Customer Relationship Management. CRM. An acronym that draws a reaction from many senior managers these days, particularly in the Information Technology camp. A hunkering down and a change of subject.

It wasn't always that way. In the early 1990s the idea of a customer centric technology environment seemed sensible, even exciting, and a source of sustainable competitive advantage. The vendors leapt into the fray and the promise of a technology fix to drive a complex business structural change was irresistible for some.

We've seen the result; the floor is littered with CRM project failures, many of them spectacular. But the lessons have been well documented and history need not repeat itself for those organisations willing to apply some intellectual horsepower to the way forward in the CRM arena.

So we continue to invest in CRM and CRM is big business. Jupiter Research predicts that online CRM technology spending will grow from $2.3 billion in 2003 to $4.7 billion in 2008 - accounting for 25% of the $18.9 billion of overall CRM spending. [$NZ or $EASSumeUS]

Why? Because the need for effective customer management is nothing new. It drives growth; growth through repeat business and growth through referrals. Small companies do it to survive - the loss of a major customer to a small company may be a critical blow. Successful small companies build personal relationships to deliver these exact outcomes. The same imperative is driving large organisations.

However, large organisations need automation to deliver the same level of personalised attention as their smaller competitors because there are more service points and more people delivering that service. No longer a single point of contact. And waiting in the wings, a raft of traditional and new competitors waiting to cherry pick your most valuable assets - your customers.

Add to that the global context. We live in a time of accelerating change. For those of us driving business models forward, we are on the cusp of the most exciting business environment we have ever seen - or the scariest - your view depends on your appetite for risk and change. We are not, however, paid to take speculative risks with our business future, no matter how large the pot of gold at the end of the rainbow. So the challenge is to sift through the CRM options and determine a path forward that targets growth and delivers a degree of certainty that we will not fall on our swords.

Timing is the key. Knowing when to drive change and when to consolidate. Fortunately, the path to take in the CRM arena is very clear; your business model needs to place the customer firmly at the centre of your business universe. You need to present a unified face to your customers from any point in your sales and service network. You need to do this so that your customers feel understood, valued, and well serviced. Doing these things well will please them, and pleased customers will value your relationship, a value that exceeds the sum total value of the individual interactions and transactions that take place. A strong relationship is a serious piece of glue between you and your customers and breeds a level of tolerance that can withstand occasional operational failures.

So if you are not there yet, then consider the timing. Consider how far you have to travel. If you still base your business model on a single channel (your sales force) and you still base your metrics and business analytics on your product-set then be warned; you have a long journey in front of you.

The journey begins

Moving your organisation to a customer centric model is a journey. You can climb on board at many points along the way. The 'CRM system' is the last stage in the journey; this is one of the lessons learnt. Without the 'need' of a tool- set in your organisation, CRM is simply a solution looking for a problem. Hence the number of organisations with CRM systems in place and issues with low adoption. Because that is what CRM is - a tool set. As an analogy, EXCEL is another tool set - a great tool - it delivers a huge bang for your buck. But having EXCEL on your desktop alone doesn't deliver effective spreadsheets to drive your business. Instead, the user community sees the obvious fit between EXCEL and their problem and the rest is history. So if CRM is the last step, what does the complete journey look like?

Step 1:

The first step is your customer management strategy. Decide who needs to be managed and how you will go about it. Remember that the word 'customer' may need to encompass your suppliers, partners, sponsorship community, competitors and industry groups as well as those who buy your products and services.

Step 2:

Determine the end game. How do you want your customers to behave? Think about what constitutes a profitable customer in your model and what behaviours they exhibit. Decide how to drive changes in customer behaviour that enhance profitability. How will you tell your customers how to behave and how will you reward those who do so?

Step 3:

Develop a segmentation model that will allow you to differentiate your sales and service strategies. Move away from the one-size-fits-all model. Your segmentation model will underpin success in the CRM arena so think this one through carefully.

Step 4:

Look at how your product development strategies support your customer strategies. Make it easy for your customers to buy, buy and buy again from you. Look at product bundles, cross-sell and up-sell strategies to help your customers understand how they can enhance and extend the range of products and services they already have from you.

Step 5:

Decide how you need to organise yourself to interact with your customers. Look at the structure of people and channels. Look at the behaviours you need to encourage and measure within your organisation. Change your performance management approach to support your customer centric model. And don't forget to look at your sales team, how effective they are and whether they are driving you forward - your sales force will set the pace and the style moving forward.

Now you are ready for the final step, a tool set to support your customer management infrastructure. Without a tool set, your costs will skyrocket, as many of these elements are data and process intensive. Be clear that automation is the answer; many CRM system implementations certainly deliver the wrapper for customer data but very little in the way of automation; another lesson to be ignored at your peril. Concentrate on three core elements as you define your tool-set requirements:

The timing

Back to timing. How much work do you need to do? A lot, but while the whole concept is daunting you don't really have a choice?  Slowly but surely, organisations are developing their CRM strategies, their tool sets and getting it right. So if the time is not yet right consider when it might be. Don't leave it until those leading the charge are already out of sight and around the corner.

Building your strategy will deliver an enormous amount of confidence in your ability to move forward successfully. You may find you don't know as much about your business as you thought when it comes to the hard metrics needed to support strategy development. Don't just guess; put the metrics in place to provide a framework for measuring progress. Use the intellectual horsepower in your organisation to define a strategy that delivers sustainable growth, after all you know your customers and you know your market. Oh... and start now.

June 2003