
based upon the customer interaction), and to be more precise, the
actions we can take in order to engage them through the customer life
cycle, as follows:

Reach: trying to get the attention of the people we want to reach.

Acquisition: attracting and bringing the reached person into the

influence sphere of our organization.

Conversion: when the people we reach or have a more

established relationship with, decide to buy something from us.

Retention: trying to keep the customers and trying to sell them

more (cross-selling, up-selling).

Loyalty: we would like the customer to become more than a

customer: a loyal partner and even a brand advocate.

The Customer Life Cycle

Source: E-Metrics Business Metrics For The New Economy by Jim
Sterne and Matt Cutler
Buyer journeys and customer relations are more than models
Of course, models are models and the interaction and buying patterns,
as well as conversion paths, are often more complex in a multi-channel
world than the models we use to capture them. The customers ever
evolving buyer journey is not linear and funnel models dont match
with an increasingly complicated behavior, that necessitates a fully
connected or integrated marketing 2.0 approach. Certainly with the
advent of social media people have more choice and power. Now they
are in the influence sphere of your business, next they are not. Since
Sterne and Cutler came up with their model, many other
representations of the customer life cycle were made.

Customer life cycle loop

Its nearly impossible to fully monitor buying journeys and decisions.

You dont know if a new customer saw your billboard, you dont know if
his friend advised him to buy your products, and you dont know all the
online and offline channels, he used to inform himself and even interact
with you or your agents or resellers if you have a channel go-to-market
model.
He might have been called by your internal sales team and next be
visited by an external sales rep or contacted via a partner, while he told
the internal sales rep he was not interested in working with your
company. Sounds familiar? Disconnected systems and processes? Silos?
If only you had a more holistic and customer-centric customer view
With the advent of new ways of interacting, the disconnect only
becomes bigger.

And what about existing customers? Do you know them well enough?
Are you sure there isnt a customer with an extremely high buying
potential that sits there in your small accounts because he only buys
from you when your competitor is out of stock? What about churn?
Does the customer come back?

The Customer Lifetime Value (CLV) is a prediction of the total

value (mostly expressed in net profit) generated by a customer
in the future across the entire customer life cycle

The customer life cycle in a connected reality

Its important to understand your prospects and customers

throughout their entire journey and life cycle, and, at least, to
know what happens with them through all contact moments
and touchpoints between them and your company (and the
people working for and in it).

The customer life cycle hasnt changed that much but the ways to
achieve reach, acquisition, conversion, retention, loyalty, advocacy
have. There are more options for both customers and marketers. And at
the same time more challenges. The same goes for the measurement
of the customer lifetime value.

Still, having an overall view and matching the different stages in the
customer life cycle with the direct and indirect signals, needs and
emanations of intent, in alignment with the brand dimension, is crucial.
It goes beyond the individual marketing campaign, channel and tactic.
And its one of the reasons we like to look at customers as people in a
connected perspective. Its also one of the reasons why marketing
automation, in combination with CRM, became so popular. However, we
see that in general there is still a lot of focus on using such tools (that
are getting new names for a reason) in a disconnected and often limited
and campaign-centric way.

When we look at the overall customer life cycle its clear that there are
several threads running across each stage and thus also each layer of
the proverbial funnel: think about the use of content that meets
customer intent and needs (content marketing), for instance. Content
marketing can hardly be called a marketing discipline as such as
content plays a role in all stages, from reach to advocacy and beyond.
The same goes for social media marketing. And, yes, even email
marketing and some more traditional forms of marketing. The list goes
on indeed. When we look at individual touchpoints first and then about
tactics and channels, we can start having a more integrated view as
well and connect the dots of business goals, buying journey, sales
cycle, customer experience, channels, content and the key part of the
equation: the customer.

Customer Lifetime Value (CLV): introduction and measurement

Back to the beginning: customers have a life cycle. And businesses

know it. The question they have been asking themselves for ages is
how you can define the CLV of your customer portfolio and even of
specific customer groups or individual customers. There are many
models to do that as well. The customer lifetime value (CLV) is a
financial metric used to look at customer profitability and,
when properly calculated, a potential impact on the different
marketing efforts across the customers life cycle. Just like
marketing ROI or Return on Marketing Investment it is a
financial value. It is advised to use CLV in order to create value
across the customer life cycle.

The value of the customer lifetime looks at the investments we plan to

make for the customers (retention, sales, promotion, customer service,
whatever) and the return we expect from them. Its a forward-looking
indicator that has everything to do with the present and the future. CLV
is the present value (expressed in your local currency) of the expected
future cash flows from the customer.
The problem with calculating the CLV this way is that it happens from a
global perspective (customer base), and it is difficult to use to calculate
the value of the CLV on micro levels like a marketing plan. Furthermore,
CLV calculation models often find their origins in rather direct marketing
oriented activities and are less useful for customer investments that are
more difficult to calculate (think branding, for instance).

Return On Marketing Investment and the CLV

Marketing ROI expert Jim Lenskold at one of our events

Another way to calculate the value of the customer lifetime

starts from the micro-levels, even individual marketing and
sales actions. Despite what many unfortunately still believe, it also
can be used to calculate and predict the impact of branding related
activities. Im talking about Marketing ROI (or ROMI). And no one looked
deeper into it than Jim Lenskold.

ROMI, short for Return On Marketing Investment is based on the

incremental return of every USD (or your local currency) extra that is
spent in customer-targeted activities (so also future-oriented). It is
primarily a financial parameter that can be used for making prognoses
and for calculating the efficiency of running marketing and sales
programs.

However, in order to be able to do that, you need to have a well-

implemented ROMI-program in your company. Although data from ROMI
programs offer an excellent way to calculate and follow the value of the
customer lifetime bottom-up, there are many hurdles to take.

First of all, few companies use ROMI as a parameter and even fewer use
it on all levels, ranging from every individual campaign to the corporate
level. Implementing such programs requires many cultural changes in
the company and that doesnt happen overnight. Even with ROMI
programs you often will need to make extrapolations, for instance for
high-risk customer investments.

The CRM and customer equity perspective

You can also use your CRM programs to calculate the CLV, on a
global and often a micro level as well but here too there are
many hurdles. An interesting approach, that combines the traditional
way of calculating the CLV and Return On Marketing Investment as a
financial parameter, is that of the customer equity, as explained in an
article in the Januari 2004 edition of the Journal of Marketing by Roland
T. Rust, Katherine N. Lemon and Valarie A. Zeithaml.

In their article, called Return on Marketing: Using Customer Equity to

Focus Marketing, (PDF opens), the authors describe the Customer
equity as the sum of all values over the total customer lifetime of a
company. Starting from that definition, they developed a framework to
optimize the lifelong value of all customer relationships from a CRM
perspective.

