Creating a Customer-Integrated Enterprise Drives Value and Builds Loyalty
The world of CRM is in the midst of a profound strategic shift. Recognizing the limitations of previous approaches to CRM, world-class companies in various industries are now launching customer initiatives from a fundamentally new perspective. The next generation of CRM will revolve around optimizing the customer experience, ensuring that each interaction not only meets corporate objectives, but also provides value for the customer.
In the past, CRM focused on automating the functions of various departments in the front office - first the salesforce, then the call center. These efforts often reduced costs and delivered new efficiencies, but they lacked a marketing-driven focus to understand and build the value of each customer relationship. More often than not, these CRM projects resulted in an undifferentiated customer experience - one that failed to build loyalty, strengthen profitability, or deliver competitive advantage.
Now, the customer relationship is at last being given the care and attention the term "CRM" has always implied. As opposed to focusing only on the automation of internal activities, the new generation of CRM is outward-looking and customer-facing. Indeed, the success of CRM now hinges on building a customer-integrated enterprise that embeds marketing intelligence into every customer process to ensure the customer experience is optimized during each interaction.
"Experience is the ultimate conveyor of value and is a major influence on future buying behavior," states Gartner in a recent paper, "The Value of Customer Experience Management." "A good customer experience encourages loyalty, while a poor customer experience can put relationships at risk, resulting in reduced wallet share and defection."
The Limitations of First-Generation CRM
Despite its customer-centric name, the first generation of CRM solutions left the customer behind. Early emphasis on automating the salesforce and the rest of the front office failed to integrate the marketing department. Indeed, there was no rigorous effort to develop, manage, and leverage marketing and customer intelligence. Lacking a holistic view of the customer's value and total relationship, these initiatives did little to improve the customer's experience.
This may help explain the high failure rates and significant disappointments associated with these efforts. Despite the commitment of significant resources to CRM initiatives, the customer ultimately remained dissatisfied and prone to turnover.
The disappointments associated with CRM can be largely understood by considering the limitations of first-generation CRM systems. Among the limitations often cited are:
- Focus on transaction data as opposed to actionable intelligence. First-generation CRM provided data about past transactions, sales pipelines, and call center talk times, but provided no relevant customer intelligence to help front-office professionals decide how to manage a customer interaction appropriately. Indeed, these systems captured lots of data about customers, but failed to provide necessary insight about customer value and behaviors.
- Focus on automating silos as opposed to enabling unified customer management. Even when there were effective marketing systems in place to drive customer intelligence, these systems were not embedded into operational processes to ensure every customer interaction was optimized. In fact, first-generation CRM tended to further entrench the silos of marketing, sales, and service instead of creating a unified front office that would cultivate relationships and manage customers across channels and over time. As a result of these silos, customer touch points were not kept "in sync" with other channels, resulting in a fragmented customer experience.
- Focus on internal activities as opposed to customer-facing processes. First-generation CRM revolved around increasing the efficiency of internal activities (especially those related to sales and customer service), but neglected to account for the customer's experience. No significant effort was made to embed marketing intelligence in customer-facing processes. This made it impossible to differentiate customers by value and needs - and to recognize them as individuals. As a result, the first wave of CRM has often strained customer relationships as opposed to strengthening them.
As a result of these limitations, today's CRM solutions have failed to improve customer relationships or loyalty in a meaningful way. Significant customer attrition or "churn" has become a fatal trend in many industries; some companies lose 20 to 30 percent of their customers each year. Meanwhile, it is becoming increasingly difficult to realize organic growth through cross-selling and up-selling.
New approaches are necessary to reverse these trends. The future of CRM is not about reducing call times, providing visibility into the sales pipeline, or driving organizational efficiency. While these goals remain important, they will not enable companies to address the strategic challenges they now face. Only by improving their marketing-driven ability to manage every customer relationship will companies bridge the gap between the promise of CRM and the reality of today's business framework.
Putting the Customer and The Relationship Back in CRM
Customers want personalized attention, consistent treatment across channels, immediate resolution of their problems, recognition of their value, and communications that are relevant to them. Only by bringing those goals into alignment with corporate objectives for revenue growth and cost savings will companies realize the high returns that CRM proponents have promised. Rather than merely focus on front-office automation, companies must focus on the customer and the relationship to ensure the success of CRM in the coming years.
The emerging customer-integrated enterprise designs its marketing, selling, and customer care processes around the experiences of the customer. It ensures its own business imperatives are in deep alignment with the customer's perceptions and goals. Whereas once the customer would be considered an external party, now the boundaries are blurred. The customer is actively and seamlessly integrated into the flow of business activities and processes. Marketing intelligence is leveraged to optimize the customer experience.
As Gartner states, "Every time a customer comes in contact with an enterprise, through any of its channels, the customer has an opportunity to form an opinion - good, bad, or indifferent. Over time, this collective set of customer experiences forms a picture in the customer's mind, which ultimately forms the image of the brand and its values. Enterprises that are serious about CRM are serious about designing and maintaining a quality experience."
In a customer-integrated enterprise, the marketing department has a central role to play. It must focus on managing the customer experience, ensuring that each interaction provides value for the customer and company alike. It embeds marketing intelligence in customer-facing business processes, confirming that each customer's experience is relevant and appropriate. Marketing becomes the conductor that drives and unifies the customer experience across every channel.
