CRM- Perspectives from the marketplace — Simon Knox Book Summary
What is CRM
According to Hewson Consulting’s definition, CRM is a business strategy focusing on winning, growing and keeping the right customers. It has mainly three elements:
- Identification, satisfaction, retention and maximization of the value of an organization’s priority customers or the key accounts
- Ensuring the presence of the company around the customers with constant and clear communication and with a holistic knowledge of their needs and benefits.
- Creating a visionary picture for customer’s values and goals
One of the most important drivers to invest in CRM is moving the business from efficiency-driven to being effective. Efficient firms seek an advantage in product design, product function, manufacturing process, services, etc. They seek a competitive advantage in scale, experience and creating barriers to the direct competitors. However, effective firms seek supremacy customer information on their behaviour and motivations and customer involvement.
Three long term forces are believed to be paramount in creating a customer-driven business with the support of CRM
- Understanding the evolution of Relationship Marketing to make customers loyal to the brand
- Utilization of Information Technology for efficient use of customer’s insights and effectively responding to the requirements
- Keeping up with the changing customer’s behaviour and motivations and contributing to the product development process
Strategic framework for CRM
Many organizations fail to take advantage of CRM because they do not know what CRM is and their over-dependencies on fancy tools sold by IT integrators.
Nonetheless, CRM is a framework, a strategy, and an integration of relationship marketing and Information technology to manage relationships with the customer segments to improve the shareholder value. A good CRM practice involves the cross-functional teams in every 5 processes that are discussed further.
Process 1: Strategy Development
It’s a process to understand what is the current status of the firm and what are its goals. What kind of customers that the firm wants and how to segment them?
All these questions can be resolved by starting with a clear definition of the core business and what is their mission statement. The whole organization needs to align if the business is implementing CRM and moving towards being customer-orientated. Careful customer segmentation is required and the key principle in CRM is to understand that each segment would be different and hence the relationship with the respective segments need to be managed differently too.
The role of IT plays a critical role here. The data warehouse that takes inputs from all the information systems can be useful in creating predictive modelling for the customer behaviour and ultimately segments. For instance, Orange, a telecom company, do its analysis using around 200 variables to gain insights on payment behaviour, churn propensity and usage. That further helps Orange to measure Customer Life Time Value and decision making in customer management.
Nevertheless, this is the first step of CRM implementation but it actually impacts the data gathering process, use of technology and algorithms to segment the customers and even influencing the strategies for building customized propositions and relationships.
The issues faced at this stage are the use of legacy IT can impinge the implementation and inefficient conversion of information into insight.
Process 2: Value Creation
This process focuses on building the value proposition for the customer and how to maximize the lifetime value of the customers.
It consists of three elements: determining what value the customer receives, the value the organization receives from the customer and the management of the value exchange. The key metric to be looked at here is the Customer Lifetime Value (CLV) which is the projected profit over a customer’s lifetime.
Placing the customer at the centre of the organization is paramount and have a different relationship with different segments is critical. The solution is to create a customer service infrastructure with the following objectives:
- To develop a single integrated view of all the customers across all business
- Accommodate easy integration with legacy system of the acquired company and accommodate changes in the business strategy
- Cater to do business using different channels, direct, digital, TV, etc.
- Understand the customers, put a value on them and tailor the products to service them
- Evolve the product and service portfolio
Mostly the processes and IT systems are built around policies rather than customers and that creates significant problems
Process 3: Channel and media integration
This process includes the best ways to have two-way communication between the organization and the customers with the ideal customer experience at an affordable price.
The creation of a captivating value proposition that brings success not only involves designing products or services but also getting customers to comprehend and engage with those products or services. This is only possible with an appropriate combination of channels and media to engage with customers, ensure a positive and consolidated customer experience.
Media and Channel are separate and related concepts. Media is a mode of communication such as the internet while channels are the direct or indirect routes to market that include distributors, retailers and service providers.
To exemplify this concept let’s discuss the case of Birmingham based Wesleyan Assurance Society, a mutual assurer company. The company was losing it customers as their target were extremely conservative, to address this issue Wesleyan began with the implementation of Sales Force Automation system that tracked everything the sales personals do — from the number, type and length of calls to the details of the prospects or the referrals they may receive. The Sales personals were named Financial Advisors and they helped the clients on the spot with the compliance, delivered instant underwriting and various other insurance proposal levels. The system allowed them to analyze the needs of the potential and existing customers and help financial advisors to sell.
The limitation in using such an integration is that it is easier to adapt in a single department but it becomes much complex in a broader initiative.
Process 4: Information management
This involves replication of the mind of customers and organization of the information which is coupled with insight, judgment and inspiration.
Toronto based, Canada Life (UK), a financial institution, is one of the best examples of this process. The issue faced by Canada Life was quite common in any financial services. The wave of mergers and acquisitions had made the core system running on different technologies that created a challenge to one-stop service to customers as the information was stored on an account basis, not on a customer basis. Replacement of the system might seem a clear solution but there were many issues such as migration cost, considerable time that will disrupt the day-to-day operations and also many legacy system process back-end transactions adequately. Instead, they opted for a software ‘middleware’ that acted as a glue to integrate back-office legacy systems and wrapping the system with a common front-end. This way the system became customer-oriented as all the customer information is stored in the middleware. This allowed selecting a policy based on customer perspective rather than a policy number. For example, if one has to make any change in the policy information, it will require only one task for the customers irrespective of how many policies they hold.
Process 5: Performance assessment
The final process is to gauge the performance by setting the standards, developing metrics and measuring results to improve shareholder value.
Siemens, a world leader in electrical engineering and electronics, was facing coordination issues with its customers (hospital and clinics) in its Computer Tomography (CT) division. This division was not improving Siemen’s performance in the market. The thing they lacked is customer satisfaction throughout the product life-cycle. The remedy this they installed a web camera in the hospital’s designated scanner rooms, to view the work-in-progress from the room preparation to scanning and a discussion on the installing specification. This way they measured and monitored the performance and maintained the links with the customers if the equipment fails or needs an upgrade. Today, Siemens is the world’s second CT equipment maker.
Conclusion
Customer orientation is the essence of customer relationship management to improve the shareholder value with better prediction. The core implementation challenge is the lack of understanding of the CRM process. Other factors are breaking the legacy system and aligning the whole organization to become customer-focused. Nevertheless, with proper leadership, cross-functional management and utilization of technology can come up with the best CRM solution.
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