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Issue of May 2006 

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Customer-friendly business strategy = successful CRM

Bob Thompson, the founder of and President of Front Line Solutions identifies what makes a successful CRM implementation and highlights the factors contributing to its failures, in a conversation with Kumar Dawada

Bob Thompson

There is no standardisation in defining a Customer Relationship Management (CRM) system? How do you think this issue can be sorted out?

CRM is a customer-centric business strategy, period. It is designed to improve customer relationships.

The minute a company’s primary objective is other than improving customer-relationships, it is no longer CRM even if CRM software is installed. Hence customer-centric strategies distinguish CRM from CRM software.

There have been many cases of CRM failures worldwide? Why?

Negative perceptions about CRM have discouraged many companies from going ahead with CRM. But many such decisions are based on the bad experiences of other companies. What is needed is to understand why some implementations fail but others succeed.

There are critical success factors or best practices, which contribute to the success of CRM. Difficulties in implementing CRM and getting positive RoI stem from implementers repeating the same errors. CRM failures are rooted in common errors and the outcomes will be much better if implementers identify and follow best practices.

Companies who do not want to take action on the negative feedback or more requirements of customers should not attempt CRM. The same applies to companies not willing to empower and equip their line staff to deal with customers. Companies lacking the discipline and priorities required to implement effective measurement should also not go in for CRM.

The most predictable cause of CRM failure is trying to achieve RoI through cost-cutting. Also, many CRM product and service providers are doing CRM implementers a disservice by spreading misinformation about various aspects of CRM.

It has to be always remembered that customer-centric planning and people management are the primary drivers for success of CRM. Process and technology are only implementation tools.

What kind of best practices do you feel lead to positive RoI?

Adopting customer-centric strategies is the leading factor of CRM’s success. Many companies attempting to implement CRM do not actually want to become customer-centric. This leads to failure.

Secondly, investing in people at points of customer contact i.e. line level training and support are important for CRM’s success. Thirdly, there is a necessity for organisational change—change in departmental roles and responsibilities to ensure CRM’s success.

The last requirement is that CRM implementers need baseline data to measure against. Hence setting measurable goals is also needed for CRM to succeed. Any single factor is not enough but multiple factors ensure successful CRM implementation.

What kind of customer-friendly strategies ensure the success of CRM?

Companies must work out a customer-centric plan by using customer defection rate data and customer satisfaction research. They must adopt a customer’s perspective and work on developing a comprehensive planning write-up and specific business objectives.

The strategies should be such that they provide benefits to both the company and customers. They should lead to shorter cycle times, greater customer involvement in custom-made product or service development and reduce operation costs by redesigning workflow that eliminates work which does not add value to customers.

The strategies must be based on what the customers have asked for and devised as per their needs. They have to be a result of interaction and information-based communication with customers instead of being a promotional exercise.

How can companies develop and adopt customer-centric strategies?

This requires active involvement of senior or top management leaders themselves. They must take customer calls and lead by example. They have to take action themselves.

For an organisation to be successful, it is necessary that the boss is a visionary. He should take care of resources so that things get done. It must be his priority to invest in resources, solve problems and be involved. This will make him seen as an active and visible leader who brings forth transformation in the organisation. Employee training, counselling and helping in dealing with new jobs and responsibilities are necessary to make people understand their roles.

Too little investment is done in this area. Hence, the top management should make this a priority.

So what should companies do when it comes to putting the CRM software in place?

Every company is different. Some companies implement an overall single centralised system. Others isolate and tackle specific problems one at a time.

It is necessary to have a long-term vision by the senior management. The best approach is to break the problems into steps, improve processes, technology, and measure periodically—for instance, every six months or one year to see its impact.

A company cannot just claim that it is customer-oriented. It must assess its tactical environment, infrastructure, and technology. Fact-finding must be carried out to take a closer look at the culture of the company and its people.

The organisation must find out how much change is required, how long will it take to effect it and take a look at the real problems. By being focussed it can find out the factors that have bearing on the business.

CRM has moved from being an operational tool to a tool with analytical functionalities. What are your observations?

Marketing analysis is important to provide proper customer intelligence. It helps the organisation in deciding on the strategy required to retail a customer

Analytical tools have been around for a long time. Availability of data has become a business priority. Proper analysis ensures that the organisation makes right decisions.

Marketing analysis is important to provide proper customer intelligence. It helps the organisation in deciding on the strategy required to retail a customer. It is necessary to have the minimal customer data to find out who is profitable, who is not, and who is likely to defect.

Technology can help pinpoint this information and solve the problems due to the emergence of analytical applications. Analytical CRM must be added to the campaign management system.

So what triggers customer defection, and how is it possible to retain customers using CRM?

It is more cost-effective to retain customers than to acquire them. Most customers say that poor s
ervice caused them to take their business elsewhere, but most business managers believe that price is the main factor for customer defection.

Emotions play a greater role than quality or price in the decision to defect. People leave a company because they are ignored or not treated well. Also, a small percentage of customers complain. The others just go away never to come back.

To improve loyalty and retain customers it is necessary to understand drivers of loyalty and defection from the customer’s viewpoint. An organisation must develop a loyalty strategy and focus it on the right customer. They should systematically deliver what the customer values and fix it quickly if they are unable to deliver. The organisation should have proper measurement and reward systems to encourage customer-centric behaviour.

These ensure that the organisation is customer-centric, which is what CRM is all about. It enables the business to grow faster and earn bigger revenues. That is the business benefit CRM should deliver.

And what are the current trends on the CRM front?

The key trend today is customer experience management. This means analysing the interaction that a company has with the customer throughout the service engagement. There is a conscious follow-up effort on measuring, understanding and improving value to the customer.

For instance, in the hotel industry if the ambience and service are good; there is a better interaction between the customers and staff, and the customers will come back and be loyal. This new trend has been observed in the last few years. It is important for the service industry. Hosted or on-demand CRM is also a growing trend and a necessity for hosted or managed services.

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