The customer equity is the result of three important

underlying parameters:

1. the value equity (the objective perception of a brand by the

customer from a realistic quid pro quo viewpoint)

2. the well-known brand equity

3. the retention equity (that expresses the customer loyalty).

Improving (the value of) the customer equity happens by working on

and combining the various components (called drivers) of these three.
For instance: you can raise the value equity by giving the customer
more, by making things easier for him, etc.

Also the role of customer segmentation is important . The authors state

that segmenting your customers should be done from the viewpoint of
the long-term potential of the customers. Finally, the article underlines
the importance of brand switching and even developed a model to
calculate the possibility that customers will switch brands.
 Return on marketing
investment using customer equity

Its an interesting, very future-oriented model (and thats what CLV is

about, remember) because of its clear focus on a customer-centric
approach (note that brand equity is one of the three underlying
parameters of customer equity, and thats a clear message from the
authors about customer-centric thinking versus brand-centric thinking),
its focus on ROMI and the evident role of customer segmentation.

Many solutions, many questions

There are other ways to calculate the CLV. They all have their
advantages and disadvantages, and much of course depends upon the
type of company or industry (for instance: retailer chains versus B2B
service firms). All the mentioned and other models have their specific
historical roots that can limit their use in certain environments.

Choosing the best way to calculate the CLV depends a lot from the tools
you have, the way you calculate your sales and marketing investments
and how customer-centric your company truly operates.
Example 1: Customer Lifetime Value and Acquisition

A suburban golf pro shop determined that their customer base broke
down quite naturally by geography. The pro shop determined that most
of their customers came from two zip codes, one to the east and one to
the west, and accordingly, the pro shop decided to calculate the CLV
separately for each zip code. What they discovered was that the CLV for
the east customers was 4 times the CLV for the west customers.

Once they dug into their stats, they found out how important this
differentiation was. The east zip was 30% of their customer base but
80% of their profit. The west zip represented 70% of their customer
base and 20% of their profit.

The pro shop had been spending their marketing dollars evenly east
and west. Even though they knew the customers from the east were
more valuable, they continued to put 50% towards the west because it
seemed more effective. They were simply getting a much better
response from the west marketing. Calculating the CLV for each
segment made it obvious that the marketing dollars were not being
allocated effectively.

Example 2: Customer Lifetime Value and Retention

A chiropractor instituted a Chiro-Bucks rewards program to help retain

patients. Patients could earn points for various activities, from receiving
services, filing their own insurance, or referring other patients. These
points translated into straight dollars off. After a year using the points
program, the chiropractor found that it was being used heavily and,
when averaged out among his entire customer base, represented
almost 10% of CLV.

Unfortunately, the increase in retention since starting the program

(other factors assumed constant) had only been 2-3%. What the
chiropractor found is that Chiro-Bucks had not extended the life of the
majority of customers; most tend to use chiropractic until they no
longer need it or insurance no longer covers it. The Chiro-Bucks had
simply helped keep some people that previously would have defected
to another chiropractor due to dissatisfaction with the service, the
majority of whom could probably be saved by implementing better
service systems. Understanding CLV had enabled this chiropractor to
see that the Chiro-Bucks program had a cost far greater than its long-
term economic value.

Of all the many exercises in a business, computing Customer Lifetime

Value can be one of the most eye-opening and rewarding. Hopefully,
the point has been well-made by now that knowing the lifetime value of
your customers can help you truly understand the value of your
marketing and retention expenditures.

The goal of this post was to provide a detailed look at a broad brush
approach to CLV to address how to think about Customer Lifetime
Value as much as how to calculate it.

What should you takeaway from this post? Hopefully, that you can
derive true value from a back of the napkin approach to CLV, but that
you should realize the limitations of using such a non-scientific
approach. Each business is different, but there might be a time where
you feel the need to get your geek on. If so, below are some resources
for further exploration of Customer Lifetime Value.

The Three Types of CRM Systems

a. Operational CRM

It concentrates on three areas of business processes: the

computerization, enhancement and improvement of services. These
areas are based on offering customer support mostly. There are major
automation applications, which support the CRM systems that aid in the
computerization of marketing, selling and services process.

These automation applications are:

Marketing automation: It concentrates on automating the marketing

processes. Marketing campaigns management consists of the use of the
actual information of a specific customer in determining, evaluating and
developing communications aiming at customers in multilevel,
multichannel or individual environment. The campaigns are usually
simple and use unique and straightforward communications. At
multichannel environmental level, the strategies used are a bit hard
and pose a challenge to many. The implementation and integration of a
communication strategy is tricky. The performance evaluation and
campaigns quality should be computerized and be clear to each
channel.

Sales force automation: CRM systems are used in acquiring new

customers and dealing with existing customers. The system identifies a
customer and maintains all the data. The data can be distributed to
various stages, which consist of lead generation for more prospects.

Service automation: This application deals with managing. Examples

of the operational CRM are the actual interactions with customers like
websites, data aggregation systems, direct sales, call centers and
blogs. It enables anyone around the organization to access customer
information and gives actual views of customer needs.

b. Analytical CRM

This is a CRM type that maintains the analysis and operations of an

organizational back-office. Here, the sales are not done directly to the
customers. This type is made in a mode to analyze critically the
information, the demographics and anything else relating to the
customers. The sole aim of analytical CRM towards the organization is
developing, supporting and enhancing the decision-making in the
organization. It establishes the powerful patterns and forecasts in the
clients information and data collected from different operational CRM
systems.

Features of analytical CRM

Deploying and implementing the outcome to improve the

effectiveness of CRM systems and processes, and enhance
relationships and customer interaction.

Analyzing, determining and developing comprehensive rules and

methods to level and optimize the customer relationship.

Getting the entire important customers information from

different channels and sources.

c. Strategic CRM

The role of this CRM type is to focus and improve the knowledge of the
customer and utilize it in enhancing and customizing the customers
interactions in sustaining a strong relationship with them. Developing
CRM strategies uses various steps:

Amplifying commitment: Strategic CRM is experienced in all business

departments of the organization like distribution, marketing, finance
and sales. It is very important to have the customer support and
feedback to help them in determining the strategies.

Building a valuable project team: After securing the organizational

commitment, the next thing is to develop the strategies and build an
established and valuable project team. The project team members are
always experts and professionals and they are involved in the decision-
making of the company.
Requirement analysis: The strategy concentrates and focuses on the
actual requirements of business. It involves questionnaires and surveys
with high-level sales, financial managers and marketing to correct all
the information and expectations of the customers in bettering the
company. This activity is very important in developing successful CRM
systems that help in business goal achievement.
Three Types of CRMOperational, Collaborative & Analytical

There are three types of CRM: operational, collaborative and analytical.

