CRM Training - Customer Relationship Management Consultant

CRM Training

• What is CRM?
  
• Key issues
  
• Implementing a CRM programme

• CRM model
  
• Interface analysis

• CRM has often failed
  
• Conclusion
  

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Is CRM really a panacea?

Not a day goes by without Customer Relationship Management CRM being mentioned in the media, or in annual reports or press releases. It seems that it is the answer to all issues facing organisations. What is it and why is it being heralded as the universal specific of customer issues? In essence it is nothing more than a revisiting of the old adage - 'know thy customer!'

Previously customer relationships were simpler and it was easy for a banker or retailer to know each customer, their needs and wants and recent past transactions. With the increase in complexity of relationships; channels; and products, coupled with the increasing propensity for customers to have multi-relationships with different parts of an organisation, (a customer may have a retail account with one part, an investment portfolio with another, a mortgage with a third part and insurance with yet another) that knowledge has become harder to maintain.

CRM seeks to re-create the position where you know your customer and understand what makes them tick.  It uses the recent developments in software that allow mapping of complex transactions and relationships to give a holistic picture of a customer and, in theory, gives the client the same level of service through a range of possible channels.

In a sense it focuses on customer share rather than market share, using the Pareto rule that 20% of your customers will deliver 80% of the value, and is about understanding just who that 20% is. This does not preclude increases in market share but does focus on value from any customer base. This then allows you to focus on the value generating proportion and maximise your 'share of their wallet'. Any CRM initiative will also support the other current management objective  - that of maximising shareholder value, as it is only possible to maximise shareholder value if you maximise return from customers and therefore offer your customers the products and services they demand.

What is CRM?

It is based around a few premises on customers:

• new customers are expensive to capture (estimates put the cost at as much as ten times the cost of a retained customer) and take time to deliver value
• lost customers tell many others about their experiences and rarely come back
• retained customers are better value and in time move from being clients to becoming advocates working on your behalf
• your major efforts should be spent on excellent customers or groups of customers - i.e. those that are likely to yield good returns

Much research has been carried out into customer profitability and the conclusions are consistent (see chart above). The longer a customer is with you the better the profitability and the chart clearly shows that after the second year you start to make money from cross-sales, repeat orders, referrals etc. Clearly the higher the turnover (and therefore the shorter the time they stay with you) the less likely you are to make profits. In life insurance this is critical as the embedded value of a customer takes even longer to become established and is why actuaries spend much time trying to improve the lapse rate (persistency). CRM therefore is about managing your customer base to ensure that they stay with you and therefore yield a better profit. It is also about getting rid of those customers that take up a disproportionate amount of time for the profit that they yield.

CRM Key issues

CRM must be seen as an organisational wide initiative as it will only succeed if the way in which customers are perceived and managed is changed. This cannot just be in one or two points - but must be across the whole organisation.

It must improve the customers' life as well as yours - how can you help them to improve their day? - what do they get out of it that helps them to improve their business? The greater overlap between your needs, your customers' needs and in turn, the needs of their customers that there are to the services that you offer, then the more likely you are to succeed.

Key steps in initiating and implementing

A CRM programme is not (just) about IT- although most writing on the subject often seems to take this viewpoint. It is about a fundamental change in the way that you manage your customers but, of course, using enhanced IT support to enable that change to take place; and to facilitate the right information available to implement it.

Some key points:

• Be clear as to your objectives in commencing such a programme - understand why you are doing this - who it will affect and the benefits that will accrue. Wherever possible the benefits should be quantified and documented
• Focus on the customer and the market- not the system - the system is merely an enabler and should only be considered after the strategic and business planning has been carried out.
• It must be business-lead not IT-driven - business must take ownership and lead the project to make sure that it does what is required rather than buying a state-of-the-art programme that misses the target.
• Plan for the changes to behaviour and provide training for staff. Change management begins right at the beginning of such a programme and involves planning and thinking through the implications, involving the users in the planning and ensuring that the people side is not overlooked in any implementation.
• Introduce a new culture and change incentives in order to motivate staff to adopt it. Too often new changes are introduced without thinking about the behaviours that exist within the organisation or are driven to occur due to the remuneration system. If you are demanding different behaviours from people then remuneration systems must reflect this change. If it does not then behaviours will gravitate back to those that meet the organisational needs.
• Do not underestimate the amount of work involved! A proper programme must be set up with the right levels of resource, budget and sponsorship.

