Basics to CRM

Although CRM software can deliver a wealth of benefits, many companies fail to appreciate that technology is just one component of a successful CRM initiative. With the addition of Siebel CRM, Oracle’s experience with more than 5,000 CRM initiatives has shown that the most successful companies approach CRM as a complete business strategy, focused on improving the way a company markets to, sells to, and services a customers.

When implemented effectively, a CRM strategy results in greater employee, partner, and customer satisfaction and improved financial performance.

Oracle identifies the following components as central to any CRM initiative:

• Effective customer segmentation
• Integrated multichannel strategy
• Well-defined business processes
• The right skill sets and mindsets
• The right technology

Effective Customer Segmentation

Customer segmentation-the process of dividing a market into discrete customer groups that share similar characteristics-is a critical component of a CRM strategy. Customer segmentation allows an organization to understand which customers are most profitable and how to most effectively market to, sell to, and provide service to these customers. With this knowledge, a company can determine which investments will drive the greatest returns.

Segmentation begins with the development of the customer profile, which includes a rich description of the key characteristics of a specific customer, including both basic data (demographics, purchasing history, and so on) and information derived from analyzing the customer’s life cycle process. The customer profile encodes, for example, observations about which offers appeal most to the customer, which channel(s) the customer prefers, which product attributes the customer values most, how much the customer has spent in the past and is likely to spend in the future, and other issues of strategic relevance.

By analyzing the customer life cycle process, organizations can pinpoint significant differences as well as significant similarities among customers. The job of segmentation is to sort out which differences and similarities are most important across all customers, and then to divide the customer base into groups based on the relevant distinctions. Effective segmentation is greatly aided by the power of CRM technology, which gives organizations the ability to capture and analyze large bodies of timely data and to discern significant correlations among customer attributes. In addition, CRM technology provides a single view of the customer across all company touch points. Having this holistic view is vital to segmentation efforts.

In the past, because organizations had no easy way to capture, consolidate, and analyze customer data, their segmentation strategies were limited and often based on criteria of little strategic value (such as geography). With CRM technology, on the other hand, organizations can segment customers according to far more complex and less obvious factors, such as channel preference, profitability, buying patterns, and other meaningful customer attributes.

Integrated Multichannel Strategy

For a CRM strategy to be successful, a company must offer its customers multiple ways of interacting with the organization. Companies today can no longer compete effectively with only one channel.

Not so long ago, most organizations had one primary distribution channel. For example, consumers could buy General Electric refrigerators any way they wanted-as long as it was through a GE retailer during store hours. Customers could order products from L.L. Bean any way they wanted-as long as it was over the phone to the call center. In this world of fixed, single-channel distribution, customer relationships were relatively straightforward.

Today, however, market forces and new technologies are dramatically changing traditional channel structures. Whether through the click of a mouse, a toll-free call, or a visit to a store down the street, today’s customers can defect to a competitor with unprecedented ease. In this climate, a single channel simply cannot serve customers effectively. Complicating the marketplace even further, customers traverse channels in varied patterns-from the Web to the call center, back to the Web, and so on-while expecting to be recognized every step of the way in an ongoing dialogue with the organization.

As a result, organizations need a clearly stated, integrated, multichannel strategy that satisfies the following requirements:

• Aligns the right products to the right channels
• Balances customer needs and channel costs
• Enhances the customer experience

Aligning the Right Products to the Right Channels

Companies can use any number of channels to market to, sell to, and provide service to their customers. Options include field sales, retail outlets, call centers, resellers, the internet, and wireless platforms, to name just a few. In designing a channel system, a company must consider which channels are best equipped to support the company’s products and services, meet the needs of specific customer segments, and support each stage of the buying cycle.

For example, one online pet store, no longer a going concern, learned quickly that selling 50-pound bags of dog food to an older demographic via the Web was not a sustainable strategy. The costs associated with shipping the 50-pound bags to consumers priced the product out of the market, and the low internet usage among the target audience further limited sales.

