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Time to be bold: tune your CRM strategy

16th May 2007
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By Volker Hildebrand, SAP Labs

Investments in CRM applications have produced a broad spectrum of results. Some companies experienced dramatic increases in revenue and customer satisfaction along with significant cost savings, while other companies have seen limited returns and disappointing results. The benefits would be greater if more companies took CRM to the next level by designing their CRM strategy for future aspirations instead of just implementing software to support current capabilities.

Focusing on bottom-line costs and departmental goals limits the top-line potential of CRM investments. To gain a competitive advantage and promote sustainable, profitable growth, organisations need to take a holistic approach to CRM and develop bold strategies to win, know and keep their customers. Of equal importance to maximising the value of your CRM investment is a deliberate execution and implementation plan coordinating business and IT initiatives.

The key to generating new growth

More than ever, CRM is critical to an organisation’s success. Driving growth has replaced cutting costs as the most important goal for CEOs. Organisations are beginning to explore a more disciplined approach to exploit untapped opportunities and to make the most of relationships with customers. To stimulate new growth they seek new ways to increase wallet share, deploy new channels, penetrate underserved segments, reach out to new customers and enter entirely new markets.

Increasingly under pressure to generate more revenue, business leaders have realised that internal efficiency alone is not enough to guarantee market differentiation and competitive edge. Success is no longer determined by price and product alone, but also by well-designed sales channels and service processes. Hence it’s no surprise that CRM initiatives are back on the agenda of many top executives. To energise new growth in today’s complex, highly fragmented, proliferating multi-channel environment, organisations need to excel not just across but beyond customer touch points, taking CRM to a higher level. This is what we call “CRM without compromise”.

Organisations need to strengthen and hone their capacity to identify sources of differentiation that are difficult to imitate, discover opportunities to create value for the customer and to get value in return. In order to succeed, an organisation must achieve more than running effective marketing campaigns or operating an efficient call centre. Operational excellence – across and beyond the front office – and competitive agility are imperative to achieve sustainable, profitable growth.

CRM business imperative I: operational excellence

Today, operational excellence needs to encompass more than customer-facing operations alone. Entire business processes such as order to cash or customer problem resolution need to be stream¬lined, seamlessly connected to other critical business functions (from finance to the supply chain), and designed to meet customer expectations regarding quality, speed, convenience and reliability. Organisations need to break down the silos and redesign business processes from end to end, intertwined and coordinated across front and back offices for a common goal: to create and deliver customer value.

CRM business imperative II: competitive agility

Key to staying ahead of the competition is the ability to quickly perceive, adapt and respond to ever changing customer and business needs – before the competitors have even become aware that an opportunity exists. Agility and speed have become critical competitive differentiators. Constant innovation and business transformation have become imperative. As less emphasis is placed on the products and services offered by an organisation, what becomes more important is how quickly it can deliver those products and services to customers and how flexibly it can respond to market changes. Hence, for a company to enjoy success in the coming years, flexibility, openness, collaboration and speed must become an integral part of its corporate culture.

CRM business imperative III: customer-centricity

It’s the customer’s perception of everything a company does that creates an image of its brand and eventually determines its success or failure as a business. That’s why successful companies build their business around the customer (figure 1 illustrates this concept). They know who their most valuable customers are and they understand their needs and buying habits. They design and continuously improve business processes across their entire ecosystem – including suppliers and channel partners – to respond quickly to changing customer needs. They strive to become fully customer-centric, deliver superior customer value and consistently provide an exceptional customer experience across all customer touch points.

 The Customer-Centric Enterprise

Figure 1: the customer-centric enterprise

All of this puts CRM at the core of a successful business strategy. By taking a holistic approach to CRM, successful organisations boldly elevate the role of the customer throughout their business and approach CRM with the same fortitude, care and steadfastness with which they approach other critical business functions. By capitalising on customer insight, they can identify and prioritise sales opportunities faster and more effectively; discern and leverage sources of differentiation; drive product and service innovation; and strengthen relationships with both customers and partners. Anticipating customer needs early helps them improve decision making and reduce time to market; and also provides the basis to better align supply with demand and quickly shape demand in times of constrained supply.

