Customer Relationship Management (CRM) applications are designed to help you retain your customers. Studies suggest that a mere five percent increase in customer retention can boost profits by a massive 85 percent, and it’s no secret that the majority of customers switch allegiance to a competitor purely because of poor service. So any effort to improve service levels is definitely worthwhile.

CRM systems have an important role to play in creating positive customer experiences and building customer loyalty, so why has there been a surprisingly high failure rate for CRM implementation in recent times?

A CRM survey initiated late last year by the New Zealand Direct Marketing Association (NZDMA) revealed that CRM expectations were not meeting reality. A typical comment from senior management respondents provided a clue: “There is a lot of confusion around what CRM actually is." It seems there are a number of different interpretations.

Unfortunately many staff, sales staff especially, resist CRM systems because they fail to understand the long-term benefits that can result from a little short-term “readjusting". They see it simply as a fancy piece of software creating a lot of extra work for very little return.

They couldn’t be more wrong. If CRM implementation is to have the desired outcome, mindsets must change.

Benefits must be sold to all staff. Rachel Ah Kit, business development manager for Database Communications, points out that a good CRM system provides sales people with a much better targeted audience, “after all the more you know about a particular customer, the more complete the picture". Going one step further, staff will also have access to better information (such as transactional) to gauge the likelihood and frequency of repeat purchases.

“In short, they will know which customers to spend more time on," says Ah Kit. “It’s shifting the focus from revenues to profits. Concentrating on high-profit clients is a much better utilisation of time and energy."

Some diehards may trot out the argument that their brain is the best place to store customer information, but in reality there is no better answer than centralisation. “Our brains may make fantastic databases," suggests Ah Kit, “unfortunately they’re not networked. If somebody leaves, it costs the company dearly in lost data."

Identifying your most profitable customers is arguably the most valuable benefit a CRM package can provide. Ian Brooks, author of 10 Steps to Becoming Customer Driven, reminds us that the objective of any company should be to have more profitable customers who stay with your company for a long period of time. “Reps must look beyond their next sale."

Brooks advises businesses to rethink remuneration schemes. “Rather than rewarding new sales, remuneration schemes should be focused around customer retention and customer satisfaction, because that is what is going to have the biggest impact on profitability." He says sales staff concerned about the necessity for a CRM system, could be likened to standing at the back of a boat that has a gaping hole at the front. If a company’s overall customer relationship strategy is flawed, guess who’s going down with the ship.

In terms of staff resistance, according to Garth Laird, vice-president of Navision Asia Pacific, the majority of issues arise when there is a lack of senior management support. “The project may have been an initiative driven from IT or sales management without a proper sponsor or an appropriate drive from top management to give it power and promote the virtues of it."

This was borne out by the NZDMA survey, where a majority of senior management level respondents exhibited an 'introductory’ level of understanding of what a well implemented CRM programme can achieve.

Ah Kit says it all comes down to getting a total 'buy-in’ from the company before any software gets installed. “Get key staff involved in the development process, and have them provide input on potential improvements, to ensure that the programme meets your overall business objectives."

Successful CRM system implementation is all about teamwork, and not attempting to force change on people too quickly. CRM is a “crawl, walk, and run" application that should evolve over time. Ongoing communication and consultation is also critical.

“The best approach is to get a team in place; get sponsorship from senior management; define both business and technology objectives; and review your organisation’s requirements," says Laird. “You need a team of people from the CEO through to IT who are going to own the system. If you have the CEO of a mid-market company involved and a key sponsor, such as a project manager, the chances of success will increase by at least 50 percent."

He says an organisation’s CRM system requirements must be carefully analysed, from a management, staff and user perspective. “For example, Joe Bloggs in Wellington may want the system to invite people to a regular event; while a guy in Auckland wants a simple mail merge. Just getting these two disparate requirements from users means getting good buy-in from the start. It results in delivering a product that actually meets their needs rather than just taking an application out of the box and plugging it in."

Integrating existing “back-office" applications with “front-office" CRM solutions can also be a major downfall for companies, wasting thousands of dollars. Integrated back-office/front-office products will facilitate much easier implementation and acceptance.

In recent times, many CRM solutions have been re-engineered to take advantage of the web. Organisations can now implement CRM on a web server and have people log in on standard Netscape or Explorer browsers. This saves installing software on their PCs and guarantees that everyone is using the same database and version.

It is predicted that in 2002/03 all applications will be web enabled and much more portable (to PDAs and mobile phones). There will be a trend towards component-based software, and while CRM systems will continue to be adopted across the board, the biggest growth in sales will be through SMEs.

Sales automation will also accelerate as synchronising barriers come down. Web-enabled mobile phones can already connect with central CRM databases for accessing phone numbers, emails and addresses while on the road.

Getting the most from CRM

Selling the bigger picture benefits to internal users is not always easy, says Lloyd Thomas, a CRM specialist currently implementing a CRM system for Unisys.