However, marketing cannot be successful in this role unless it is deeply integrated with sales and service to provide a "single face" to the customer. Collaboration and coordination become critical. Silos must be taken apart. Customer-facing groups must work in unison to provide a compelling and seamless experience - one that perpetually deepens the customer relationship.
Truly customer-focused companies have an opportunity to set themselves apart in powerful new ways. By enhancing the experiences of their customers, they strengthen loyalty and build their brands. By providing higher levels of value, they enhance or maintain profit margins - even as competitors are commoditized and abandoned by their customers. Companies that embrace this strategy lay the foundation for continual growth, particularly through up-selling and cross-selling to existing customers.
But customer-integrated enterprises need not sacrifice efficiencies and cost-savings to enhance customer relationships. To the contrary, these companies are gaining a long-term competitive advantage by simultaneously reducing operational costs and providing a powerful customer experience. Their ability to pursue both benefits in parallel is the secret to their success.
Best Practices for Building a Customer-Integrated Enterprise
As customer-integrated enterprises have discovered and demonstrated, the next generation of CRM is about providing new, enhanced levels of customer intimacy while, at the same time, reducing costs. Companies that want to achieve this competitive advantage need to develop five key capabilities. They need to: understand customer value; build customer intelligence; embed marketing intelligence everywhere; coordinate the experience across touch points; and break down departmental silos.
- Understand customer value. This is the current and potential value assigned to each customer based on profitability, potential growth, and other factors. Through such measurements, companies can tier their customers to ensure their most valuable ones are given appropriate attention, diverting resources away from less valuable relationships. Service tiering is central to cost management. It enables companies to reduce costs on clients that represent minimal opportunity, while concentrating on those that promise to generate the greatest returns. While such efforts were given short-shrift in the first generation of CRM, they are increasingly recognized as the first essential step to success in the next generation.
- Build customer intelligence. This is the information and insight that a company gathers over time and in the course of each interaction. This intelligence enables a company to determine in real time what messages or offers are most appropriate to each customer - based on preferences, priorities, decision criteria, etc. It also helps a company plan each interaction to ensure that the experience builds on the customer relationship in the optimal manner for that specific customer. For example, an up-sell offer may be appropriate for a new customer with a great deal of potential, while a retention offer may be appropriate for a profitable customer who represents little additional potential.
- Embed marketing intelligence everywhere. This is the ability to share customer intelligence - a "single view" of the customer's total relationship - throughout the organization. This will give professionals on the marketing, sales, and service teams the insight they need to manage the customer appropriately - in real time. Indeed, every customer interaction should be informed by the knowledge of a customer's value - and a customer's needs, preferences, and priorities. Call centers and Web sites must gather, embed, and act on this intelligence in order to provide truly compelling and personalized service levels. To make this possible, customer-integrated enterprises are centralizing their customer intelligence in a single location. They have found that today's fragmentation of such information makes it difficult to manage and coordinate. By centralizing the intelligence into a single marketing system, companies gain the ability to manage the information more effectively and support the various touch points in a more consistent and compelling fashion.
- Coordinate the experience across touch points. This is the capacity to communicate with customers across channels and touch points, ensuring the provision of consistent and appropriate experiences. This helps ensure that every customer interaction builds on the last one to enhance and expand the customer relationship. Each interaction must reflect the sum of previous interactions, but also the context of the current interaction. To build this capability, companies must be able to manage their customers across a proliferating number of channels - whether they are call centers, Web sites, or retail point-of-sale systems - to ensure the customer obtains a seamless experience.
- Break down departmental silos. Companies also must develop an organizational structure that ensures a unified customer experience. Managing the customer experience recognizes that CRM software can no longer be constrained to marketing, sales, or service silos. Rather, it requires solutions that seamlessly span functional silos to ensure every interaction is an opportunity to enhance the customer experience and enhance the value of the relationship. While marketing may design and coordinate the customer experience, the ongoing management of all customer relationships must be tightly coordinated across all groups within the enterprise and among its customer-facing partners. Customer-focused teams and professionals must work together to ensure the company presents one face over time and across channels.
Capabilities such as these shape and influence the customer's experience - even as they enhance the agility and productivity of the companies that build them. By focusing on the customer experience, the customer-integrated enterprise builds processes and empowers its people to manage customers with precision and care.
The Experience of Market Leaders
Success in the future will revolve around managing the customer's experience strategically. This new emphasis on the customer experience is not about ensuring every customer receives the best treatment a company can offer. Rather, companies must leverage leading marketing, analytical, and customer management capabilities to ensure every interaction is optimized - driving customer value while meeting their own business objectives.
When companies have the ability to analyze both a customer's value and objectives, they have the intelligence they need to ensure that each interaction is relevant and appropriate for that customer relationship. They also have the intelligence to invest customer-focused resources for optimal returns. The company's business objectives - to reduce costs, strengthen profitability and drive new growth - are brought into alignment with the needs, concerns, and aspirations of the customer.
As market-leading companies have found, this is the true promise of CRM - and this is the source of the dramatic shift that is now under way.
