By Bruce McCracken
Ask a dozen business people about what customer relationship management (CRM) is, and half of them will give you six different answers and the others will admit to not knowing. Ask those same twelve business people if they need to, at least, consider CRM and you can expect over half to say yes, especially if they are a small to mid-sized company (SMB).
Reports abound with CRM failure rates reaching as high as seventy percent. The reasons why customers are alienated and offended, software becomes shelf ware, and CRM launches become a remake of 'Titanic' fall into three interrelated categories:
- The business does not know the people involved, their customers and employees.
- The company mistakes technology for the driver instead of a vehicle driven by the customer.
- The firm ventures into a realm beyond their internal expertise.
SMBs Poised for CRM
The Aberdeen Group in its June 2002 report, Customer Relations Management: Mid-Market Holds Surprises concludes, "CRM for mid-sized user organizations is still in the early stages. This low penetration level indicates that CRM adoption for the mid-sized market is just starting." CRM migration is projected to continue to for the SMBs as reported by Aberdeen in its November 2001 report, Worldwide CRM Spending Forecast and Analysis 2001-2005. The report segments businesses into four tiers by size.
The Aberdeen report reaches the following conclusions. "Tier 2 and Tier 3 show very close CRM spending. In, 2002, their U.S. CRM spending shares are 17.7% and 17.3%, respectively. Between 2001 and 2005, Tier 2 is expected to grow at a compounded annual growth rate (CAGR) of 12.2% while Tier 3 will experience a faster growth, at a 13.9% CAGR, which will lead to a market share higher than Tier 2 by 2005."
Hugh Bishop, senior vice president explains a factor in the ramping up of CRM for the SMBs:, "In this current environment, suppliers in this market are starting to look at their pricing strategy and product mix to make their solutions more available to the mid market. The smaller companies are using this to catch up, adding in capabilities that they could not get in 1998/9."
I See Said the Blind Man
There is an old adage that if you don't know where you are going;, you are going to wind up somewhere else. This applies to many new initiatives for businesses in non-core endeavors. Far worse many businesses do not even know where they are starting from, as they can't see the forest for the trees.
Denis Pombriant, vice president and managing director CRM for the Aberdeen Group observes, "The idea of understanding your own business requirements before you go out and look at a solution sounds like common sense. It is amazing how often we forget to analyze our needs before we buy. Frequently organizations forget to identify their goals, objectives and business problems and it is only later that they match the problems up with technical solutions. It is absolutely critical to identify your needs."
An effective CRM strategy requires foresight. Sandra Rathod, senior analyst CRM for the Sageza Group of Mountain View, California suggests that, "Companies tend to be more reactive than proactive when it comes to creating relationships with customers. Many SMBs do not have a clear understanding or vision as to what CRM can bring to their organization."
Pombriant adds, "If you go out unarmed, without basic information, it is natural for a vendor to define your problems in ways to where they can provide a solution like the man with a hammer who says all of the world's problems are a nail."
Rathod focuses on the smaller businesses regarding CRM, "Smaller organizations are so busy focusing on 'the business' that they often overlook things that could make their business run more smoothly and efficiently. I would also attribute this to the 'seat of your pants' mentality of many smaller business owners. They not only need a unique product/service offering, but they need to plan for the future and have vision. CRM adoption is often a second thought for smaller companies and they do not fully realize or understand the positive impact a CRM system could have on their company."
Who Are You?
While many businesses have mission statements, these can be images as opposed to realities in many instances. Corporate identity may be perceived in terms of commerce and industry with a disregard for the human value of culture. CRM orbits around people, people within the organization and its customers. Regarding the term Customer Relationship Management, the three words are in the proper order of priority.
Anne Marie Smith, assistant professor, management information systems at La Salle University in Philadelphia, Pennsylvania points out that, "One of the problems for many of the SMBs, is that they don't have a deep understanding of their own cultural expectations as an organization and how they interact with other organizations and people."
Rathod adds, "Another huge mistake that is consistently made is disregarding the real change that needs to go on within a corporate culture to really become a customer-centric organization. Often, the human factor is over looked by management."
Those farthest up the corporate ladder frequently make the strategic CRM decisions. They can be many layers removed from the actual personnel who will use the system and interact with the customers. Without involving the front line people in the decision- making process on how to do their job better, the odds of success may be less than the odds of resentment.
Christopher Fletcher, vice president research director CRM for the Aberdeen Group, explains that, "One of the biggest mistakes on the sales side is thinking that you can force software on people and make them use it. You are going to have companies with people who don't want to use the tools or have the skills needed. This is going to continue to be a problem. They put in software with the intention of generating reports for management and neglecting the needs of the sales force that actually use it."
Mirror, Mirror on the Wall
Predicated upon cultural fallacies or ignorance, many CRM initiatives are often doomed to not only fall short of expectations, but to boomerang. Enamored with technology, a highly touted, exclusively automated system can be rolled out by a business with disastrous results and customer resentment.
Rathod notes that, "Solutions that are supposed to create a more customer-centric company do not ever include the customer perspective. So, what happens is that the strategy and solutions are designed from an internal perspective of what the company thinks the customer wants or expects. The best way to design CRM strategy and solutions is to really talk to and listen to customers' experiences and perceptions, analyze the customer feedback."
