A 12-stage CRM strategy

In the experience of many organizations, CRM is a powerful growth strategy capable of producing significant benefits and transforming both organizations and industries. However, for every company that has achieved dramatic success, there are many others that are still struggling to realize the full potential of their customer-driven growth strategies. For these latter organizations, the path of implementation has been filled with obstacles and the pace of implementation has been far slower and more frustrating than anticipated.

The lessons learned by others and the methodologies and technologies available can be used by any organization to make the change from a product or service orientation to a customer-focused orientation that provides strong returns on the CRM investment in a matter of months rather than years. The 12-stage CRM strategy outlined in this section is a proven methodology for resolving many issues in a logical, efficient manner. Although no two companies can follow precisely the same implementation path, the stages defined here need to be a part of the process, and most of them can be carried out simultaneously. Some organizations will already have moved through some of these stages; others will need to start at the beginning. The following paragraphs describe in detail the activities involved in each stage and the significance of each of the 12 stages.

12-Stage CRM Strategy

1. Develop a clear set of business objectives.
2. Formulate a detailed Plan of Action.
3. Provide strong leadership.
4. Institute changes in corporate culture.
5. Obtain support of a senior management member.
6. Build in stages, starting with the most crucial area.
7. Create an integrated business design.
8. Concentrate on activities that create economic value.
9. Develop a customer-driven product and service development process.
10. Encourage the development of organizational capabilities in team members.
11. Generate early "wins" to create a self-funding process.
12. Include customers in a two-way flow of communication.

Develop a clear set of business objectives

Defining clear business objectives is an obvious first step in any project, major or minor. However, because of the evolutionary nature of a CRM strategy and the involvement of so many areas of an organization, it is extremely important to establish business objectives that will create a competitive advantage and guide the overall implementation process. These objectives should relate to the fundamental concept behind a CRM solution.

The business case prepared to convince senior management of the benefits of CRM should be firmly and logically based on overall corporate objectives—perhaps the corporate mission statement, if one exists. It should include information about direct competitors and how the system supports corporate strategies, plus the expected qualitative and quantitative benefits. As mentioned earlier, improving customer satisfaction and creating a base of more loyal customers will have both qualitative and quantitative benefits—more sales per customer, lower cost of sales, incremental sales via referrals, and ultimately more profits. Some of these benefits may be intangible, but collectively, they are powerful reasons to support CRM.

Formulate a detailed plan of action

Four to eight weeks will be required to develop a comprehensive plan defining the type of customer-focused initiatives that will establish the new way of doing business, the organizational operational changes, and enabling technologies that will be the driving forces behind implementation.

Technology planning and implementation should be closely integrated with the business planning phases to create a self-correcting process. With an integrated process, the planned business objectives and the organizational and operational changes define the requirements for the enabling technologies. The process of selecting the enabling technologies may identify feasibility issues that require adjustment to the original business plans.

To structure the planning process, it is very useful to develop a framework that describes the role and interrelationship of each of the operational areas required. A staged approach, in which operating capabilities are developed only to the point needed to realize near-term objectives, is far more viable than one designed to meet every conceivable need for the next 20 years. Five guidelines for a staged project are

• Build for the near term
• Make it scalable
• Use it
• Determine the changes required to increase productivity
• Build on this knowledge
  
  

Provide strong leadership

For any major project, sound leadership is a prerequisite; therefore, the people selected as team or project leaders need to have leadership attributes that will keep the project and the project staff on track. A balance between business and technology backgrounds is preferable for leadership candidates—knowledge in both areas will assist at all stages of the process.

Institute changes in corporate culture

At the heart of CRM strategies is changing fundamentally the decision-making process within the company. Rigorous data analysis is replacing business instinct as a basis for both day-to-day decision making and strategic planning. Other changes in the corporate culture may also be required.

Obtain support of a senior management member

The success of every CRM project will depend on several factors and the effective integration of all stages; however, the support the project receives internally is of particular value. The support of a senior management member—for example, the vice president of marketing or sales, vice president of finance, or other member of the senior management team—is crucial to the success of the CRM strategy. The importance of this stage of the process cannot be overemphasized. The designated senior management person must be an integral part of the CRM team and committed to attending and actively participating in all project meetings and workshops.

Build in stages, starting with the most crucial areas

The first stage of development should focus on the operations and technology needed to implement a top-priority set of CRM business objectives, as identified in Stage 1. Typically, the first stage of development can become operational in two to four months, and at a small fraction of the costs that have traditionally been incurred for new systems. Many companies use the first stage to establish a "proof of concept," to demonstrate to management that CRM really works, and then follow up with subsequent stages to scale up the operations and technology as well as to expand the scope of the overall program.

Create an integrated business design

Many companies have realized significant returns from CRM strategies simply by building systems and launching programs. Yet, to realize the full potential, CRM strategies must become a way of doing business managed through an integrated business design involving the entire organization, all elements pulling in the same direction.

