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
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
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
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
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
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 customers 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
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,
- 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
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 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
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
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 systems 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
Chapter 9: Customer Knowledge and the Data
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
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 companys performance against the customers
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
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
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
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
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
The Automobile Association
The UKs 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.
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
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
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