Smith presents a scenario in customer service that is not an uncommon example of a system becoming more of a problem than a solution. A business may consider implementing a system "with a fully automated solution that will use smoke and mirrors with the hardware/software doing all the work without people. The people that would be interacting with it may find that onerous, objectionable or frustrating. Since you don't understand the culture that you are projecting or the culture of your customers, you might be inclined to go that route."
Rathod adds, "Strategy and vision must be formulated, and processes created. Processes that are customer-centric and will help delight customers NOT frustrate them. It is all about creating the WOW! And you certainly cannot WOW customers if you do not know what they want and how they think your company meets and exceeds expectations."
An imprudent implementation without discovery of the culture of the company and interaction with its customers can be very dangerous. No CEO wants to play the lead in a remake of "The Emperor's New Clothes".
Rathod poignantly gets to crux of the matter, "CRM is not a technology - CRM is a philosophy! So, it is key that customers are taken into account when considering CRM and that strategy and processes are developed to create the right kind of customer experience, then technological solutions (or outsourcing) can be considered and evaluated based upon the need. This is one of the most common mistakes made when considering CRM."
Ingredients in the Recipe
Defining an optimal mix of channel touch points in customer service can leverage a very positive ROI. The mix should include a mixture of high tech and high touch combinations with the customer having an easy option to choose the channel. Smith adds, "As they are part of decision process, they can decide on the level of support. That gives them part ownership into the process. This feeling of empowerment does engender customer loyalty."
Smith explains the advantages and appropriate automated high tech applications, "You can solve simple problems very easily with automation, and up to 80% of the problems are simple. The savings in human capital outweighs the cost involved in building the technology. Another benefit is that all of that information is captured and can be used for analysis."
Pombriant explains, "Because it so hard to keep people, many providers triage the easy calls and reduce the load. Many organizations are finding that helpers of 50% or more of the inquiries can be handled in an automated fashion."
Often the customer may know that the automated offerings will not address the issue, especially if the contact is based upon issues (more than one area of inquiry). Additionally some people simply don't want to talk to or listen to a machine. They must be offered an option for human assistance very early in the process with avoidance of automated redundancy.
Bishop points to recent history as a teacher concerning customer contact sans human interaction. "You have to have a solution that will allow the customer to interact by the Web, phone, email to be successful. The explosion of the dot- coms was because some thought you could be successful with one channel and that was not the case. It is critical that there is a human touch."
Once the human contact is made, the advantages of high tech analytics can still be harnessed as Smith explains, "The people who need the most attention become a more loyal customer when they can talk with a real human being. The person taking the call needs to be trained to take the appropriate data about the call for analysis. If they follow the guidelines, the integrity of the database is maintained. The more experienced and highly trained the call center reps are, the more they can participate in refining the automated processes as they can see patterns. The human analysis often adds a dimension that can be overlooked."
Sending Out an SOS for CRM
For the vast majority of SMBs, CRM is not a core industry. Lacking infrastructure, expertise, and resources, an outsourcing solution built around a solid business plan devised by an outsourcing consultant should be a very serious consideration.
Rathod explains "The important reason to use independent consultants is that a small company probably does not have the expertise to do these kinds of investigations themselves and it is often difficult to really hear the voice of the customer, especially if the customer is saying something that you do not want to hear."
A CRM outsourcing consultant can weave through the cacophony of vendors to the smorgasbord of outsourcing providers. With unbiased diligent discovery of the corporate and customer culture, the optimal recipe for channels and interaction levels can be balanced with cost and goals.
Chris Fletcher, vice president research director CRM for Aberdeen advises a serious look at outsourcing. "For most of the SMBs, the biggest issues involve marketing to and selling to their customers. I see very little resistance to, in fact, a lot of acceptance of an outsourcing model for marketing and marketing automation. The two most commonly outsourced segments are marketing and help desk." Pombriant adds that, "The outsourcing transition is pretty seamless."
Bishop notes the increase of outsourcing CRM in the future. "Another trend that is going to go along clearly is the inclination to, instead of purchasing the solution to deploy on their own that they are responsible for managing, is to pay somebody else to run it. The other trend is to outsource the call center."
Many organizations are very short sighted regarding CRM. Instead of assessing their CRM needs with a true cost/benefit analysis with an eye to the future, they take myopic view of only the costs in the present.
Pombriant explains, "Many people measure CRM by the same yardstick that they use to measure other applications. That yardstick tends to be oriented towards cost reduction and ROI. It should be noted that CRM is one of the few application types that cannot only reduce costs, but can also do a lot to increase revenues. We are looking at cost abatement side of the equation and not looking enough at revenue enhancement. The cost abatement side can give the benefit one time; revenue enhancement should stretch way out into the future."
As business moves into the future with increased velocity in a smaller world, what once was a fine line becomes a razors edge. There is rarely a question concerning the adoption of technology, as it is usually a forced choice. CRM is already a factor, even for those who choose not to adopt it. Wise objective choices will lead to business vitality. As for the alternative, there are many people who can impart a story that does not have a happy ending.
Bruce McCracken is a business writer with specialization in outsourcing. His coverage areas are primarily in IT, eCommerce, CRM, HR, and supply chain/distribution with focus on small to mid-sized companies. His work, useful links, and commentaries with guests may be seen at www.brucemccracken.com. He may be emailed at email@example.com.