“In our case, bigger picture benefits included forecasting and making clients visible on a global basis. Partial usage isn’t an option, so usage of the system is non-negotiable and initially has to be enforced," he says. “This means you have to be extra-responsive to staff feedback, and ensure that all appropriate support mechanisms are in place for handling transition, training and 'how to’ issues, and for dealing with complaints. All suggestions for improvement are considered for implementation and many are put in place."

Thomas says there are various ways of enforcing usage, the most common being to change business processes to require the CRM tool. “For example, monthly reviews may be based on a CRM report - no up-to-date CRM report, no monthly review. As the longer term and bigger picture benefits kick in, then usage of the tool will become embedded and routine."

Defining a set of objectives to encourage the use of a CRM system is vital for success. “A short-term objective may be that your top 20 customers will be on the system within one month," suggests Navision’s Garth Laird. “While a long-term objective may be that after 12 months, the sales closure rate is increased by 10 percent across the board."

The next step is to get staff to buy into those objectives. Tell them what the CRM solution can do for them. How it will increase their productivity and effectiveness in dealing with people. And for those sales people who are perhaps a little overprotective towards their data, there are applications that allow companies to segment different sales data so that only certain people can view it. “However, there’s no hard and fast rules for convincing staff that their data is protected. They just have to realise that they’re part of the overall project,' says Laird.

Lifting the lid on CRM

Sponsored by Microsoft New Zealand, Pivotal Corporation and Ceritas Digital, a New Zealand Direct Marketing Association first-of-a-kind CRM survey targeted 800 companies. Key findings revealed:

• Some 86 percent of respondents have implemented or are in the midst of implementing CRM initiatives, with customer retention the prime motivator.
• More specifically, 82 percent stated the desired goal of CRM implementation was to retain customers, 51 percent said this was being achieved.
• Likewise, of the 75 percent of respondents who cited increasing sales to existing customers as their central goal, only 35 percent said this was being delivered upon.
• There was also a divergence of opinion between marketing and IT respondents on what parts of their CRM initiative were working and not working. Fifty-five percent of marketers said CRM definitely improves customer retention, while just 35 percent of IT respondents agreed. The concern is that a number of companies lack a champion to coordinate CRM efforts, which makes it difficult to measure the success and failure.
• A majority of senior managers exhibited an 'introductory’ level of understanding of what a CRM programme can achieve. According to Ceritas Digital’s Michael Friedberg there must be more training and education forums to build knowledge.

A common response was that it is wrong to assume CRM is simply a piece of software or add-on application, when it is really a business strategy that should be owned and driven from top level management down. “It’s about changing a company’s cultural mindset" was an indicative comment.

And then there is data warehousing

Data warehousing seems to be big and getting bigger. It is also no longer just the preserve of the big corporate players.

Recent statistics from Gartner Group say that data-warehousing and business intelligence systems have become a US$30 billion a year industry globally. In New Zealand the major data-warehousing player, Oracle New Zealand, says it is reaping many millions of dollars each year from the sector. The company’s national manager for i-platforms Carol Lee Davidson expects continued and strong growth.

Oracle for one, is specifically targeting the smaller and medium size enterprise sector with its integrated suite of web-based data-warehousing tools and Davidson says DW tools are increasingly within the reach of smaller companies.

So exactly what is data warehousing?. e-Business information portal iStart (www.istart.co.nz) defines data warehousing as a database repository designed to support an organisation’s decision making. It is batch updated and can contain enormous amounts of data which typically includes customer transactional history.

In New Zealand, 'Business Intelligence’ or Data Mining’ tools from companies such as Cognos, Oracle, Progress Software and Teradata are used to “dig through" this information uncovering patterns and relationships contained within the business activity and history. It is the extraction and reporting of this information that, when put in the hands of management, can help organisations with their strategic and competitive positioning.

iStart says that typical benefits cited include the early ability to identify top customers, relative product-line profitability, demographic trends and fine-tuning of pricing policies to gain market share.

Oracle’s Davidson sees data-warehousing systems as allowing companies to hone in on the anomalies in their data which in turn lets a company predict market trends or look at customer retention and make substantial savings.

“Data warehousing used to be like teenagers and sex - talked about a lot but not much was happening."

Today though, she says, the new systems are much more affordable. For instance Oracle can install a leased data-warehousing system from $1200 a month or if a company intends to buy a system, prices can start at around $4000 a month paid over 18 months.

If you are thinking of implementing a data-warehousing system Davidson says the questions you must ask yourself are:

• What are the most important goals for your business this year and how can you measure those?
• Look at who is accountable for achieving those goals and how that person or persons are going to be accountable.
• What business processes are most important for your continued business success?
• Can you approximate the life-time value of each and every customer. Davidson says this is a huge factor. Businesses must know, in terms of their customers, who are the good, the bad and the ugly.
• Can you readily analyse product sales across geographical regions and distributors?
• Can you readily analyse customers across geographical regions?

Glenn Baker is a New Plymouth-based writer.

Email: glennb@xtra.co.nz

By Glenn Baker.