What is CRM?

By Stewart Deck

What is CRM?
CRM stands for Customer Relationship Management. It is a strategy used to learn more about customers' needs and behaviors in order to develop stronger relationships with them. After all, good customer relationships are at the heart of business success. There are many technological components to CRM, but thinking about CRM in primarily technological terms is a mistake. The more useful way to think about CRM is as a process that will help bring together lots of pieces of information about customers, sales, marketing effectiveness, responsiveness and market trends.

What is the goal of CRM?
The idea of CRM is that it helps businesses use technology and human resources to gain insight into the behavior of customers and the value of those customers. If it works as hoped, a business can:

• provide better customer service
  
• make call centers more efficient
  
• cross sell products more effectively
  
• help sales staff close deals faster
  
• simplify marketing and sales processes
  
• discover new customers
  
• increase customer revenues

That sounds rosy. How does it happen?
It doesn't happen by simply buying software and installing it. For CRM to be truly effective, an organization must first decide what kind of customer information it is looking for and it must decide what it intends to do with that information. For example, many financial institutions keep track of customers' life stages in order to market appropriate banking products like mortgages or IRAs to them at the right time to fit their needs.

Next, the organization must look into all of the different ways information about customers comes into a business, where and how this data is stored and how it is currently used. One company, for instance, may interact with customers in a myriad of different ways including mail campaigns, Web sites, brick-and-mortar stores, call centers, mobile sales force staff and marketing and advertising efforts. Solid CRM systems link up each of these points. This collected data flows between operational systems (like sales and inventory systems) and analytical systems that can help sort through these records for patterns. Company analysts can then comb through the data to obtain a holistic view of each customer and pinpoint areas where better services are needed. For example, if someone has a mortgage, a business loan, an IRA and a large commercial checking account with one bank, it behooves the bank to treat this person well each time it has any contact with him or her.

Are there any indications of the need for a CRM project?
Not really. But one way to assess the need for a CRM project is to count the channels a customer can use to access the company. The more channels you have, the greater need there is for the type of single centralized customer view a CRM system can provide.

How long will it take to get CRM in place?
A bit longer than many software salespeople will lead you to think. Some vendors even claim their CRM "solutions" can be installed and working in less than a week. Packages like those are not very helpful in the long run because they don't provide the cross-divisional and holistic customer view needed. The time it takes to put together a well-conceived CRM project depends on the complexity of the project and its components.

How much does CRM cost?
A recent (2001) survey of more than 1,600 business and IT professionals, conducted by The Data Warehousing Institute found that close to 50% had CRM project budgets of less than $500,000. That would appear to indicate that CRM doesn't have to be a budget-buster. However, the same survey showed a handful of respondents with CRM project budgets of over $10 million.

What are some examples of the types of data CRM projects should be collecting?

• Responses to campaigns
  
• Shipping and fulfillment dates
  
• Sales and purchase data
  
• Account information
  
• Web registration data
  
• Service and support records
  
• Demographic data
  
• Web sales data

What are the keys to successful CRM implentation?

• Break your CRM project down into manageable pieces by setting up pilot programs and short-term milestones. Starting with a pilot project that incorporates all the necessary departments and groups that gets projects rolling quickly but is small enough and flexible enough to allow tinkering along the way.
  
• Make sure your CRM plans include a scalable architecture framework.
  
• Don't underestimate how much data you might collect (there will be LOTS) and make sure that if you need to expand systems you'll be able to.
  
• Be thoughtful about what data is collected and stored. The impulse will be to grab and then store EVERY piece of data you can, but there is often no reason to store data. Storing useless data wastes time and money.
  
• Recognize the individuality of customers and respond appropriately. A CRM system should, for example, have built-in pricing flexibility.

Which division should run the CRM project?
The biggest returns come from aligning business, CRM and IT strategies across all departments and not just leaving it for one group to run.

What causes CRM projects to fail?
Many things. From the beginning, lack of a communication between everyone in the customer relationship chain can lead to an incomplete picture of the customer. Poor communication can lead to technology being implemented without proper support or buy-in from users. For example, if the sales force isn't completely sold on the system's benefits, they may not input the kind of demographic data that is essential to the program's success. One Fortune 500 company is on its fourth try at a CRM implementation, primarily because its sale force resisted all the previous efforts to share customer data.

What industries are leading the way in CRM implementations?
As in most leading-edge technology implementations, the financial services and telecommunications industries set the pace in CRM. Other industries are on the CRM bandwagon include consumer goods makers and retailers and high tech firms.

Which industry is behind the curve?
Heavy manufacturing.

Stewart Deck can be reached at sdeck@cio.com.