Operational CRM generally refers to products and services that

allow an organization to take care of their customers. It provides
support for various business processes, which can include sales,
marketing and service. Contact centers, data aggregation systems
and web sites are a few examples.

Collaborative CRM is communication with customers and covers

direct interaction with customers including feedback and issue
reporting. Interaction can take place through web pages, email,
Automated Voice Response. Collaborative CRM greatly improves
on services offered.

Analytical CRM addresses the analysis of customer data for a host

of different purposes. In general it is used to design and execute
targeted marketing campaigns that optimize marketing
effectiveness. Analytical CRM takes into account product and
service decision making, pricing and new product development.

The results of a CRM strategy are far reaching and can either be
implemented in basic software or in a more complex software
installation depending on the companys requirements. We at Straight
Marketing implement various CRM software packages that address a
clients needs whether it is for processes, sales or services. If you are
ready to grow your business, contact us today to speak with our
marketing experts. We are here to help you by implementing the most
powerful online marketing solutions. Feel free to contact us at 800-713-
9884 or e-mail us at info@straightmarketing.com with any questions or
inquiries and we will respond promptly to your inquiry.

3
 5 Key Challenges in CRM Implementation

Mobility & innovation are the two main key drivers to reach the
business goals for any enterprise. Today, Customer Relationship
Management or CRM plays a crucial role for managing numerous
interactions with existing and future customers.
CRM also helps to collaborate between sales, marketing, customer
service and technical support functions in the organzation. This article
explains why CRM is important for your organization, and what are the
key challenges faced by enterprises while implementing CRM.

Why is CRM needed for Businesses?

Customer satisfaction is the key to success in any business. In order for

a business to consistently maintain success, it needs to satisfy its
customers by providing high quality products or services at the right
price. Thats why businesses need to constantly interact with customers
in order to understand their true needs.
It needs to track and analyze those interactions in a systematic and
organized fashion in order to build lasting customer relationship which
translates to long-term success.

Key Challenges in CRM implementation

1. Defining Clear Objectives

The organization should have a clear set of objectives which it would like
to achieve through the CRM. These objectives need to be listed and
defined as measurable metrics. Without doing so, the company cant
assess the benefits or the ROI of the CRM system.

2. Appointing a Core CRM Team

The CRM initiative is not an IT project. A core CRM team should be

formed in addition to the participation from Top Management, Senior
Executives, Customer Service, IT and end-users. Only after the
requirements are clear should they be handed over to IT for
implementation.
3. Defining the Processes

It is important for the processes to be clearly defined and enforced in

order to set up the CRM project for success. One good practice is to
create a central repository, accessible to all, which stores all the process
definitions. This allows the document to be available for referencing by
anyone using the system.
Key processes that need to be defined from the start are Change
Management process, Feature Re-evaluation process,etc. Also, clear
security measures with access management need to be in place to make
sure that important data is not accessible by those who shouldnt be
accessing it.

4. Managing the Application

Once the CRM has been rolled-out, it is important to re-align the work
culture of the teams around it. The business operation should properly
map with the CRM application. This also means that end users should
perform day-to-day operations through the CRM application by default
and not optionally.

5. Finding the Right Partner

The rate of CRM success considerably goes up with the right solution
partner. Ideally select a partner who can do both, strategy &
implementation. It is important that your partner shares the risks of
your CRM implementation. Working with a vendor who understands
local work culture, technology limitations and listens to the employees,
are ideal.

How can CRM Solution help Businesses?

CRM solutions can help businesses increase their sales effectiveness,

drive customer satisfaction, streamline business processes, identify &
resolve bottlenecks, all of which directly contribute towards the bottom
line revenue as well as assurance of repeat business. CRM solutions are
not just a nice-to-have but a necessity in a world where customer
retention is of prime importance.
15 Practical Challenges in CRM Implementation

Challenges in CRM Implementation can be broadly categorized into:

1. People Challenges

2. Technology Challenges

3. Business Process Challenges

4. Other Challenges

People Related Challenges in CRM Implementation

#1 Lack of senior management sponsorship

CRM initiative solely driven by IT team without management buy-

in.

Business users unclear or unconvinced on benefits of CRM.

Management not willing to commit to enforce CRM adoption.

Underestimating Change Management demanded by CRM.

Mitigation Having an internal CRM champion from executive

management.

#2 Expecting too much, too soon Boiling the Ocean

Trying to accomplish all CRM objectives in the initial launch.

Adopting a Water-Fall methodology instead of Agile

methodology for CRM project implementation.
 Under estimating end-user transition by giving them full-featured,
complex CRM system from get-go.

Mitigation Adopting Think Big, Start Small, Move Fast

strategy for CRM.

#3 Lack of scope clarity & budget overruns

Not committing adequate time & budget to requirement discovery.

Underestimating integration effort.

Not anticipating quantity & quality of data to be migrated to the

new CRM.

Underestimating end-user resistance and training costs.

Underestimating infrastructure costs.Underestimating

customization & implementation costs

Mitigation Detailed requirement discovery workshops &

adopting Agile project methodology that allows early
identification of these issues.

#4 Underestimating Change Management

Active resistance due to perceived threat from CRM.

Passive resistance to adoption due to inertia of changing old

habits.

CRM interface slow or un-intuitive, making it cumbersome to use.

CRM viewed as something that benefits management only

Mitigation Making end-users aware of what benefits they get

out of CRM. Incentivizing (both positive & negative) to use CRM
system. Ensuring an intuitive, easy to use, fast CRM system.
Planning adequate training exercises.

#5 Changes in Key Stakeholders in Middle of Project

Internal CRM champion(s) leaving the organization or having

change of role or department.

Arrival of new IT Head or Business Head, who has a different vision

for CRM.

Changes in key personnel from CRM vendors side that roll-back

the progress made on vendors understanding of organizational
objectives

Mitigation Adequate documentation of CRM project objectives

and intermediate progress sign-offs. Enlisting more than one
internal CRM champion for redundancy.

#6 Lack of Expertise of the CRM vendor

Vendor does not have enough experience with the CRM product
being implemented.

Vendor does not have technology or process maturity of delivering

CRM projects of similar scale.

Vendor not fully aware of the challenges in CRM implementation

and is ill-prepared to anticipate and deal with them adequately.

Mitigation Adequate due diligence at vendor selection stage

to assess vendor maturity and expertise.

Technology Related Challenges in CRM Implementation

#7 Lack of CRM Product Fit

Product cannot support multiple deployment options, namely On

Cloud, On-Premise, Private Cloud, etc.

