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What is CRM, other than Customer Relationship Management?
There are many definitions out there for CRM and you will notice that you get a different answer every time you ask, "What is CRM?" The BASIC definition of CRM is to "combine technology and business strategy to give an organization a 360 degree of their customers in a way that continually enhances and strengthens the relationship." CRM makes the relationship with a customer/client geometric as opposed to linear. There are three main areas of the geometric loop that CRM addresses. These three areas are Marketing, Sales Process/Sales Force Automation, and Customer Service/Care. At all times a customer is in any combination of these three areas. CRM is used to increase your customer base, provide exceptional service, increase customer satisfaction, improve customer relationships, and create loyal customers that make repeated or related purchases. Even if your product truly is a one time purchase, then effective CRM will still generate referrals.
The most important word in that definition is strategy. Although it may be very hard to do, you can have CRM without technology, but you cannot have CRM without a solid business strategy. Technology is the “add-on” to CRM that makes it faster and more efficient. It amplifies the strategy, whether it is good or bad. Most businesses think they have a strategy, and they do but it is not necessarily a good one which is part of the problem. The strategy has to be a sound business strategy that is agreed upon by everyone in the organization. Understanding the strategy is imperative for anyone who touches the account in any way. Strategy also has to be agreed to, up and down the organization, especially throughout upper management. The strategy must be formulated by the people who best understand and are most affected by that segment of CRM. Successful CRM requires at least three separate strategies: Marketing, Sales, and Customer Service. The first two most businesses already have.
The first component of CRM is the marketing strategy. Most businesses have a marketing strategy but with CRM that strategy may be more finely tuned to focusing on the ideal customers as well as target markets and audiences than the businesses competitive advantage.
The second component of CRM is sales and sales force automation. Here again, most businesses have a sales process and an existing sales strategy of some form. However, with CRM that strategy also is refined and the sales process is enhanced so that the benefits from the CRM strategies are higher profits and quicker close times.
The third component of CRM is customer service/care. This is an area where most businesses that do not have automatic processes also have no set strategy. Any business that provides service to its customers must provide good service that distinguishes them from the competition. If not, that business will eventually cease to exist. The problem is without a set strategy that is adhered to by the entire business the customer service will be inconsistent at all levels. When various people are dealing with a single account and there is no strategy or way of balancing what's going on then the resulting inefficiencies can lead to customer dissatisfaction and defection.
Building and maintaining customer relationships is critical to holding a competitive advantage and staying ahead of your competition. According to the Gartner Group, enterprises that fail to establish strong relationships with their customers will erode their competitive positions by 15-20% annually.
How strong are your customer relationships? How satisfied are your customers? Do you provide them with the best service available? OK, so the answer to these questions are, "Great", "Very", and "Yes", how would the customers that you have in mind answer the same question? According to Gartner, 70% of enterprises believe they provide their customers good service while only 46% of their customers agree. Who else in your organization touches that account? A "touch" is any communication or interaction between someone in your organization and anyone in the customer's organization. That can be a service technician, a support person, even someone in payables asking about a late payment. Now, how are your customer relationships? How satisfied are your customers? Do you provide them with the best service available? Do they like you and your company? CRM makes sure that you and your customers are on the same page and both get what you expect out of the relationship.
The technology side of CRM pulls all this together so that various people in the organization can see what’s going on with each individual account and understand the strategy behind it.
Why use CRM, some common benefits of CRM
There are many benefits that stem for the common features of most CRM applications. Here is a partial list of some of these features and benefits. One note to remember is that Contact Manager applications are not CRM, but CRM has Contact Management built into it.
Features – Benefits
Have a unified database to share all prospect, customer, vendors and competitor information that everyone who needs to see it can see it. - Having all of your important customer information in one place: priceless.
Have a system in place that matches how you run your business, track the data you want tracked and be readily available at any time. - Saves time and reduces employee stress and aggravation of having to learn new ways of doing things.
Have the ability to know exactly what’s going on with a prospect or customer at any time. When someone is going to contact a customer there should be no surprises. That person should be armed with information about everything going on with the customer: the good, the bad and the ugly. - Don’t walk into a hornet’s nest; instead walk in as a hero! If there is an issue with a customer, you better believe they expect you to know about it and either have a solution or be well on way to getting one.
Use automatic reminders to see what you need to do next. Do you need to follow-up on something or with someone? Are there marketing, sales, or customer care tasks you need to work on today? - Be more productive with your time and more effective at your job.
Never ignore follow-up again when it comes to a prospect or a customer. Have automated processes to direct you who to talk to and when, and do this based on your schedule. - Follow-up in a timely manner helps increase customer loyalty and gain new customers. Weigh the same amount of time it takes to follow-up against the lifetime value of a customer to see if it is worth the effort.