Companies that have taken this path, transforming their organisation from a product-centric into a customer-centric enterprise, report amazing returns: double-digit revenue growth, improved customer satisfaction and loyalty, reduced churn rates, increased front-line employee productivity and higher service levels along with dramatic savings in customer acquisition costs as well as lower costs of marketing, sales and service operations (see figure 2 for sample benefits of SAP customers).

 SAP Value Engineering)

Figure 2: CRM benefits of SAP
customers (Source: SAP Value Engineering)

A strategic framework for the customer-centric enterprise

To maximise these benefits and make the most of relationships with customers, organisations should consider a basic set of strategic principles that we have identified based on the successful CRM strategies of best-run companies. These principles constitute a strategic framework for the customer-centric enterprise and can help organisations to distance themselves from their competition and secure long-term success (figure 3).

Balance efficiency and effectiveness

A good CRM strategy needs to balance efficiency and effectiveness. Many organisations tend to focus largely on efficiency and often ignore the impact of their actions on effectiveness. This may alienate customers and erode profits. Improving efficiency doesn’t matter unless you do the right thing in the first place. That’s why effectiveness must take precedence over efficiency – without neglecting to identify critical processes and areas for efficiency gains.

 strategic framework for CRM without compromise

Figure 3: strategic framework for CRM without compromise

Capitalise on customer insight

To get ahead of the competition, organisations need to develop proprietary information about customers beyond common industry wisdom and embed this customer insight in critical planning and decision-making processes such as sales planning, new product development and marketing investments, as well as resource alignment and supply chain planning. Successful organisations build a customer intelligence network, make customer insight accessible throughout the organisation and translate this knowledge into frontline actions.

Align marketing, sales and service

Operational excellence and consistent customer experience can’t be achieved when departments make independent decisions and take isolated actions to achieve their numbers. Organisations need to give up their internal, departmental views and revise their frontline business processes and information sharing across marketing, sales and service. They need to align their customer-facing operations, break the silos, link discrete systems or – even better – create a single instance, so they can frequently share and pass valuable marketing, sales or service information to the right person.

Manage customer experience across touch points

Today customers demand multiple channels that they can use to get information, purchase goods, pay their bills, request services or get support based on their specific needs and preferences. They expect convenience, choice and operational reliability, and a consistent experience across all touch points. The ability to successfully manage the complexity of customer interaction across multiple channels in a proliferating environment, synchronising off-line and online channels while taking advantage of automation efficiencies, can become an important source of differentiation.

Guide customers to the right channel

Many organisations fail to tailor the channels to meet the touch-point needs of their customers and don’t guide them to the most appropriate channel. For example, a common strategy is to simply push as many customers as possible to low-cost self-service channels. This can, in fact, increase costs and churn rates and destroy market share. It’s important to understand the channel economics, strengths, and weaknesses of each channel, and carefully evaluate how to reach out to customers. To yield the best results you must optimise your entire channel mix, aligning your channel strategy with customer segments (based on interaction needs and customer value) and business goals.

Beyond the touch point: connect the front office and the back office

Synchronising front-office, back-office and supply chain activities is absolutely critical to attract and retain customers, fulfill demand and deliver on service promises. Many organisations are losing revenue simply because they fail to connect their front and back offices. Without seamless, real-time integration, customer satisfaction declines and customer attrition rises as online transactions fail, products aren’t available at the time and places needed, orders can’t be changed, service technicians don’t have the right spare parts, returns aren’t correctly passed through to accounts payable and customer issues can’t be resolved immediately at the first call.

Create a customer-driven value network

As companies focus increasingly on their core competencies, they will be evermore dependent on an ecosystem of suppliers and partners to meet customer demand and generate new growth. To be successful, partners need to become an integral part of a value network, providing complementary capabilities to promote the brand, sell products and offer value-added services. Defining the role of these partners, managing the relationships with them and integrating them in a way that enables seamless end-to-end business processes across the entire network will be critical.

Adopt a technology framework for integration

As adaptability, collaboration and speed become winning elements of corporate success, organisations need an open and flexible IT architecture that provides a platform to seamlessly integrate processes and information from disparate applications, enable intra-enterprise and inter-enterprise collaboration and quickly map business processes to changing business needs.