Product not flexible enough to allow for deeper customizations to

enable fit with organizations growing and changing needs.

Product not keeping pace with current CRM trends, such as

Global, Social, Mobile, etc.

Product not intuitive or user-friendly, thereby hindering user

adoption.

Mitigation Adequate due diligence at product selection stage

to ensure fit not only for current business needs, but also for
organizations growing and changing needs.

#8 Integration Related Issues

Existing legacy systems dont support modern, web-services

based integration that is required with CRM.

Lack of adequate support from other vendors of existing systems

that need to be integrated with CRM.

Data integrity issues and uncertainty over single source of truth.

Mitigation Adequate due diligence at requirements discovery

stage, identify what data needs to be pulled from where and
involve existing systems vendors in discussions early on.
Develop prototype where needed.

#9 Infrastructure Related Issues

CRM On-Premise

Inadequately sized hardware leading to poor CRM performance for

end users.

Underestimating the budget for setting up a true High-Availability,

secure CRM setup, leading to cost overruns.

CRM On-Cloud

Underestimating cost of scaling up on cloud.

Lack of complete control over your own data and accessibility at

all times.

Compliance/Regulatory Issues.

Mitigation Plan carefully upfront. Best, choose a CRM that

supports both models.

Process Related Challenges in CRM Implementation

#10 Data Migration Gotcha!

Data fragmented and silo-ed in various existing applications and

difficult to integrate and consolidate in the CRM.

Data integrity issues in the migrated data.

Incorrect assumptions about the quality of the data to be

migrated. Adequate time and budget not planned for the
inevitable data cleaning/scrubbing exercise.

Mitigation Know you Data! Having clarity about your data in

terms of how much, how good and where is mandatory.
#11 Impact on Existing Business Processes

Considering CRM as just a technology, instead of business

transformation tool.

Inflexibility to change existing way of doing things, giving up

entrenched (bad) business practices and adopting best practices
that CRM enables.

Implementation that is overly disruptive of existing business

practices.

Complexities in re-architecting customer facing processes through

CRM.

Mitigation Recognize the transformative power of CRM, be

flexible to adopt best practices. Enlist a sponsor from executive
management early on.

B part

Implementing a CRM system can seem like an overwhelming and

daunting project. There are so many technical components to consider.
Theres choosing the application; procuring and configuring the
necessary hardware; determining the features and functionality to
include; developing integrations to other systems; and finally going live
with this great new system. Too often, however, all the planning and
effort that go into the project does not bring about the expected results
and the system is not readily adopted by users.

So what can you do to help ensure better adoption of the system and
ultimately a successful project? There are many things to consider
beyond just the technical planning and implementation. Below are a
few best practices used by organizations who have successfully
implemented and adopted CRM within their organization.

1. Management Buy-in

CRM implementations can be a significant investment in both time and

money for an organization. To gain the most value from the investment,
it is imperative for your leadership team to be committed to the project,
not only with providing the funding, but also with being a driving force
in the leadership of the project. When employees see a committed
leadership team, they are more likely to understand the importance of
the project.

2. Involve Users Early

It is important to recognize that any new system brings about change

to an organization. Sometimes the change is welcomed and at other
times it is not. In either case, with change comes uncertainty for the
people affected by that change. Uncertainty can lead to fear of the
unknown and sometimes people reject the system before it is even fully
implemented. To help mitigate this risk for your project, it is beneficial
to include the voice of the user in your implementation process. This
might mean interviewing representative users from various groups and
incorporating their thoughts in the requirements. It may also mean
including some users in the design and planning or ensuring they are
represented by someone who understands the end-user processes.
Regardless, you should make sure to communicate with users from the
planning stages all the way through to implementation and post-
implementation follow-up to help ease the fears caused by the
unknown. Many times users who are involved can become champions
of the system and spread the excitement about the benefits the new
system will bring.

3. Implement in Phases

Whenever possible, it is best to implement CRM in phases. The initial

phase should contain enough functionality to improve processes and
start to generate excitement about the capabilities of the system.
Limiting the functionality in the initial phase provides users with a
manageable amount of learning to do, while still gaining benefit from
the system. After users have had the opportunity to digest the initial
phase, the next set of functionality should be implemented. It is often
not be necessary to have a significant lag between phases.

4. Business Process First, Technology Second

Although CRM is a technology, the driving force behind it should be the

business processes, not the technology. A CRM implementation will be
more successful if it fits the intended business processes rather than
forcing the business processes to fit the system. It is sometimes
tempting to adopt a build it and they will come ideology, but this can
lead to poor user adoption as the system does not adequately address
the business requirements needed. Taking the time to define the
business processes which will be addressed by the system and then
designing the system in a scalable manner to meet those requirements
will lead to a more successful implementation

5. Provide Training

Training is an important element of any new implementation. Without

the proper training, users may have difficulty learning the proper use of
the system. As a result, they may become frustrated and resistant to
using the CRM system. At this point, the data in the system may
become incomplete and untrustworthy, which can lead to further
frustration. Without allowing time for training, it can appear as a lack of
commitment to the system from the leadership team. Training should
ideally be role-based in order to allow users to easily understand what
they need to do in relation to their job function. Whenever possible,
training should be ongoing and provided in small sections to increase
the retention of the information learned.

6. Gather Feedback

Provide users with the ability to provide feedback and suggestions for
changes in the system. This allows for the continual improvement of the
system and helps ensure that the system stays relevant. A CRM system
implementation should not be thought of as done once it has been
implemented. It is only just the beginning! The most successful CRM
implementations are those that continue to evolve to meet the
changing needs of the business.

4)

Top 10 CRM Principles

1. CRM is more than just software

CRM may in theory, be a piece of software, but for businesses, it can be

a crucial tool for helping them to improve. Using CRM requires strategy
and knowing what it is that you want to gain from using it, why is why it
isnt just something you can install and hope it will do the hard work for
you.

2. Effective Analysis is Crucial

CRM software will provide your business with a whole host of data
about your sales and your customers. Knowing how to analyse these
figures is crucial as well as working out what you will do with them. The
data collected from CRM can help you both in the present and in the
future and help you identify weak/strong points in your products in
order to make changes or push what sells the most.

3. Customer Focus is Important

The clue is in the title Customer Relationship Management. Whilst

you are ultimately looking to improve your sales, you wont be able to
do so without understanding your customers.

by DNSUnlocker

Businesses can benefit greatly from interacting with their customers.

Use the data gathered from CRM to give something back to your
customers and in turn youll get something back from them. By valuing
and rewarding your customers youll experience better customer loyalty
which will continue to produce pleasing results for your sales.