Develop a customer-driven product and service development process

Product-driven companies have a tradition of building products based on instincts and engineering requirements rather than on customer requirements. Even when these companies agree that an "outside-in," customer-driven process could remove much of the risk of product development, they may not make the transition easily. A significant step forward in becoming customer driven is establishing a process for monitoring customer purchase rates and then using the value proposition to quickly identify the changes in customer behavior that signal a need for revitalization and new development. It is not necessary to dismantle or even radically change the product development component of an organization. The strengths of that component need to be preserved while integrating a stream of customer input. The objective is to establish a dynamic product and service development process that can adapt as quickly as the marketplace can change.

Concentrate on activities that create economic value

Often, the transition to CRM strategies requires new skills and organizational processes. An ideal way to learn is to learn through action, that is, by applying new practices and processes guided by experienced leaders. This "rapid deployment" methodology enables companies to immediately launch a range of sophisticated customer programs by relying on the resourcefulness of their own staff and, to the extent needed, guidance from experienced consultants. To optimize results, the work should be carried out by cross-functional teams that are unified under a shared set of objectives. In addition, the teams should be focused on using innovative methodologies and, most importantly, should be committed to producingtangible, measurable results.

A "test and learn" process is becoming a basic requirement for CRM success. This process is much more than a measurement system. It is a way of doing business. Its foundation should be a rigorous test- and control-based measurement system that is integrated with customer initiatives and other areas of investment to measure business outcomes in a systematic way. A key metric should be impact on customer value. In addition, the process should include regular review sessions that bring together senior management, analysts, and key operating staff to plan refinements and steer the business based on both internal and external (customer) feedback.

Encourage the development of organizational abilities in team members

It is no longer necessary for companies to spend millions of dollars and years of effort before producing measurable returns from CRM. Compelling returns can be generated within months of the launch, which in turn helps to build valuable momentum. Companies in many industries have consistently realized dramatic gains that provide a proof of concept in the early stages of CRM development. These gains also become the basis for developing economic projections, and in some cases, they provide a self-funding, self-sustaining mechanism for the CRM strategy. The examples in the sidebar illustrate the magnitude of gains realized from the first CRM programs launched by companies in various business sectors under their new CRM strategies.

CRM Gains for Different Business Sectors

• Automobile manufacturer: 60% increase in the repurchase rate based on improved targeting and communication
• B2B communications company: 50% gain in cross selling effectiveness among small business customers
• Pharmaceutical manufacturer: Sharply reduced product introduction and marketing costs based on channel optimization
• Software manufacturer: 50% reduction in marketing costs associated with upgrade sales
• Credit card issuer: 15% reduction in attrition of high-value customers based on proactive intervention
• Communications company: 15 to 1 return on investment in improved customer acquisition
• Property and casualty insurer: 400% increase in campaign response rate over forecasts

Generate early wins to create a self-funding process

For most companies, adopting a formal CRM strategy results in a fundamental shift in goals. Priorities are established based on their potential to drive profitable growth, and the primary means for driving the growth is to grow customer value. Successful organizations in this era of the customer are placing top priority on measuring and tracking customer value in clear economic terms.

Customer valuation has become a core capability that companies need to develop. Customer value can be measured on an individual customer level. The results typically prove the rule that a large majority of the value is coming from a small proportion of the customer base—often referred to as the 80/20 rule. They may also reveal that the company has been allocating for too many resources to the least valuable customer segment. With this vital information in hand, a wide range of strategic and operating decisions can be made based on the projected impact on customer value.

Include customers in a two-way flow of communication

Customer information has become a major strategic asset for businesses, creating requirements for information management and control that are just as important as those for managing an organization's finances. An advanced information control capability requires the significant involvement of the call/contact center and should integrate two major components of CRM:

• Managing customer contacts—an active control process for information exchange with customers
• Managing customer knowledge—a control process for the retention of information and accessibility

Radical changes in the marketplace, as emphasized throughout this book, mean that it is no longer sufficient to conduct periodic surveys to monitor changes in the marketplace. The marketplace changes daily and customer expectations can change significantly and quickly, often because of aggressive competition. The continuous and systematic capture, retention, and analysis of customer information, from virtually every point of customer contact, is an essential activity in a successful CRM strategy.

Major advances in contact management software are being made to support ongoing information exchange between a company and its customers and for seamless integration of multichannel communications with customers. There are several important sources of customer information:

• Customer contact channels, including call centers, retail outlets, and e-commerce Websites
• Transaction systems for detailed customer behavioral data
• Outbound marketing programs to measure results of promotional campaigns
• Secondary data sources such as credit data and compiled demographic and lifestyle data
• Market research for insights beyond those revealed by actual customer behavior and dialogue

When properly integrated into the CRM framework, these information sources provide a continuing stream of updates from customers that enables companies to respond quickly to their evolving needs and priorities. (see Figure 1)

 

Figure 1: Eight areas of operational and customer-oriented capabilities in CRM.