The path to CRM success: how to become a top CRM performer

Today, only a few organisations have managed to become truly customer-centric. Most companies still have highly fragmented customer management applications to support specific departmental or divisional needs. CRM implementations range from initial, isolated efforts to improve customer-facing processes (such as simple contact management or spreadsheet-based sales planning) to more-sophisticated support of specific customer interaction channels for improving sales effectiveness or call centre efficiency. In years to come, more companies will embark on a journey to reach higher ground, aligning channels and departments, to become entirely customer-centric, value network-enabled organisations, thus allowing them to achieve better and more-tangible results (Figure 4). The big question is: how do you get there?

 evolution of CRM

Figure 4: evolution of CRM

This transition isn’t easy. It takes time and calls for a commitment to a customer-centric philosophy across your organisation from top to bottom. You need a vision, a strategy and an execution road map to get there. And you should proactively manage the change process and continuously monitor performance improvement. In fact, a recent SAP analysis of best practices in CRM confirms that top CRM performers develop a broad, thoughtful vision and strategy focused on the outcome, launch incremental initiatives that fulfill the vision, and manage to and measure value realisation.

Develop bold vision and executable strategy

Successful companies develop a broad and thoughtful vision focused on the outcome. They consider CRM implementations to be business initiatives versus IT initiatives and take a holistic view of customers, channels, processes, employees and technology when defining an executable strategy. Business transformation is a key theme where near-term projects fit into a comprehensive long-term vision.

Top performers look at end-to-end business processes that span multiple front office capabilities and channels. They think beyond the basic functions of front office users leveraging traditional back office data and processes to deliver value to their customers and improve organisational reliability and performance. They have a committed and aligned management team that is focused on the transformational end results, and focus the organisation on achieving that outcome. Top influencing factors for realising value are leadership and change management.

Take an evolutionary approach

The key to success of such wide-ranging CRM implementations is an evolutionary approach where each step in building the ecosystem represents a carefully planned, well-defined advancement of the business strategy. Successful companies have taken a very disciplined, sequenced path to implementing CRM, launching highly focused projects first to solve clearly defined problems in areas that can undermine overall performance, such as customer service or order management.

In these most critical areas they start with improvements that yield the biggest returns. Upon achieving their goals with small projects, they leverage their initial investments to address additional challenges. For example, they may extend their implementations by integrating additional channels like the web and leverage customer insight to better target ongoing customer interaction and drive product innovation. Over time they continuously improve their capabilities to not only achieve efficiency gains, but also to increase customer value and maximise the value they get in return.

Manage performance and measure value realisation

Executives can't have a handle on the performance of their organisations and processes unless they define and use the appropriate value metrics for efficiency, effectiveness and agility. They need to establish a carefully balanced set of key baseline metrics (KPIs) around customers, people (employees), processes, channels (including channel partners) and products, determine current performance levels, benchmark best-practice processes, set aggressive goals for improvements and continuously feed back the results of those value measurements to the respective business and process owners.

Performance management also requires a firm executive commitment to manage and enforce changes. Linking incentives and compensation to targeted performance outcomes will encourage employees to exhibit the intended behavior and help them achieve their goals.

A recent SAP/ASUG benchmarking survey indicates that the majority of companies focusing on value and value realisation meet or exceed their value projections. Most companies overlooking value did not measure value, believed that they were late to realise value but couldn’t verify it, and most of them believed that they missed their benefit objective. A lack of aligned leadership and business case ownership, a lack of value measurement and hence missed value opportunities led to a disconnect between projected benefits and actual value achieved.

Use IT as a catalyst for business transformation

Information technology has become a mission-critical enabler for CRM, not just to understand customer needs but also to determine how to most efficiently and effectively deliver on those needs. But IT can be more than just an enabler – it can serve as a catalyst for business transformation. CRM without compromise is about transforming a business into a customer-centric business.

It’s about building a synergistic ecosystem with employees, customers and partners that consistently creates and delivers customer value – an ecosystem where customer demand drives the supply chain; customer insight inspires innovation; and employees are empowered to best serve the customer.

Organisations that are able to build such an ecosystem that is also flexible enough to quickly respond to changing customer needs and business challenges will have a sustainable competitive advantage and enjoy profitable growth for years to come.

By Volker Hildebrand is VP CRM product management, SAP Labs, Palo Alto

Click here to find out more about SAP.

You can also download more information including:

CRM without compromise - A strategy for profitable growth

CRM Done Right

CRM without Compromise

Harness Business Analytics for Improved Marketing

Avoid the Four Perils of CRM


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