4. CRM is a ContinuingProcess

Whilst yes, some businesses use CRM in the short term to promote
specific products and services, CRM should be used continuously in
order to see continued results. The needs and wants of customers will
continue to change and so it is important that your business continues
to change and grow as well in order to keep them loyal to your
business. Setting short term and long term goals can help you to
develop CRM strategies that will continue to produce results.

5. Use it Across Your Entire Business

Lets say for example, you owned a clothing line. By implementing CRM
right through from the design process (by taking not of what your
customers like, colours they prefer, which prices theyre most likely to
buy at and putting this thought into your designs), right through to
customer service (using CRM data to deal with queries quicker and
more efficiently), you will have a streamlined, customer focused
business which works at all levels to improve their experience and
encourage them to continue to use your business.

6. Use CRM to Establish What Your Customers Need & How You Can
Hive it to Them

Your customers will want you to be reliable, accessible, offer them

security, efficient, considerate, responsive and innovative. CRM data
mining can help you to improve on all of these points and most of all,
improve the two way communication between you both.

Compare prices and get the best deals on CRM systems for your
business.

COMPARE PRICES NOW

7. Involve all of Your Employers

Everyone from management right down to your administrative team
needs to be aware of your CRM activities and how it affects their work.
You could offer incentives based on data gathered from CRM in order to
motivate your staff, as well as identify key areas for training and
development. The better your staff know your customers, the better
they can all work towards building better relationships with them.

8. React to Your Findings

Its all very well collecting data about your customers and their views,
but if you dont react and respond to these finding you wont see any
improvement in your business. A good way to get a deeper insight into
your customers feelings could be to engage them through social
media, for example, and actually ask them about how they use and
what they would like to see from the brand. You can also push
promotions, offers and giveaways and so on as rewards for interacting
with you via your Facebook or Twitter page for example, as many online
retailers do.

9. Choose the Right Provider

Choosing the right CRM provider is crucial for ensuring your success
with this venture. Shopping around for the right provider as well as
speaking to friends, colleagues and observing your competitors
techniques can all help you in choosing the most suitable provider for
your company. Mae sure that you choose a provider who understands
your unique needs and gets your business. Expert Market UK can also
help you narrow down the choices.

10. Simplicity is Key

At the end of the day, customers want their shopping experiences to be

as simple as possible (take Amazon as an example). Customers want to
be able to see all of the information that they need as well as be able to
contact you easily when needed. You can identify how to do all of this
using CRM in order to make the customer experience even better than
they expect.
Although there are lot of companies which uses customer service as a
tool to rectify the customer complaints, they overlook the things which
are essential to make customers happy. In todays marketing world
where customer is the reason any business survives, it is really very
critical to satisfy customers needs.
Customers today want the very most and the best for the every cent
spent, and on the best conditions. Only the individuals and companies
that provide extremely exceptional products and services at reasonable
prices last. This article explains the practices which can be exercised to
please the customer. Also the article explains the difference of types of
customers

