So far over the past few months I have been beating the drum about how the customer knowledge infrastructure (CKI) supports all CRM efforts. Many other writers, practitioners and consultants seem to be coming back to this point of view. Without a trusted source of detailed customer information few businesses can accurately market their wares or provide the right services to the right customers. The idea that you can carry out operational CRM (read Call/Contact centres and Sales Force Automation) without information about the customers you want to serve seems strange. Whilst for many analytical CRM (read analysing data and information to understand trends, behaviours in an attempt to predict future actions) and the positive benefits that can be derived from its use seems to reside with some propeller heads in the bowels of the organisation until a Eureka is heard and money is made or lost. The truth is somewhere between the two. But you cannot make use of the analytics unless you have operational systems in place to undertake the right actions and ensure success.
How do organisations get it so wrong when they approach the overwhelming need for good customer information as opposed to doing CRM? The precursor to ‘doing’ CRM is getting to grips with information about your current and desired customer base. This is basic marketing 101 for most people. But basic marketing and basic management practices seem to go out the window when CRM is mentioned. For many they have bought into the hype rather than the substance of CRM. A recent definition in the February 2002 Harvard Business Review (Avoid the four perils of CRM): “CRM aligns business processes with customer strategies to build customer loyalty and increase profits over time. (Note that the words ‘technology’ and ‘software’ are conspicuously absent from the definition)”. Now I wouldn’t go that far because without some form of technology you will not be able to capture and store the relevant customer information you need to create that CRM future.
Technology begins with that organic thing called the brain and maybe supplemented by pencil and paper. It all begins with a state of mind that applies CRM to the organisation and the purpose of the whole business’s reason for existing to serve customers at a profit to both parties. As organisation get larger and more sophisticated in their customer information needs then paper files are not enough and you will need that computer with its relational database. Yet without a customer strategy and marketing plans that incorporate the use of customer information why bother. The idea that forecasts of tomorrow’s sales can simply be extrapolated from yesterday’s works for few very well regulated industries. The www.dot.bom era of last year bears this out partially. The need to understand your customers needs, value and potential are fundamental to implementing a CRM programme. CURARE requires customer information coupled with active measurable actions/campaigns to be successful.
This information must be identified as useful, collected, stored and made accessible to the relevant players in the organisation. A while back I was acting as the consultant/programme director for the installation of a large-scale data warehouse project that was focused CRM. Much of my time had been spent educating the various departments in the benefits and use of information to improve relationships, increase retention, reduce acquisition costs, and reduce risk and fraud. The customer wanted to do all of this and was ready to spend the money on the technology and the specific consultancy expertise I could bring them. Agreement was achieved with IT and the marketing team of what was to be the start. We also identified the need to get buy in from all other parts of the organisation that required that centralised trusted source of customer information. The management team also bought in to notion the incrementalist experimental approach: build the foundation on a robust logical data model then take one area at a time to demonstrate ROI and growing business benefits. Big bang approaches take years to come through and often the needs that were there when the project started have changed – business moves on. In our view the hardest part of making their vision become a reality was changing their culture. Built in silos and plagued with politics we new it would be a tough to change anything. The sponsors however were aware of the need to change and saw our step-by-step ROI approach as a means of winning over the doubters.
They were all happy to spend the money on the technology and to listen attentively to an agreed vision of what they needed to do to become a joined up organisation. The hard part that included training, workshops, action plans and actually implementing the change was not to be. Senior management changed and the sponsor moved on and they really were not ready and, and, and…… This is not really the norm! It would be great to say this was the only time this happened to but its not!
So why spend all this money? Lets just put in a call/contact centre? Because in spite and despite this oft-told tale we must all persevere and others have shown that it really can be done. It must be remembered that the whole thing is a journey. We believe in a CRM roadmap, a compass and a good guide plus committed senior management sponsors that remain in the driving seat for a long time. The incrementalist approach is slow but coupled with realistic ROI goals that may combine both hard and soft numbers CRM can be grafted on to an organisation. If the graft takes then the infected organisation will take up the holistic view of CRM and make it happen.
Where to start? As always the recommended path begins with segmenting the customer base
A focus on analytical CRM can provide better and more in depth customer knowledge. If the knowledge is coupled with the processes then it can lead to improved effectiveness for marketing, sales, and service. It is the joining together of analytics and operations that make the CRM engine run smoothly. I am really talking about trying to create the joined up organisation. However if we go back to the incrementalist approach then we can see there is a need to prove that each element of CRM put in place will benefit the whole. Now a way of doing this is starting with the end in mind (see CRM Managing the Benefits Part 1) and work back to what has to be put in place for success. Now you cannot expect to do it all at once (really!) but you can choose areas where you can see the best return. Many automatically say of course we should use the 80/20 rule and choose for example our most valuable customers to focus our efforts on. Some have the idea that your currently best customers will of course generate the greatest income in the future as well. The small problem with this is the question of how you come to the conclusion they are the best and the uncertain fact that they really will be the best source of income in the future.
One of the first jobs of any analytical approach should be to understand just what and who constitutes your existing customers base. There are quick and dirty approaches based on revenue, figmental profitability figures and imaginary cross/upsell opportunities. Often the idea that a particular group of customers are your most valuable is at best anecdotal and at worst illusory. However this may be the very place to start your analysis. Identifying customer opportunities that can create growing profitable relationships (value for both parties) must be coupled with the operational capability to do something about it. What is the point of just knowing something of value if you just cannot do anything with that information. So is CRM really all about creating massive database marketing systems? No that is not the case, but without a CKI coupled to specific marketing and service focused people, processes and technology there is just no point in making any investment in CRM.
I will continue to push the view that customer strategy comes before any investment in technology and the technology itself cannot take the place of rational plans. For some the technology purchased represents their belief that the form, structure, culture and agility of the organisation will flow from that purchase – come on get real! You may not be able to get the organisation right before you embark on your CRM journey but you should at least make plans that incorporate the need for organisational learning, change, potential conflicts and technical difficulties. CRM is not and should not be seen as another ERP. CRM is something for everyone not another type of glue but a way of thinking internally as well as externally. It requires more thinking and doing than the failure prone technology approach.
We need to see CRM as a means of creating joined up organisations, which must be good news for the customers that reside inside organisations and outside. What will drive this will be the use of a CKI closely coupled to operational systems, which combine both the human and the technical. Incremental CKI that is focused on early realisable and measurable ROI is the only way forward and what better place to start than understanding just what and who make up your customer base.