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Developing and Implementing a CRM Strategy
The integration of people, processes and technology



Customer relationship management (CRM) is firmly on the corporate agenda. Planning and Implementing Customer Relationship Management Strategies, a joint Business Intelligence and Renaissance Worldwide research programme, discovered that six out of ten companies had introduced CRM initiatives, and a further quarter planned to do so. The principal business drivers are:

• increasing customer lifetimes

• reducing costs

• improving efficiency.

The main obstacles to becoming customer-centric are poor processes and practices, especially in the areas of communications, service and delivery. Marketing in particular is identified as needing improvement, with systems a close second.

Each company will approach a CRM project from a unique perspective and will confront a particular set of critical success factors (CSFs). Where one organization may struggle to cope with implementing new information technology (IT), another may have a robust technology already in place. Use of external consultants may be critical for one business to achieve the process change, while another may target the reduction of external consultants as part of its plan.

The following text provides an outline of each chapte, and the key themes and elements discussed in this Report.

Section One: Overview and Critical Success Factors for CRM

Chapter 3: CRM Strategy Planner

The CRM strategy planner focuses on the main activities critical to planning and implementing CRM. It outlines core tasks to bear in mind and uses examples from the case study companies to detail how the challenges of implementing CRM have been tackled. Key questions are highlighted which will help focus and direct any CRM strategy implementation.

Chapter 4: Critical Success Factors For CRM

Generic CSFs can be defined for any CRM project and these are discussed in Chapter 4. These align around customer-facing processes and include:

• creating a customer culture

• adopting customer-based measures

• introducing effective IT

• segmenting customers

• developing an end-to-end process.

The degree of change required around each of these measures needs to be evaluated at the outset.

Many companies have customer-facing processes in place, such as complaints handling and customer service. Other initiatives may be less effective. For example, there is widespread dissatisfaction with loyalty programmes — in many cases, they do not create added value because they are not integrated with product or service development. It is important not to develop what is, in effect, a wish list of processes, however. Processes need to be actionable and economic.

Changing the business culture to be customer-centric can be a significant challenge because of the long-term dominance of the product view. It is vital to change the measures on which business performance is assessed — this also allows the organization to benchmark how well it is progressing towards CRM. Reporting is closely linked to culture, as it indicates what the company believes is important.

While customer satisfaction measures are relatively widespread, many companies struggle with identifying customer profitability. Fewer than half of all organizations have this measure in place (although one-third plan to introduce it), while more complex indicators such as lifetime value, are even less widely adopted. Aggregated, gross financial measures still dominate and need to be added to. Customer-defined measures also need to be adopted to evaluate performance against expectations.

CRM systems and technology have been a major focus and 40 per cent of companies have already implemented them. Vendor selection is critical: a robust process needs to be adopted, as the right partner will affect the outcome of the project. End-users need to be consulted and piloting organized, with strong management support and training to ensure adoption. The impact of internal IT issues can be overlooked, but may harm the outcome of CRM implementations unless they are carefully managed.

Gaining a better understanding of the customer base is an important step, especially the adoption of new segmentation practices (which seven out of ten companies are undertaking). The primary new approach is ‘needs analysis’, providing insight into how these differ by customer group. This may often reveal where the organization needs to make service improvements, or where it can achieve differentiation.

To be effective, the CRM process needs to be integrated end-to-end across marketing, sales and customer service. This may require the introduction of board-level representation of the customer. There are important human resource implications, such as managing the expectations created by the project concerning timescale, costs and results. High-level sponsorship and a steering committee can be central to this, working closely with the project team.

Section Two: CRM — Ten Key Challenges Chapter 5:Adopting a Multidisciplinary Approach to Scoping the CRM Project

A key aspect of the CRM project is that it is cross-functional, and requires co-ordination of both front and back-office activities. This is why the emphasis must be on the culture and process, rather than on the technology. Mapping the processes involved from a customer’s perspective when interacting with the company can be a useful way to identify where integration is necessary and what changes are required. As well as being cross-functional, CRM may also cross the boundaries of the organization itself to embrace partner organizations and suppliers.

Developing a sound business case that aligns the project with well-defined returns on investment is central to progressing CRM. Cost-savings are less likely from this type of project, placing a stronger emphasis on greater operational efficiency, increased revenue streams and longer customer relationships. The business case should identify both internal and external drivers of the shift towards a customer focus, and should propose solutions that address these issues.