Introduction
Those were the days when Ford used to sell the cars in black colour
only quoting any colour you wanted providing it was black. Today, the
whole idea of selling a car in one colour seems absurd. There are
millions types of cars available in thousand different colours and still
customers are unsatisfied. What has changed is the fact that where as
in market, today the situation is reversed and now the customer is king.
That is what todays customer is. Customers are now able to tell you
what they like or dislike about your product, marketing system,
business and brand. This is where the substantial change has
happened. What has led this change in the customers behaviour?
What led customer to be a king?
Why a cloth selling company will take the automotive parts back from
the customer? Well that is why Nordstrom famous for. It is story when
a customer returned automotive part to Nordstrom stating that it was
bought from Nordstrom and Nordstrom accepted it back. According to
Nordstrom, the clerk accepted the tier back because that is what
customer wanted. The whole story explains the importance of customer
in todays market and the extent companies are luring them.
There is no disbelief that todays consumers are at a far better position
than that of past as consumers with more safety, security and choices
towards product as the products are made as per their convenience,
needs and desires. Lately the markets have been transformed from
sellers market" to buyers market" where the choice exercised by the
consumer will be influenced by the level of consumer awareness
achieved. When it comes to customer preferences, it is not a matter of
right, wrong or what might ultimately be acceptable. Its simply a
matter of what the customer wants to buy.
Meeting some of a customers demands may be expensive. But then,
consumers are the one who is paying for the product. Today the firms
do not leave any stone unturned to attract the consumer and gain a
significant market share. The companies have started differentiating
their own products with the consumers eyes. They promise of the value
to be delivered and believe in customer value proposition. But what
makes customer so important to business owners?
Why customer is important?
To any business, customer eccentricity is as important as product.
Today the markets are guided by the desire of customers. There are
companies like Southwest Airlines quotes that We like to think of
ourselves as a Customer Service company that happens to fly
airplanes. Customer eccentricity is extremely essential to a business,
because without customers you will no longer have a business. It has
been studied that customer are very prone to lose interest in the
product with every new product launch.
It is known that process of acquiring new customer needs more money
on advertising and marketing to make new people aware of your
business and get them in the door to make a purchase than that of
retaining the old customer. It helps to provide revenue and certainty for
the business. If organizations do not develop customer loyalty and
satisfaction, they could lose their customers. It is essential for the
companies to create a friendly atmosphere for customers; greetings,
smiles, and eye contact. What else should business owners consider to
make the king happy? Is just a customer service or effective customer
service required?
How to please the king?
Who wants to lose? Nobody thats why a win-win resolution is so
important. Studies have shown that keeping customer happy has
always given positive results to company. In any service industry, it is
very often when the customer gets cranky and comes back frowning.
Turning that cranky customer into your number one cheerleader is not a
big deal. Making little changes to service style can make big differences
to your customers. Here are some tips to go from okay customer
service to great customer service.
Ask, listen and communicate- Always provide customer what is
expected. Have proper communication which keeps customer calm.
Also it is very important to listen to customers need. A good listener is
always a good seller. By listening to customers you can best determine
exactly what they are looking for and help them determine the best
product for their needs.
Stick to promises made- It is always important to play the sales
game without misleading the customer about products, pricing, delivery
etc. Stick to promises you made to customer. Reliability is an important
part of any good relationship. Broken trust definitely hurts business in a
long way. This rule applies to all aspects of your business including
appointments, deadlines, etc. Also As a seller, it is equally important
that a customer buys into us before he or she buys a product.
Treat customers kindly- It is the human tendency to get pampered
which implies to customers too. Always give customer something more
than expected. They want to feel like valued customers whose time and
opinion matter.
Be Innovative- Customer is a hungry species and keep looking for new
things in the market. Bit of innovation definitely helps to attract new
customer. It also helps retaining the old customers as well which is
utterly critical to any business in the competitive market.
Create personal relations Studies have shown that a well planned
public relations campaign is often far more effective than advertising.
Public relations will customer helps seller to build goodwill among
customers and community. It alleviates the brand popularity and
creates good perceptions regarding your company and services. There
are many other ways such as appreciating the alliance, loyalty
programs or reward points which enhance the confidence of customers.
Be passionate about customer experience - It is very important for
a seller to identify the reason he is in business. It is none other than the
customer who demands us to be in the business. We as business
owners should be focus to provide a good customer service to our
customers.
Believe in your product - Selling is only a transfer of belief. Its
simply helping others believe the same way you believe about a
product or service. Also it is always easy to get other people in
something in which you believe too. Hence it is very important for a
seller to believe in his product before convincing buyers to buy that
same product.
Smile - Who else can understand the power of smile more than a sales
person. A man without a smiling face must not open a shop. Smile
speaks that you are positive about the interaction with the customer. It
helps you to gain the confidence of the customer and gives an ease of
access to customer.
Power of 5 Ws As said by Donald Porter - Customers dont expect
you to be perfect. They do expect you to fix things when they go wrong.
It is very important for sellers to understand the problem of the
customer. It is one of the most influential ways to calm a furious
customer is to show you really do comprehend their dilemma. To ensure
the clarity of the problems, you need to ask questions which explain
power of 5 Ws which are: Who? What? Where? When? Why?The Ws
help us to solve the problem efficiently and quickly.
Resolve disagreements - Do it with a LAUGH. Customer complaints
are the tests which teach us to learn hard and fast. Five As are
definitely a best approach to solve any dispute with customer without
any further pending grudges which may not be in favour of you. Use
Acknowledge, Apologize, Accept Responsibility, Adjust the solution and
assure that customer that problem will be solved.
Remember the golden rule- Put yourself in the position of the
customer, and treat them as you would like to be treated as a customer
by the business owners. Would you be like to suffer as a customer?
Definitely Not. But there are times when customer can have
unreasonable demands or tries to exploit the services given where
business owner should identify the right customer. How to identify the
right customer and when the customer can be wrong?
Is the customer really always right?
In my opinion, most of the customers are right but there is always going
to be a customer that just cannot be pleased. These customers are
from one those people, who are nit-pickers, whiners and belongs to the
know it all crowd. These customers can never be pleased even after
offering free services.
Take an example of US number one Southwest Airlines. Few years back,
Southwest Airlines employees asked an obese passenger to pay for two
seats. The passenger later sued the company. After couple of court
hearing, the southwest airlines won the case. This was a clear case of a
customer who was wrong. To any airlines, all the passengers are its
liability including the one who sat next to obese person. Business
owners are responsible to serve each of their customers equally.
There are several reasons why customers can become irrational or
difficult to deal with. As Jeff Bezos has said that If you make
customers unhappy in the real world, they might each tell six friends. If
you make customers unhappy on the Internet, they can each tell 6,000
friends. In the era of marketing where customers are sanctioned with
the power of digital and social media to overtly blow up their
dissatisfaction. And as a result of that, we hustle to carry out their
unethical demands. By this, we build a different cohort of customers
who actually adhere to us even when they are wrong and we are right.
Who is the Right customer?
Do we know who our right customer is? It is really tricky to differentiate
between the right customer and the wrong customer is not right.
Studies have suggested few parameters which help to understand the
difference of right and wrong customers. Below are the parameters
which can used to assess the customer:
Discount seekers if the customer only looks forward for discount
ignoring the kind of service offered, he is definitely from one of those
greedy customers which can never be loyal to company and will switch
to different products as soon as finds a cheaper one. Business owners
need to tackle this type of customers with not depending much upon
them.
Win-Win attitude It is very critical for the business sellers that
customers respect their service and brand. A wrong customer always
looks forward to have an advantage over the service provided by
owners. A wrong customer will always make bad reviews about
company where as a right customer appreciates the service offered to
him/her and believes in win-win situation.
Other than above, the right customer does not take pleasure in
misusing the service provided to them and does not enjoy value he or
she did not pay for.
Conclusion
An intelligent business owner identifies the right customer. It takes
responsibility to make them feel like a king does. It acknowledges the
right customers in a public way which retunes the expectations of all
customers. Treating the right customers as kings let wrong customers
realize the importance of being reasonable to their demands.
This article has been authored by Jitendra Shukla from S.P Jain
College of Management Dubai/Singapore.

5)
6)

Electronic Customer Relationship Management (E-CRM)

Definition - What does Electronic Customer Relationship Management

(E-CRM) mean?

Electronic customer relationship management (E-CRM) is the

application of Internet-based technologies such as emails, websites,
chat rooms, forums and other channels to achieve CRM objectives. It is
a well-structured and coordinated process of CRM that automates the
processes in marketing, sales and customer service.

An effective E-CRM increases the efficiency of the processes as well as

improves the interactions with customers and enables businesses to
customize products and services that meet the customers individual
needs.

What is e CRM and how it fits into Business?

CRM (Customer Relationship Management) refers to all marketing

activities aimed at establishing, developing and maintaining successful
customer relationships.

What is e CRM today?

e CRM is the process of maximising sales to the existing

customer, encouraging continuous relationships through the
use of digital communications technologies such as operational
databases, personalized web messages, Customer Service,
Email and Social Media Marketing.
Note:
 Marketing was initially focused only on developing, selling and
delivering products. Since 1996 it was argued that marketing
should be about developing and maintaining a longer term
customer relationship.
How does CRM translate into Social CRM?

It morphs into the ability of managing online conversations between

customers, engaging existing customers, potential customers and other
stakeholders in order to create lasting relationships. CRM is now crucial
for eBusiness.
Scope of Social CRM

Monitoring, analysing and responding to conversations through social

listening tools
Find the best ways to get involved, influence sales and generate leads
by understanding social platforms
Develop customer relationship tools/self help/service and support
Using CRM based conversations to enhance online offers
Supporting collaboration within the organisation through eBusiness
processes
Enhance customer experience and add value to the business

Benefits of e CRM

Reducing costs in customer targeting (customising emails on large

scale therefore reducing costs for direct mail)
Increasing the meaning of information
Better and relevant understanding of customers and relationship
dynamics
Encouraging customer relationship/customer development and
retention through loyalty programmes
 1. Entrepreneurship
2. Creating a Better World
3. Making Life Awesome
4. The Startup Playbook
5. Resources

How to Acquire Customers

inShare28

An Example GeckoBoard Metrics Dashboard

By Ryan Allis

In todays world, marketing is all about the productnot the

advertisement. Once upon a time, you could create a mediocre product,
and then with enough ad dollars and Madison Avenue script men, you
could create artificial demandgenerating perceived value for
something that really didnt have a lot of intrinsic value.