Balancing Customer Needs and Channel Costs

Channel investment decisions are based on understanding two things: what value a channel offers to customers and at what cost. Channels must be evaluated in terms of their value proposition to customers and their costs to the company. Additionally, channel investments must be made with a strategic objective in mind, such as growing market share for a particular product or increasing overall revenue. Many managers have too quickly decided that a lower-cost channel must be more profitable and, therefore, all products are driven through that channel.

However, cost alone is a limited method of assessing channel strategy. A more thorough analysis should answer the following questions:

• Will the lower-cost channel effectively deliver value to customers?
• What type and proportion of customers will migrate to the lower-cost channel?
• Will the order or deal size be affected?
• How much will it cost to educate customers?
• Will the more expensive channel still be needed to serve some customers?

Enhancing the Customer Experience

Traditionally, companies operated under the assumption that building the best product was the key to gaining market leadership. However, with increasing product “commoditization” and increasing demands on customers’ time, companies are realizing that how they market to, sell to, and provide service to customers is just as important as what they sell. Customers demand the ability to conduct business with an organization on their own terms, and they do not want to have their time wasted by inefficient company processes.

To meet customers’ increasing demands, companies must take a couple of key steps toward enhanced customer satisfaction. First, they must provide customers with self-service options. Customers should be able to visit a company’s Web site at any time to check the status of a service request, reorder a product, or resolve a billing inquiry. Providing this type of service not only increases customer satisfaction, but also lowers a company’s customer support costs.

Second, companies need to ensure a seamless experience for customers across all channels. For instance, if a customer is trying to place an order online and encounters difficulties, the customer should be able to call a customer service representative and pick up the transaction where it was left off on the Web. A customer-centric organization will have this capability, while an organization that is not customer-centric might ask the customer to begin the transaction over again with the phone representative, wasting the customer’s time and the company’s money.

Well-Defined Business Processes

Automating an ill-defined or inefficient business process will only accelerate the pace at which an organization achieves poor results. A CRM strategy, therefore, must focus on redesigning customer-facing processes based on the perspectives and needs of the customer.

Each of these processes needs to be examined-not in isolation, but in terms of the way they are linked to other processes. Consider just three processes that are often poorly defined in the development of a CRM strategy: lead management, call routing, and service-ticket tracking.

Managing Leads

Lead management is the process of generating and or identifying a lead, qualifying that lead, and converting the lead into a sale. Within a multichannel system, leads may come into an organization from any number of sources: field sales, the call center, field service, a partner organization, or the Web. Given this complexity, organizations must clearly determine which person or department is ultimately responsible for closing leads, because this determines how leads should be routed. The organization also needs to determine how to define a qualified lead. Without a clear definition, leads of poor quality will be routed to the people responsible for closing them, resulting in frustration and lost sales productivity.

Call Routing

Many businesses-especially those organized by line of business-have not defined routing processes that can readily direct inbound callers to the most appropriate response person. The negative results include delays, frustrated customers, and abandoned calls. Therefore, before implementing CRM technology, organizations need to define optimal routing processes. Ultimately, a customer should be able to call into any point in the organization-from the front desk and the call center to the technical services department-and be routed to the appropriate person without being disconnected.

Service-Ticket Tracking

It is imperative that companies have clear business rules for managing inbound service requests. These rules should define exactly how resources will be dispatched to fix a customer’s problem and how status updates will be shared as the issue is being addressed. In many organizations, call center representatives are unable to track the progress of work being done by field technicians. This makes it impossible for them to keep customers apprised of a service-ticket’s status. The processes for sharing service request information should be clearly defined before automating those processes with CRM technology.

The Right Skill Sets and Mindsets

Because a CRM strategy requires a company’s various departments to work more closely together, it changes the dynamics of how people interact and how a company makes decisions. While CRM technology facilitates collaborative decision-making, this very virtue can create tension in fragmented organizations whose members take proprietary attitudes toward data ownership. Managing change is thus critical when implementing a CRM strategy.

