"The Royal Treatment" continued.
How Can Firms Get Started With CRM?
Companies implementing CRM need to be open to change, Lee says. "I've had CEOs and senior managers say to me, 'We know we have to change, but we can't stop doing what got us here.'" he says. "I look at them and say, 'Take your pick.' CRM is about change. There is no such thing as CRM Light. Implementing CRM is painful. There's no way around that."
The good news for small firms: Large companies
typically have more problems implementing CRM. "It's easier to turn a sail
boat than it is to turn a battleship," Loftis says.
To begin, companies must adopt customer-centric business strategies, Lee says. When doing so, many firms realize they practice "silo management," which is a business practice in which all departments within an organization manage and complete work independently. They don't function to maximize value to customers, he says. "CRM is like a giant jackhammer breaking down silos," Lee says. "You have to get out of those traditional silos in order to maximize value for customers." Businesses also must re-engineer roles in their companies to support the new customer-centric approach, then begin the "needs analysis" process to determine their software requirements.
When implementing CRM,
it's imperative that firms secure senior-level support, Lee says. Successfully
implementing CRM involves making fundamental organization changes--changes
that need the principal's backing. "No one else is authorized to take a
new posture toward customers or make changes to departmental roles and responsibilities,"
Lee says. Executive sponsorship ensures CRM will continue to receive appropriate
funding each year.
Businesses also must create
one definition of "customer" that meets the needs of each department in
the organization, including sales, marketing and customer service. Cecil
recommends that businesses hold customer retreats to identify who their
customers are, what problems those customers are experiencing, what actions
they've taken to show customers they care, how they should be helping customers,
what competitors are doing, how technology can help them and more. The retreats
should include senior employees from all departments.
Prior to beginning a program,
firms also should measure their current levels of customer satisfaction,
customer retention, revenue per customer and more to create control data
that later will be used to measure the effectiveness of CRM. "Not everyone
takes advantage of the deployment initially," Loftis says, "so you have
a group that you can measure that isn't a part of the program, as well as
a group that is." Most importantly, businesses must have the discipline
to measure those metrics periodically once CRM is in place. For example,
document management companies can hire research firms to call customers
anonymously and question them about their printing needs and their satisfaction
with various print providers. Approximately one year after firms implement
CRM, they can rehire the research firms to call the same customers and record
changes.
Businesses should consider
hiring CRM consultants who aren't affiliated with software firms. "I call
this the Mayo Clinic approach," Cecil says. "Have them run you through the
CAT scan, give you the diagnostic and tell you what shape you're in relative
to what shape you could be in." Consultants can help firms determine which
software would best meet their needs. "The value of that evaluation will
exceed the cost of a consultant doing it," he says. More importantly, businesses
will end up with software they can use.
Firms should use caution
when selecting consultants, however. "It doesn't pay to go off and spend
tons of money with a very high-profile international consulting company,"
Lee says. "Most of the international consulting companies are in it because
they smell money. The level of expertise is pathetic."
In general, small to medium-sized
businesses can expect to spend between $500 and $5,000 per "seat" during
the first year of CRM implementation, Goldenberg says. (See "CRM Glossary"
on page 54.) Those costs cover hardware, software and communications such
as dial-up internet connections and DSL lines. By the second year, those
businesses generally spend $500 to $1,500 per seat. Most businesses begin
noticing significant results approximately one year after implementation,
Lee says.
CRM Glossary
Application service provider (ASP):
A firm that offers CRM software using a "pay-as-you-go" pricing model. The
software is stored on the ASP's computer system and is accessed via the
internet.
Churn rate:
Rate of customer-turnover
Customer service and
support (CSS): Department responsible for retaining and extending customer
relationships once a product or service is sold
Back-office solution:
Technology that assists with business functions such as accounting, logistics
and human resources that do not directly involve customer interaction
Call center: Department
that handles inbound and/or outbound calls for a firm. (Although the term
traditionally refers to telemarketing, call centers increasingly are being
used to manage incoming order processing or internal computer support operations.
"Call center" also can refer to technology that helps manage phone communications
with clients.)