Today, with word of mouth (good and bad) spreading easily on social
media and with the demand for quality designed products so high, you
simply cant succeed with a poor product.
So if youre marketing a bad product, stop. Stop everything. Take those
funds that youre spending on advertising and put them instead into
product development. Invest in building a great product before you
even think about marketing.

Then once you have a great product, start storytelling. Use your
marketing budget and talent to reframe the story thats being told
about your product by yourselves and others. At the end of the day,
marketing and advertising is only partially company-directed. The real
storytelling happens at the level of the customer, the level of the user.
How your customers tell their friends about what theyre using is much
more important than what you tell the world about your product.

In todays world, word-of-mouth marketing is everything. A company

and a product (particularly a consumer product) can truly never
succeed unless the stories that are being told about it are coming from
real people with real passion. You just cant create a great product
without passion, and you cant create a scalable sales volume for a
product unless you have a great story infused with user passion.

Storytelling is by far the most underrated skill in business. -Gary

Vaynerchuck

Marketing today is just good storytelling, ideally across multiple media

in a trackable and financially scalable manner. The point of marketing is
to ensure that the right people have heard the right things about your
product and your organization. The tidal wave of virality behind a good
product can only come from a place of authentic quality.

Theres a lot of information out there about branding, but at the end of
the day, a brand is just the aggregated sum total of each human
beings experience with your company and your products, including all
your stakeholdersyour customers, your employees, your
shareholders, and your investors.
The Keys to Scaling Customer Acquisition

The six keys to scaling customer acquisition and marketing are:

1. Amazing word of mouth from a great product (requires both a

good product and the right viral hooks and social invite systems).

2. Understanding the financial lifetime value of a customer.

3. A tracking system that can help you calculate the cost per lead
per channel.

4. A tracking system that can tell you your conversion rate per
channel.

5. Constant testing of new channels, new creative (for example, new

radio ads, new banner ads, new designs), and new funnel
processes that help you convert a lead into a customer, and a
customer into a repeat lifetime evangelizer.

6. Great storytelling combined with beautiful design.

How to Scientifically Scale Customer Acquisition

To acquire users and customers, you need to have a system in place for
tracking results and you need to constantly be testing. You need to
spend between 10-15% of your monthly advertising budget on testing
new advertising channels. And in order to be able to understand how
much to allocate per advertising channel or per marketing channel, you
have to calculate a really important number. You have to calculate
your customer acquisition cost.

If you dont know your customer acquisition cost, stop advertising. Stop
spending money on advertising until you calculate that number.

In June 2005, I was having lunch with a friend of mine named Jud
Bowman. Jud was the co-founder of Motricity, a company that raised
$350M in venture capital before going public in 2010. Jud was asking
me why I hadnt raised venture capital for iContact. I told him I was
considering it. He asked me two critical questions to determine whether
we were ready to raise outside capital:

1. What is the lifetime value of an average customer?

2. How much do you spend to acquire an average customer?

Since iContact operated on a subscription model, Jud told me that I

could estimate the lifetime value of an average customer by taking the
monthly average revenue per user (ARPU) and multiplying it by the
average number of months a customer stayed. I knew the average
monthly revenue per customer was $45 at the time. I also knew our
monthly average churn rate was about 3%, meaning an average
customer stayed with us 1/0.03 or about 33 months. So to get an
estimate of the lifetime value we simply multiplied $45 and 33 to get
about $1500.

ARPU x Months of Life Before Cancelling = Lifetime Value

Then to calculate how much we spent to acquire an average customer,

Jud told me to simply take what we spent per month on advertising and
divide that figure by the number of new customers we acquired in a
month. At the time, we were spending about $100,000 per month on
advertising to acquire 330 customers per month. So our Customer
Acquisition Cost was about $300.

Advertising Spend / Customers Acquired from Advertising = Customer

Acquisition Cost

There it was. We knew we spent $300 up front to acquire a revenue

stream of $1500 over about three years. This was very profitable
transaction to make over and over, but we could only do it so much
before wed run out of money in our bank account. We knew we could
spend a lot more in advertising at the same customer acquisition cost if
we had the funds.
Based on this relatively simple math we went out and raised our first
$500,000 in investment capital. It took us nine months, longer than we
anticipated, but we got it done. We brought on Tim Oakley as our Chief
Financial Officer in February 2006 and by April we had a term sheet
from IDEA Fund Partners of Durham, NC, to invest $500,000 in iContact.

Ever since, weve kept an extremely close eye on our unit economics.
Do you know the customer unit economics of your business?

Calculating Customer Acquisition Cost

Customer acquisition cost means how much it costs you to get a new
customer. Its really not that hard to calculate customer acquisition
cost. You simply take your total amount spent on advertising during a
period (lets say, a month) and then you take your total number of new
customers acquired during that month. If youre not tracking how many
new customers youre getting per month, then your company has other
problems.

Make sure you set up a system that tracks how many new customers
and how many new users you add per month (per day, even) and make
sure your accounting system can calculate how much you spend to
acquire those customers on that monthly basis.

Not only do you need to know your overall customer acquisition cost,
you need to know your customer acquisition cost by marketing channel.
It often costs different amounts of money to acquire customers through
radio versus TV, for example, or through direct mail versus online
advertising.

As a scientific marketer whos combining great storytelling with

financial acumen and financial discipline, you need to have a great
story and you need to be able to understand which channels to invest
more money in.
Of course, mathematically, you should invest more money in the
channels that are getting you the best results. For most companies,
results means new paying customers, or new leads that you can turn
into paying customers through a sales team.

Once you have a system in place, whether its through the web or
through a retail store, that can enable you to scientifically track the
additional incremental dollars put into a channel and then the
additional results that come out of that channel, you can use basic,
simple optimization formulas to determine how much to spend on each
channel.

This really only works if you have a large enough budget to be able to
calculate statistically significant data. If youre spending, say, $500 on
advertising and getting one or two customers from that spend, then
you cant really be sure if thats happenstance. You need to have
enough budgetprobably somewhere in the neighborhood of 20-30x
what it costs to acquire one new customerin order to start getting
data thats good enough to be able to base decisions on. So if you think
it costs you approximately $100 to acquire a new customer, you need
to be spending at least $2,000-$3,000 to test that advertising channel
and get 20 or 30 customers to be able to know your data is good.