The change management required by CRM entails the realigning of skill sets and mindsets. Teaching technical skills without changing attitudes will lead to poor user adoption-one of the recurrent hallmarks of failed implementations.

To support the culture change that CRM requires, many companies have found it necessary to realign their reward systems. This means, for example, that customer satisfaction scores and customer retention will carry more weight in the organization’s compensation program than customer acquisition. In addition, the organization may have to reconfigure its commission scheme to support a multichannel strategy. At Cisco Systems, for example, salespeople receive commissions for repeat orders that come in over the Web or through the call center, because Cisco Systems wants its sales force to drive as much business as possible through these lower-cost channels.

The Right Technology

The right technology is the final linchpin in a CRM strategy because it enables an organization to track every customer interaction, regardless of where, when, or how the interaction occurs. The right technology will satisfy the criteria explained in the following sections.

Multichannel Support

A CRM solution must provide an integrated family of sales, marketing, and customer service software applications across all channels, including field sales and service, call centers, resellers, and the internet. This creates a closed-loop system for capturing, organizing, and leveraging detailed information about customers, prospects, and partners so that every customer-facing employee and process operates from the same comprehensive store of logically centralized data: The right hand always knows what the left hand is doing.

For example, a field sales representative can use a laptop to connect to the corporate customer database before making a customer call and find out that the customer had earlier that day logged onto the corporate Web site and spent 15 minutes viewing several recently posted pages detailing a new product offering. Armed with this information, the representative can review the latest positioning information about the new product and prepare a tailored presentation.

Additionally, a consolidated customer data source lets an organization determine the preferences and economics of customer segments. Supported by this knowledge, an organization can determine which marketing campaigns and offers to target to which specific customers, how to design new products and services to meet customers’ additional or changing needs, how to best provide service and support, and how to reward and express appreciation to the organization’s best customers.

Industry-Specific Functionality

Regardless of the amount of pre-built functionality a CRM application offers, enterprises typically develop supplemental functionality so that their CRM solution fits their unique business processes and needs. The degree to which they must do so, however, depends largely on the number of unique requirements they have and the amount of pre-built functionality an application offers. Accordingly, organizations should select applications that offer extensive pre-built functionality to support the business processes for their particular industry. By scrutinizing the pre-built functionality available in a vendor’s offering, organizations can avoid needless costs associated with reinventing the wheel.

Scalability and Global Support

Many employees throughout an organization, including personnel in sales, marketing, customer service, and back-office functions, use CRM applications. In addition, increasingly large numbers of customers interact with these applications through online self-service channels. And, in the case of employee relationship management applications, the user base might include every member of the workforce. CRM applications, therefore, must be highly scalable and flexible enough to be delivered any way users prefer-in both hosted and on-premise versions, or in any combination.

In addition to scalability, CRM applications must also provide multilingual, multi-currency support as well as support for multiple time zones. With this support, global organizations can implement the applications in multiple languages while maintaining a single, unified repository of customer data across the different languages. This allows organizations, for example, to consolidate sales forecasting information across different global regions and to analyze data regardless of the language of the underlying customer interactions.

Flexible Deployment Options

Companies of all sizes utilize CRM technology to better meet the needs of their customers. As CRM initiatives expand across regions, functions, channels and markets, CRM vendors have introduced a variety of deployment options including web hosted, private hosted, on premise and combinations thereof. The selection of the correct deployment option is critical to the success of CRM within an organization. The table below provides some key insights to consider when selecting a deployment option including functionality, deployment time frame, available IT resources, budget and attitudes toward outsourcing.

Support for All Devices

Today’s organizations take advantage of a broad range of information and communications devices, including desktop PCs, laptops, hand-held devices, and cell phones. A state-of-the-art CRM system must support all of these devices, whatever the underlying hardware and operating systems, and must work seamlessly across devices. For example, users of mobile devices (such as laptops and hand-held computers must be able to easily and effectively synchronize information stored locally on their device with the system’s centralized database. Without this capability, mobile personnel will be out of sync with the rest of the organization, a situation that can significantly undermine sales effectiveness.