All channels through which customers interact with the business should be considered, and whether the project will address all of these in one go, or whether phased implementation will be needed. A case should also be made for the appointment of a chief customer officer or other director at board level who will take responsibility for the new focus.

According to Business Intelligence research, 64 per cent of companies claim to have such an executive with responsibility for marketing, sales and customer services, and 60 per cent say their senior management understands cross-functional plans well. However, these figures fall considerably at middle management level, indicating a skills and conceptual gap between those driving the project and those required to execute it.

The strategy then needs to be handed to a programme management team whose task is to determine the right measures, processes and systems that will deliver against the objectives. Responsibility should also be taken by the team for the internal marketing of the CRM project and achieving buy-in to its goals and objectives among end-users.

One of the most important aspects of any project is adopting a structured approach to the programme. Many external consultants offer guided pathways towards CRM. It is more important that a structure is in place than which structure is chosen. By breaking the process down into component steps, it will be easier to monitor progress and benchmark against the overall objective. The steps involved will include:

  • people issues (gaining high-level sponsorship, gaining enterprise-wide
  • buy-in, managing expectations and training)
  • management issues (motivation and administration)
  • technology issues (selecting which processes to automate and choosing
  • the appropriate solution).

Of these, people issues should be given the highest priority.

Chapter 6: Customer Assets and Customer Knowledge

Although systems are not the driving force in CRM, they are key enablers. The customer data warehouse is at the heart of effective processes as it delivers the unified, consistent view of the customer which underpins the integrated process. Populating the data warehouse is therefore critical. A data audit should be undertaken to identify where customer records are held, their condition and accuracy, and how to extract and transform them. However, legacy systems may prove to be an obstacle. Organizations are generally poor at documenting how data is held and assembled, making data transfers a complex process. There will also be gaps in the data held and these will need to be filled by accessing external data sets. Use of infomediaries is also important to validate customer data.

Data decays over time because of dynamics in the population and business world. This makes a data strategy and maintenance policy central to the ongoing effectiveness of the data resource. Many of the variables held by companies are inaccurate, especially those which are vital to customer profitability calculations.

Data matching is a complex process and levels of matching achieved will vary considerably between sources. The goal should be to achieve the best level at an appropriate cost, as perfect matches are impossible and uneconomic. Customer data is not a unique asset and when matching with external data this is likely to emerge — each individual can be found on 40 other databases on average. Care needs to be taken when selecting a process, consultant or vendor that the solution matches the prevailing market conditions, particularly with regard to legislation. Europe and the US have fundamentally different data protection environments affecting what data may be acquired and how it can be used. Most of the CRM development work stems from the US and may not allow for a more limited customer knowledge component. Since customer data has to underpin the CRM process, this can be an important issue.

Data will be required at a customer, market and enterprise level. Early steps need to be taken to identify which information is already available and how it can be compiled into a central data warehouse. The biggest gap is likely to involve customer value and profitability data. Acquiring this should be seen as an important outcome of any CRM system that is implemented.

Event-driven marketing has become an important objective within CRM. New electronic channels make it easier to identify key event triggers and to analyze vast numbers of transactional records. Business rules need to be developed to define which events are responded to and to prevent over-contacting of the most attractive customer segments. Incentives also need to be developed to encourage customers to opt-in to contact programmes — so-called ‘permission marketing’ — especially within electronic channels.

In addition to leveraging existing data sources, strategies should be evolved for harnessing information from new channels (such as the Internet and digital television) as well as ensuring that data from existing channels (such as the call centre) is being looped into the customer information environment. Segmentations of customers and markets need to be dynamic in order to respond to changing conditions and newly acquired data.

Segmentation techniques should be continually refined and improved as the company becomes better at handling segment-driven strategies. Initially, relatively simple levels may be required but greater experience is likely to increase the abilities of all departments.

An important feature of putting customer data at the centre of the process is that it may reveal areas in which the company is underperforming but could not previously recognize the problem. This is a common experience once customer complaints and satisfaction data are linked to behavioural data. Areas of corporate stress or inappropriate processes may be identified for targeted improvements. Customer retention rates and lifetime values should improve as a result.