Give management and other people who need to know access to the deals in the sales pipeline at any given time. - Management decisions and adjustments can be made much quicker by using real-time information. GoDaddy.com does this on an hourly basis and makes changes immediately.
Analyze lost sales to see where and why you are getting beat so you can fix the problem. Is it to the same competitor, is it by product and are the losses for the same reasons? - Increase sales productivity and revenue by making the necessary adjustments to reduce the number of lost sales.
Spend more time with your customers and prospects and less time on administrative tasks. A CRM system can help save you time and money if it is easy for the sales and service people to use. - Increase employee productivity, sales people need to be selling and service people need to be serving, not fumbling around entering information in multiple places.
This is a list of some of the common features of a good CRM application and the benefits that come from the feature. The true benefit you derive may be different; and, of course there are other features and benefits you will see that relate to your business.
Customer Relationship Management has been around for a long time. As long as there has been commerce and business trying to sell to either consumers or other businesses, there have been marketing, sales, and customer service. There are as many claims to the first use of the term CRM as there are definitions for it. But the actual term Customer Relationship Management (CRM), started being used in the mid to late 90’s and was in full stride by 2000.
My earliest involvement with any CRM type application was a program I developed in the mid 80’s. I have to admit that I never used the term CRM or Customer Relationship Management. I had already developed a country club accounting application and as an add-on to that I developed an interface to a fine dining system, which was one of the first PC based cash registers. Part of the uniqueness of this application was the fact that the accounting software was running on a Digital Equipment Corporation (DEC) Micro VAX system. What made this a CRM type application was that the server could enter the member’s number on the fine dining system and it would request information from the accounting system. We were able to supply the server with family information such as the names and birthdays of their spouse and children along with their favorite food and drink information. I don’t know that I was the first person to design such an application but I was asked to give a talk on the concept to all the North America dealers for that manufacturer at their annual conference. That showed that information is power when used in the right way and within a couple of years that was common practice in the country club industry. I don't think anyone knows for sure where the term CRM truly originated, but no matter where it came from it is here to stay and will only get bigger and better.
What does the future hold for CRM?
In spite of having a somewhat unjust reputation for numerous failures, the future for CRM looks very bright. IDC has predicted that worldwide CRM will be a $101 billion industry by 2007, and that application sales alone will reach $11.4 billion in 2008. IDC is the premier global market intelligence and advisory firm in the information technology and telecommunications industries. Every business will be forced to use CRM if they want to remain competitive in their industry.
Technology has advanced to the point that it should not be viewed as just office equipment but seen and used as a competitive tool. Successful businesses will recognize this and formulate strategies that will make them more competitive in Marketing, Sales, and Customer Care and integrate them into a CRM application. As long as businesses understand the importance of business strategy and work with applications that will conform to their strategic position they will have successful CRM implementations. There will be many established businesses that have been around a long time and very set in there way of doing things. If the management teams of these businesses do not recognize the change in dynamics of technology and the power of successful CRM implementation, they will be crushed by smaller competitors.
CRM can help almost any business that needs to maintain a relationship with one or more groups of people. The most obvious use of CRM is in a sales situation, either business-to-business or business-to-consumer. CRM can also be used where other relationships need to be managed such as donors, contributors, or members. So how can CRM help your business? Do you want to grow your business? Do you want more customers or more sales? Do you want to be able to provide a better level of customer service? Do you want your customers to be more loyal to you? Do you want your customer to always think of you when they have an opportunity to refer business? Do you want your current customers to purchase more products, more often? Do you want to make sure that everything that needs to take place does, and nothing falls through the cracks? Do you want an increased number of sales opportunities and make sure that all of your sales opportunities are followed through to completion? Are you in a competitive industry and want to stay ahead of your competition? These are some of the questions to ask yourself and if the answer is "yes" then CRM can definitely help your business.
First and foremost CRM is a strategy and without a sound business strategy CRM will be ineffective and fail from the start. The technology compliments the strategy and makes it happen faster and more efficiently. The most important part of the technology is the CRM application, which is the program to make it all happen. CRM has a contact manager built into it, but contact management software is not a CRM application. Different CRM applications have a tendency to cater to specific marketplaces where they work best but not necessarily anywhere else. Some CRM applications are more flexible than others and have more customization and reporting capabilities but what is consistent is that all CRM applications will address the same three segments of Marketing, Sales Force Automation, and Customer Service. There is a wide range of pricing for CRM programs which start anywhere from a few hundred to a few thousand dollars per user. The functionality differs greatly between the type of CRM application that will work for your business as does the time to implement.