CRM: Expert execution remains largely uncharted territory

Customer relationship management, or CRM, as those in the know like to call it, is a widespread term used in business annals at the moment. But those who use it effectively, and by that we mean actually doing CRM in an...

Customer relationship management, or CRM, as those in the know like to call it, is a widespread term used in business annals at the moment. But those who use it effectively, and by that we mean actually doing CRM in an integrated and efficient manner, are in the minority of those bandying the acronym around. While definitions abound, expert execution largely remains uncharted territory, and many proponents argue it’s a term that elicits more confusion within the business community than anything else.

‘Right now, we’re undergoing a bigger revolution than the industrial revolution. The sad part is, business people don’t get it,’ says Laura Pollard, president of the Customer Relationship Management Association (CRMA) Canada, a non-profit industry association launched late last year with a mandate to educate Canadian business around CRM and to promote networking opportunities among its 300-plus members.

‘The big revolution is this: we take products and services and force them into the marketplace, even if we do segmentation studies and predictive modeling. Where was the customer in any of this? What we should be doing is building our companies around the customer, and serving them – they can tell us how to build our organizations, and continue to evolve the business to keep them.’

According to the CRMA, CRM is ‘understanding all your customer groups, and using your internal organization to deliver what they need, when they need it and the way they need it.’

Insiders agree it’s a new approach to business – one that subsequently affects your strategy, your product and service offerings, your processes, your organizational structure and finally, the technology mix you use to support all of the above – and one that is definitely easier said than done.

A recent report by management consulting firm Deloitte Consulting, which reviewed more than 1,400 CRM initiatives across North America, revealed that a whopping 70 per cent of CRM implementations fail, generating minimal annual revenue gains or no improvement at all.

One of the reasons for that, says Cameron Dow, manager of solution markets at Toronto-based technology vendor SAS Institute Canada, is that although it’s a business strategy that you want to implement across the entire enterprise, to try and do that all at once is going to be next to impossible for most organizations.

‘The other factor is looking at return on investment – most companies don’t have the appetite to wait three or four years to get a return on such a sizeable investment. So what we’re seeing is a more conservative approach where you take, for instance, the marketing function, and you apply CRM applications to that [which fits into a broader strategy that you've mapped out that crosses the enterprise],’ he says.

Cap Gemini Ernst & Young recently surveyed execs from the sales, marketing and service functions within 181 North American companies across six industries. Each respondent completed two types of surveys – one general survey and one that was specific to its functional responsibility, says Paul Battista, VP, CRM services at Cap Gemini Ernst & Young Canada, of Toronto.

The wider the scores between the three executives (the more disparate their index scores), the higher the probability of real challenges, he says – in almost every instance, the organization expressed real challenges in the success of their CRM program and in trying to move forward on it. Organizations that had scores that were tightly correlated reported a much better success rate, he adds.

‘What we have drawn from that is that one of the key challenges of CRM is getting alignment strategically between marketing, sales and service executives around what the focus of CRM should be, what its key principles should be and how to understand and articulate different experiences in a seamless way so that customers don’t see three different experiences,’ says Battista.

For example, he says, a colleague recently finished paying off his mortgage and had received all the appropriate accolades from the service function of his financial institution. A week later, he received a marketing mailing offering him a discount on his mortgage renewal and other mortgage benefits.

Cap Gemini Ernst & Young’s A Case for Change: Customer Relationship Management Index Report – released last month – also revealed that 40 per cent of Canadian respondents (vs. 20 per cent of U.S. respondents) feel they have sufficient data to support one-to-one marketing for 100 per cent of their customers; 70 per cent of Canadian respondents (vs. 56 per cent of U.S. respondents) use customer profitability to segment the customer base; and Canadian respondents are more likely than American counterparts to view their service call centers as a way to build loyalty with customers and to maximize the overall value of their customers.

Most Canadian companies’ CRM efforts are still in their early days, with the current focus on strategy and planning vs. implementation. And success, according to insiders, is all in the approach.

‘A minority of Canadian organizations is doing it right. The CRM life cycle as a management trend and as a business strategy has been spoken about quite broadly in Canada for the last year or so,’ says Battista. ‘In this first phase, there’s been a lot of education about what CRM is. Unfortunately, a lot of that has been the push of some of the solutions providers – so in a lot of organizations, the definition of CRM has been equated with the particular technology solution that’s in vogue. That’s wrong.’

At the end of the year, the CMA plans to unveil a first annual, best practices in CRM in Canada study, complete with case studies, conducted by a third party, which should reveal a lot about the current Canadian CRM climate, says Lillian Murphy, VP, client services and business development at Toronto-based Carlson Marketing Group, who also chairs the Canadian Marketing Association’s CRM Council.

Moving forward, CRMA’s Pollard suggests organizations start by looking at and understanding their customers according to their needs, and their value, and identifying ‘clusters’ (differ from ‘segments,’ which are based on behavioral activities).

‘Value- and needs-based clusters are the key to CRM. If you don’t figure out a way to understand what little cluster you can own and meet the needs of and grow to meet the changing needs of, then you’re going to be out of business. And in order to do this, at the very top, management and staff need to be reoriented to what the customer-focus approach is.’

From there, she says, businesses should evolve the business model and redesign processes and interaction mechanisms to reflect this shift in focus – that includes revamping their functional departments (marketing, sales and service) to serve and deliver to the individual clusters.

‘People are infatuated with tying the channels together around the customer. But it’s not really about that. It’s about understanding who your customer is and what and where does this customer want to continue to have a relationship with you.’

Finally, the appropriate technology mix can be put into place, says Pollard. And within the technology piece, there are three areas of CRM: operational CRM, which includes internal operational systems that allow your people to have that 360-degree view of the customer interactions (customer-facing departments like customer service, sales and marketing); analytical CRM, such as data warehouses and systems that allow you to slice and dice the data you gather through interacting; and finally, collaborative or interactive CRM, which allows you to message and talk to your customers.