Chapter 7: Managing the People, Culture and Organizational Issues

Managing people issues can be the biggest obstacle to the success of a CRM project. An audit of existing processes and approaches is useful to identify areas in which the company is making it difficult for its employees to perform well and to gather their input on what would bring about improvements. This might indicate that a new customer management system is required, or that the existing system is not user-friendly and needs to be adapted to match the preferred process, rather than forcing users to work according to the system’s dictates. CRM does require cultural change, which can be very difficult for some departments and people to accept. Absorbing the customer focus as a core business value requires rethinking approaches which might have become habitual and which may be reinforced by other factors, such as incentives. Cultural change will require a much longer timescale than the technological change. An important consideration, especially for economic reasons, is likely to be whether the supporting resources are to be operated locally or centralized. Culture may also play a role here, especially within multinational organizations. Despite the drive for centralized resources, local implementations may be more appropriate to the predominant sales or customer service culture, especially because of language issues. Similarly, the opportunities for outsourcing some or all of the customer contact points should be addressed. Feasibility studies should be carried out to examine the cost, time and management resource implications. Both locality and outsourcing may have an important impact on the cost implications and business case for CRM. Return on investment may have to be based on corporate strategic goals rather than on specific improvements or revenue streams, as these can be hard to prove.

Chapter 8: Establishing End-to-end Processes

Business process re-engineering (BPR) is an unavoidable consequence of CRM, unless the business is one of the rare examples which is already oriented around the customer. It is vital to introduce new objectives based on customer measurements and to ensure that they cover every aspect of the enterprise. For example, delivering against consumer needs is the prime objective in only just over one-third of sales forces with customer needs as the prime objective are delivering. Volume metrics still dominate, especially sales volumes and gross margins.

Unless the process is changed across the business, however, CRM will simply be an expensive new initiative with no benefits. Linking processes will also ensure a more consistent experience for the customer. BPR may also bring about breakthrough performance improvements. Change management and process management techniques need to be adopted to guide the development of a customer focus, and to help transfer best practice and knowledge from each unit and department.

Chapter 9: Customer Knowledge and the Data Warehouse

The new processes should be clearly documented and accessible throughout the enterprise, especially by the use of a corporate intranet. The introduction of each technology component should also be stepwise and structured, as this will lead towards an integrated final solution rather than un-co-ordinated point solutions.

The data warehouse also needs to be an integrated repository of customer information, rather than a set of disparate feeds from operational systems. Unless this resource exists, it will be extremely difficult to drive the end-to-end process through. Access will be required to the data warehouse, with clearly defined access rights. The need to synchronize data between central, remote and mobile users should be considered within the technology solution. Users have to be persuaded to adopt the new data source, either by ensuring it is the only way of accessing customer records or by demonstrating that clear benefits will be derived from its usage.

Chapter 10: Developing a CRM Measurement Strategy

Many businesses are pursuing new metrics even if they are not considering CRM. However, it is central to successful customer-focused strategies that appropriate measures are adopted which will evaluate the company’s performance against the customer’s perspective. As well as hard measures of value and retention, softer measures also need to be incorporated and their impact on the bottom line demonstrated. Many organizations make the mistake of not establishing new measures before CRM is introduced. This makes it very difficult to demonstrate the benefit and added value of the new process. Key performance indicators are one approach, although care must be taken to ensure they are not simply deployed as a standardized checklist. It is important to measure what needs to be measured, not what can most easily be measured.

Benchmarking is also likely to emerge as an important new metric for the customer-centred organization. When considering which benchmarks to adopt, those which include a strong element of process measurement should be favoured as this allows causal links to be demonstrated with financial performance. Many companies do not even know their baseline metrics, including elements such as total marketing spend or composition of their sales force. This makes the introduction of benchmarking extremely difficult. Evaluation of marketing activities needs to be included: in many cases, this has been omitted even from existing metrics. Reporting of the new measures should be enterprise-wide and in a highly visible, accessible format (‘traffic lights’ and scorecards are popular approaches). Investment into CRM systems is rising: it is predicted that between $5 billion and $7.3 billion will be spent during 2003 on hardware, software and services for this purpose. Critical issues in selecting the appropriate solution include scalability, cycle times, and reliability of the vendor. With considerable consolidation expected among the 400 different vendors active in this arena, the latter is likely to become a more important factor over time. Systems integration will be a major aspect of IT steps taken in relation to CRM. Consideration needs to be given to point solutions which automate specific functions against broader, enterprise-wide applications. Few have yet been developed but more will become available. There may be an opportunity to leverage functionality within a solution designed for one function into another area, if the processes are similar.

Chapter 11: Automating Operational CRM

Marketing automation is a significant component within CRM, because this department has received little attention from IT to date and may not have a well-defined process in place. In this sense, it will not be an automation project at all. Process mapping will help to identify which solutions can be fitted to each function. Integration across new channels, such as the call centre and Internet, also needs to be considered when developing a specification.