Data mining: Sorting
large amounts of customer and transaction data to uncover patterns and trends
that help firms better penetrate accounts
Data warehouse: A
large, consolidated database that stores all customer and transaction data
collected by a firm's multiple business systems
Enterprise resource planning
(ERP): Software that links a company's operations, including human resources,
financials, manufacturing and distribution, and connects the organization
to its customers and suppliers
Front-office solution:
Technology that assists with business functions, such as sales, marketing
and customer support that directly involve customer interaction
Needs analysis, Needs
assessment: A vital stage of CRM implementation in which businesses determine
what software services and features they need most
Partner relationship management (PRM):
The practice of extending sales, marketing, customer service and other functions
to business partners in an effort to foster more collaborative channel partner
relationships
Sales force automation
(SFA): Software that holds information about contacts and back-office
systems such as pricing and product availability to help members of a sales
force automate the sales process
Seats: The total
number of individuals using a firm's CRM software
Share of wallet:
Measure of business conducted between an organization and a customer based
on the total amount of business the customer conducts in that business segment
Silo management:
A business practice in which all departments within an organization manage
and complete work independently
Synchronization:
Managing changes to networked database files to ensure that changes made
in one file are distributed to all other files
Technology-enabled
marketing (TEM), marketing automation: Using technology to optimize
a firm's marketing process by allocating resources to the activities, channels
and media with the best potential return and impact on profitable customer
relationships
Technology-enabled
selling (TES), sales automation: Using technology to optimize sales
of products or services through a variety of channels, including inside
sales teams, field/mobile sales teams, third-party selling partners and
e-commerce
What CRM Mistakes Should
Firms Avoid?
According to a META Group
study, 55 percent to 75 percent of CRM projects fail to meet their objectives.
What's more, a 2001 survey of more than 400 executives by Bain & Co.,
a Boston-based business consulting firm, found that 20 percent of those
surveyed believed CRM actually had damaged their relationships with customers.
"These failures are almost all predictable," Lee says.
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According to the META Group study, CRM failures
often result from sales force automation problems and "unaddressed cultural
issues" such as sales staffs that resist or even fear using CRM systems.
"The No. 1 barrier to CRM is internal resistance to change," Lee says. Many
firms' internal departments manage and complete work independently and are
continuously at odds regarding which department holds certain responsibilities
and power. By implementing CRM, Lee says, "The company suddenly says, 'We
have a whole new value system. We're going to do things in a way that adds
maximum value to customers, not that takes care of individual departments.'
That's frightening to a lot of people, and they react very negatively."
To prevent such problems, companies must explain what they're doing and why. They also must involve employees when making decisions. Employees need to feel they have ownership in CRM rather than feel victimized by it, Lee says. Companies that have employees who believe CRM isn't in their best interests "must make it clear that participation isn't optional," he says. "There is no individual important enough to the business to not be part of the process."
Another major mistake firms often make is starting at the wrong end or in the middle of the CRM implementation process. Many businesses buy CRM technology before they've established clear business goals. As a result, they often end up with fancy CRM technology that doesn't match their needs, Lee says. Businesses also attempt to re-engineer roles in their companies without first establishing customer-centric business strategies. "All they're doing is automating a cow path," Lee says. "All they wind up doing is the wrong stuff faster."
Businesses also run into problems when they have unrealistic expectations, such as demanding ROI in as few as 90 days. "Your real ROI will start to come in a year or two," Lee says. Unfortunately, many firms mistakenly look for ROI in improved operating efficiencies. "What they normally achieve is dissatisfying customers and driving them away," Lee says. "There's no better example of that than forcing customers out on the web to do customer service with no human intervention and no human option."
Some firms also make the mistake of using CRM software salespeople as advisors. "They're the worst people in the world to rely on," Cecil says. "They only have one possible solution they can provide. Their advice is worthless." He says 99 percent of CRM software salespeople have mastered a sales pitch but know very little about CRM.
Kara S. Carpenter is assistant managing editor of Print Solutions. Email her your comments at kcarpenter@PSDA.org.