CRM - A simple model

The CRM model has four major components:

• The universe of customers (current, suspects and prospects) - those customers with whom you deal and those with whom you would like to deal as you believe that they could also contribute to your profit. It is also about understanding the key levers that encourage them to use you and also the key drivers of behaviour. Too often banks especially have mistaken inertia for loyalty and based plans on this fact rather then a true understanding of needs and wants. As soon as your competitors find the right levers then inertia evaporates and with it your client base. It is of course the excellent customers that leave as competitors 'cherry-pick' them.
• The number and frequency of interfaces that a customer has - with which channels does the customer come into contact on a regular basis, which infrequently and which are not used at all. What business is carried out through them, are you charging correctly for them and do they offer a seamless level of service to him.
• The internal information feeds - what data are you capturing about your customer - what are you doing with it and how are you using it to increase your share of wallet.
• The external information feeds - what is going on in the market place - what are your competitors doing, is regulation changing what you do, what is the press and other media saying. This leads you into formulating responses to other initiatives to counter possible customer issues.
• Each of these must be understood and form key inputs to the CRM.

The model above depicts the major ingredients that CRM requires. As it clearly shows it is mainly about the current customer base. It is also however about - prospects and suspects.

It is then about understanding the interfaces that each customer has and collecting the information necessary to enable the right level of service and tailored products to be offered.

Interface analysis

Interface analysis, however, is not just about the channels that customers use, (or that are made available to them) it is also about understanding the types of interface that staff may have. The diagram explores these types of interactions and categorises them into four:

• Inter-facers: they have frequent or extensive periods of contact with customers and are heavily involved in delivery of services, e.g. banking relationship managers, payments clerks or cashiers.
• Inter-jacents:  staff such as receptionists or telephone operators who have constant involvement but little delivery. They are often, however, the first point of contact.
• Inter-fusers: often involved in development of services but they have little involvement in delivery. Some examples of these include: strategic managers, marketing, research. An organisation must enable them to develop customer awareness by giving them the opportunity to understand customer interactions.
• Inter-players:  support staff who have little contact with customers and only indirect involvement in service delivery.

Measures need to be developed taking into account each type of role to ensure their activities add value and they are motivated and rewarded accordingly. The CRM model takes information from both internal and external feeds in order to build up that picture of customers that relationship managers require. Also after each customer interaction information is fed back into the model and synthesised and then analysed to allow the same excellent levels of service to be maintained by the next inter-facer.

Why has CRM too often failed

Many CRM initiatives, however, fail to deliver the expected benefits. This is largely due to the same set of issues:

• too often it has been an IT initiative - i.e. the IT department has driven the programme or often as a system is seen as key to success the programme is handed over to the IT department without sufficient input from the business thereafter. Thinking that 'pure software' is the solution; architecture and integration were forgotten
• the wrong or inappropriate system was chosen because the IT department preferred it - or it was the easier option
• business support was lacking - poor buy-in from the business was obtained or no buy-in from the business was sought. This resulted in little ownership within the business and therefore failed implementation or poor usage
• the planning had insufficient detail or depth - introducing CRM into an organisation is a major initiative and if it is not planned adequately then it will fail. Usually the scale and nature of the operational change (as opposed to the systems change) was underestimated.  It is easy to install a system. It is much harder to change people's work practices.
• it was poorly implemented - which usually means that the training of staff was inadequate and neither were the right changes put in place to introduce a new culture
• The Executive had little customer/CRM understanding or involvement.  Too often it was seen as a tactical issue and therefore insufficiently senior sponsorship is sought
• poor quality customer data and information.  CRM being primarily about information it is vital that this aspect is considered before the initiative commences.

Typically organisations have approached the idea as something for the IT department to buy and then the CRM benefits will flow 'as if by magic'. Only when they are presented with a system that does not do what they wanted or expected; and staff do not use it do they start to understand the implications.

Conclusion

There is little doubt that the concept of CRM is a vital element in success, but to ensure that success it must be a business-lead issue, not IT-driven and must permeate the strategic and marketing thinking of an organisation.

Key steps for success:

• Follow a plan that clearly relates the CRM to strategy and the marketing functional plan;
• buy-in is essential;
• it needs to be business lead
• complete business planning before systems are considered;
• input is required from business, IT and customers; and
• you must ensure that the programme is managed properly (see diagram).

Before starting a CRM initiative it must be clear what the benefits will be, how they will be realised and what the implications are for an organisation. If this is not the case CRM will end up merely as another revenue hit with little discernible return.

~ Neil Jones ~

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