Chapter 12: Developing Tools for Analytical CRM

While operational CRM systems are being widely implemented, less consideration has been given to analytical CRM tools. Without business intelligence tools to extract, transform and report on data, combined with analytical tools to run complex analyses, it will be difficult to derive the customer insights which should determine CRM strategies. It is important to define the reports that are required and ensure that they support the process objectives when drawing up the specification for these applications. One of the most significant benefits will be the ability to model customer behaviour and values and to make predictions of future activities. Predictive and propensity models can be used to decide which contacts and products are appropriate in each situation. Business users need to be involved to ensure that reports align with what is achievable and desirable, not just what is statistically valid.

Chapter 13: Enterprise-wide Integration of Applications

Complex IT architecture is likely to underpin CRM technologies, especially if an enterprise-wide implementation is being pursued. As well as the data warehouse and data marts, Enterprise Resource Planning (ERP) is likely to be necessary. This allows for data extraction and distribution between legacy and new systems around a common architecture. Since ERP has often been introduced ahead of CRM, this may influence which applications can be adopted as most are optimized for specific environments.

A rigorous evaluation process should be followed using a project team and a

set of objective measures. Functional, commercial and business evaluation are all important as the two partners will be working together for some time. Part of the assessment should be leveraging the ability to include e-commerce and websites into the solution. Future channels, such as mobile telephones and personal digital assistants may also need to be covered.

Chapter 14: Implementing and Rolling-out CRM

If the earlier steps of the project have been followed, implementation should prove straightforward. However, it still requires significant management skill and resources to keep on track, on schedule and to budget. Leadership, training and a clear implementation process will all come into their own at this stage. Incentives and recruitment policies may all need to be changed at this point to achieve the objective. The timescale is also likely to be longer than originally anticipated, especially in less mature markets. Benefits are likely to be both hard and soft, so measures of each need to be in place.

Section Three: Case Studies

The case studies contained within this Report are intended to present a picture of the problems encountered when pursuing a CRM project and the lessons learned by leading companies. They show the different approaches taken by companies from a variety of business sectors including the oil industry, the banking sector and pharmaceuticals.

The Automobile Association

The UK’s Automobile Association (AA) has undergone significant growth and development. In the late 1990s, the AA determined to become a customer-focused business through an extensive change programme that builds on what it regards as a foundation of key assets.

Bank of America

Bank of America has pursued a CRM strategy in response to changing market conditions and the challenge of new technology. Combining customer profitability with channel preference modelling, it is refining the products and services it offers and leveraging information to improve the effectiveness of its marketing.

Boehringer Ingelheim

Pharmaceuticals company Boehringer Ingelheim implemented a sales force automation system called Merlin to transform its sales and marketing processes and orient them around the customer, and to improve sales process efficiency.

McGraw-Hill Higher Education

With no existing CRM application in place, but with the vision of becoming marketing-led, a rigorous evaluation and selection process was pursued to identify the appropriate solution. McGraw-Hill followed a ten-step implementation process and by improving the way it manages its customer information, the company has gained competitive advantage in a highly crowded market place, increased sales revenues, and improved the management and efficiency of its sales teams.

Royal Bank of Canada

Royal Bank of Canada has been developing its CRM strategy to improve customers’ experience and involvement with the bank. The development of new metrics and analytical techniques has been central to its approach, allowing the bank to offer a more personalized service.

RS Components

A well-established supplier of electrical and electronic components sold primarily via its mail-order catalogue. With the cost of production growing, it was recognized that the Internet offered a significant new delivery channel and that developing a website would provide competitive advantage, protect the company from new entrants and reduce the cost-to-serve.

Shell Europe Oil Products

Shell Europe Oil Products has introduced a customer service centre-based strategy with the aim of becoming a world-class practitioner in the delivery of customer service.

Chapter 15: Future Trends in CRM

This Chapter discusses the use of infomediaries to validate customer data and how they are likely to play a far more important role within CRM than they have within direct marketing. Pooling customer data into a data ‘co-op’ will yield a better overall picture of customers’ lifestyles and purchasing behaviour. Increasingly, these ‘co-ops’ are organized on a commercial basis by infomediaries as a significant data resource for validation, segmentation, targeting and prospecting. There is still considerable resistance to this concept, however, especially in industry sectors which are less mature in their use of data for marketing purposes.



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