Calculating Customer Lifetime Value

The next really important measure to determine is customer lifetime

value. Customer lifetime value can be used in conjunction with
customer acquisition cost to optimize your advertising and marketing
spend. Customer lifetime value means the amount of revenue that you
receive over the life of that customer. If a customer is buying a
subscription product or generating recurring revenue, you simply take
the amount of money thats paid per month (or other period) and
multiply it by the average number of months (or other periods) that
customers are around before they cancel their account or stop their
subscription.

If you are selling a one-time purchase product, then take a period of

timefour or five years, for exampleand look back at your data on
which customers are purchasing what (which you should definitely be
tracking in your purchase system or CRM system) and calculate how
much an average customer spends per visit to your store or per visit to
your website, and how frequently they purchase.

Lets take two examples. In the case of recurring revenue, if a customer

is paying $50 a month and stays around for 48 months, then the
average lifetime revenue per customer is going to be $2400. As a very
quick rule of thumband this varies greatly depending on the company
I have found that you can generally afford, depending on your cost of
production, to spend a maximum of 1/3 of the customer lifetime value
up front to acquire a new customer. Ideally, of course, you want to keep
your customer acquisition cost as low as possible while still maximizing
the number of new customers you get. So if your customer lifetime
value is $2400, you might be able to spend up to $800 in advertising to
get that customer and still break even or even be profitable.

Heres a case of a non-recurring or one-time customer. Lets say the

average purchase price is $50 and within a period of three years, that
average customer comes back six times. That means they will spend
$300 with you, so you might be able to spend up to $100 (again,
depending on your gross margin, net profit margin, and cost of goods
sold) to acquire that new customer.

Once you have the data on customer acquisition cost by channel and
customer lifetime value, (which you should also ideally calculate by
channel, by determining which customers come from which channels,
marking them as coming from that advertising channel, and then over
time, tracking their unit economics or lifetime value), you can optimize
your marketing and scale your ad budget scientifically. Once you know
your conversion rate, your acquisition rate, and your customer lifetime
value, you can scale your marketing.

As an example, in my experience at iContact, we found that radio was

much more expensive than other marketing channels. That told us that
we should reduce our spend on radio and increase our spend on the
channels that were lower cost.

Online Marketing Channels

Here are some examples of online marketing channels:

Search engine optimization, for sites like Google, Yahoo, and Bing.
Basically, this is the way in which you can build content on your
website and get other websites to link to you in order to show up
in the organic search listings.

Cost-per-click (or pay-per-click) ads, such as Google AdWords and

Bing ad center where you pay per click for visitors to come to
your website.

Build up your presence on Facebook, Twitter, and YouTube.

Purchase ads on those same services.

Purchase banner ads.

Create a network of affiliates who are incented to sell your product

for a commission on each sale through tools like Commission
Junction and Linkshare.

Get reviewed on review sites like Yelp!, CitySearch, and Google

Local.

Do daily deals with services like Groupon and LivingSocial

(although oftentimes that will reduce your profits.)
 Do email follow-up with tools like Constant Contact, iContact, and
MailChimp.

Offline Marketing

Its a lot easier to track online marketing results than it is to track

offline marketing results. The general way that you will track offline
marketing results is by spending enough of a budget in a particular
region (a particular demographic area) that you can determine the
results prior to spending any money and the results after spending the
money.

For example, lets say you focus on the Chicago area. Before doing any
marketing, perhaps you were adding 100 customers a month from the
Chicago region. You spend $100,000 on marketing in the region, and
now youre acquiring 200 customers a month. So that $100,000 spend
has enabled you to acquire about 100 new customers. Depending on
the frequency of your spending, you might say thats about $1,000 per
new customer, which would be your customer acquisition cost from that
channel of advertising. Then you can figure out what it would cost and
what the approximate results would be if you scaled that campaign
nationally or internationally.

Some of the offline channels are obvious and have been around for
decades, like television, print, radio, Yellow Pages, direct mail, trade
shows, sponsoring events, putting up billboards, and using campus reps
for word of mouth. The key is to test all of the channels and track the
actual results from each one.

Increasing Customer Growth & Revenue

To summarize the key points of this section: in order to grow your

advertising, tell a better story, and scientifically scale your marketing,
here are some important steps:
 1. Calculate your cost per lead (CPL) and your conversion rate by
channel. When you combine your cost per lead and conversion
rate, youll know your customer acquisition cost by channel.

2. Determine what you can pay per new customer.

3. Test new advertising channels using scientific methods and

combine that with great storytelling.

4. Create a premium version of your product so you can upsell.

5. Test doubling the price and see what happensreally test the
price elasticity of your product.

6. Get more affiliates and distributors.

7. Open up more sales offices.

8. Add more retail locations.

9. Create additional products.

10. Hire more salespeople, or just hire someone to call your

existing customers and offer to sell them other products that help
serve their needs.

11. Raise capital and expand your advertising.

You can always raise capital once you know the unit economics of your
marketing to expand your advertising scientifically.

Marketing is generating an interested lead. Its turning someone from

an unknown quantity into a trackable prospect. Sales is turning that
trackable prospect (the lead) into a paying customer. Account
management (or customer service, depending on your business) is
about turning a customer into a repeat customersomeone who will
come back time and time again and be a lifetime evangelizer.
Techopedia explains Electronic Customer Relationship Management (E-
CRM)

Electronic customer relationship management provides an avenue for

interactions between a business, its customers and its employees
through Web-based technologies. The process combines software,
hardware, processes and managements commitments geared toward
supporting enterprise-wide CRM business strategies.

Electronic customer relationship management is motivated by easy

Internet access through various platforms and devices such as laptops,
mobile devices, desktop PCs and TV sets. It is not software, however,
but rather the utilization of Web-based technologies to interact,
understand and ensure customer satisfaction.

An effective E-CRM system tracks a customers history through multiple

channels in real time, creates and maintains an analytical database,
and optimizes a customers relation in the three aspects of attraction,
expansion and maintenance.

A typical E-CRM strategy involves collecting customer information,

transaction history and product information, click stream and contents
information. It then analyzes the customer characteristics to give a
transactional analysis consisting of the customer's profile and
transactional history, and an activity analysis consisting of exploratory
activities showing the customer's navigation, shopping cart, shopping
pattern and more.

The benefits of E-CRM include the following:

Improved customer relations, service and support

Matching the customers' behavior with suitable offers

Increased customer satisfaction and loyalty

 Greater efficiency and cost reduction

Increased business revenue

Businesses that strategize and implement an E-CRM solution are able to

align their processes around technology to effectively deliver seamless,
high-quality customer experience across all channels. Customers have
the power to help themselves through online personalized services that
are made available on demand. The Internet provides a simple and
ideal medium where customers can get information from websites, buy
products and find answers using FAQ sections, forums or chat rooms.