In CRM, Just Do the Math: 1 + 1 + 1 = Profitability
What comes around goes around. In the good ole' days of small towns with one little mercantile, the storekeeper knew customers by name, knew their needs and preferences, and knew which products they'd buy this week. Decades passed, and life was modernized. The advent of mass marketing and mega-shopping centers entered the scene. Slowly, as businesses began to focus on volume and selling to the masses, they could no longer distinguish between who was a regular customer and who was just passing through the store. No one was known personally; no one received individual attention. Then the great era of the Internet began, with customers demanding personal services, individual attention and customization. Businesses needed to re-establish 1:1 relationships with each customer.
The Internet - with its 24-hour, seven-day-a-week access, real-time customer interaction, and personalization technology - has opened new doors for businesses in terms of customer service and satisfaction. Today, businesses are rediscovering the importance of the storekeeper approach of knowing each customer by name and meeting his or her individual needs. As a major part of this re-introduction to their customers, companies are spending millions of dollars on Customer Relationship Management (CRM) systems to capture, harness, and utilize a customer's critical data. In fact, a recent study by AMR Research concluded that 87% of companies are investing more on CRM this year than ever before. Additionally, several large U.S. corporations will spend more than $250 million on CRM over the next two to three years, according to CRM Forum.
With these large investments, issues have surfaced in terms of quantifiably measuring the payback. The ROI debate rages on; where is all the money going? Is it worth the investment? Can quantitative metrics be established for CRM programs? What are effective measuring tools for CRM?
The Internet, general technology, and the renaissance of data are fueling the opportunity for companies in any industry to service their customers more personally and intelligently. Internet Service Providers (ISPs) are no exception. To provide the critical service of connecting people to the Internet, ISPs are focusing on using CRM techniques and drawing on a unique perspective with online subscribers, while keeping an eye toward delivering profitable results. With tech-savvy customers demanding a reliable, quick Internet service, ISPs face opportunities and challenges in delivering a 1:1 customer experience; it may be helpful for companies in other industry segments to consider CRM from an ISP mindset.
One Customer at a Time
An obvious marquee of successful businesses, whether online or offline, is the ability to develop long-term trust and loyalty with customers. To be successful, ISPs must go beyond superficial customer-centric policies - building a strong customer relationship must be part of the company's very fabric. For that reason, CRM must always be a focus.
Whether recognized by the CRM moniker or just plain "above and beyond customer service," innovative ISPs are focusing on strong customer relationships and serving customer needs as close to the individual level as the company profitably can. Several CRM initiatives gaining ground among ISPs and other technology companies demonstrate time and time again that the customer is first.
Many ISP and other technology companies, faced with rising costs of acquiring new customers, increasing churn and pressure from the market to turn a profit, have taken aggressive measures to differentiate themselves based on excellent service and satisfaction of customer needs. EarthLink and other companies seeking to be innovative have appointed Chief Customer Officers (CCO) charged with representing the customer base at the executive level of the organization. The chief customer officer acts as the voice of the customer - raising customer issues within the company, understanding and managing the user experience, and creating new programs to meet the needs of the customer. As the CCO role has developed, there have been correlating needs in other parts of the organization, such as MIS, operations or customer service, where other customer-focused or CRM-supportive positions have developed as well.
Another innovative way companies can deploy CRM is to proactively reach out to customers through regularly scheduled outbound calls. For instance, ISPs are calling customers who haven't used their account soon after sign-up to ask them if they need assistance getting started. This tactic is one way to initialize the customer relationship - letting the customer know that he or she is important to the company. Such tactics serve to build trust and rapport.
In addition, continually surveying customers to seek their feedback on how a company is performing can help companies better understand the needs and requirements of each customer. Such surveys seek to illuminate the customer experience across all stages of the customer's life. These surveys rate the level of customer satisfaction and generate real-time customer feedback.
Companies deploying CRM strategies would be wise to keep detailed records of all subscribers' interactions with the company. Such data allows support representatives to be aware of customers' previous calls and to have at their fingertips a variety of tools to better assist with customer questions and anticipate future needs.
One Program at a Time
To be successful and profitable in the CRM arena, companies must start at the corporate level with a clear, long-term vision for the role of CRM within the organization. Once that overarching platform is established, CRM programs should be tested one program at a time to validate the approach and generate immediate ROI.
Like any prudent business endeavor, CRM programs also must positively impact the bottom line. A good goal for any CRM program is to make available and use all the data necessary to provide personal-level service to each customer, while generating profits for the organization.
Companies deploying CRM initiatives must establish standards or goals for CRM measurement in the planning stages of each specific program - prior to implementation. In the past year, META Group reported that less than 10% of large companies with CRM deployments could measure a tangible ROI. Why? Too many companies are looking at CRM at a macro level - annually, enterprise-wide, or as a huge capital investment in a complex system. When organizations look at the CRM "system" as a whole, it is hard to identify individual benefits. Thus, that approach isn't effective. Without specific, measurable, short-term goals, CRM programs will be short-lived.
Some industry pundits are comparing CRM with TQM (Total Quality Management) of the late 1980s. Companies invested millions of dollars in TQM software, hardware, and programming. The result for many companies was little to no benefit. How could that happen? Companies couldn't get a handle on what TQM was or what it should offer. It sounded like a great idea, but in many cases there was a lack of specific goals or measurement mechanisms, or even the understanding of what to measure or how to measure. Thus the programs floundered, and companies lost money, rather than gaining profits. Eventually, companies lost the vision for TQM. If CRM initiatives are not proven to deliver specific measurable results, CRM will suffer the same fate.
It would be quite simple if one master checklist of successful CRM metrics could be established; however, that model wouldn't work. Each company must establish its own measurement criteria for each program - since each combination of market segment, industry dynamics, customer base and product line is unique, each combination requires unique parameters and success criteria.
In the ISP market, critical metrics may include:
o Customer Satisfaction & Loyalty - As the saying goes, the customer is always right. ISPs rate their success on satisfying customers and establishing a long-term relationship. Tracking referrals is one way to gauge this success ratio. Referrals are the highest compliment a customer can make and serve as a key sales channel in the ISP space.
o Churn Rate - In the ISP market, the level of turnover in the customer base is a critical benchmark. It costs more to acquire a new customer than just keeping an existing one happy. For instance, according to Boston Consulting Group, in the financial services industry it costs $6.80 to market to an existing customer online versus $34 to acquire a new customer. EarthLink's focus on retaining its current customers adds long-term value and profitability, but the key driver is to serve the customer well.
o Profitability - As with any corporate program, CRM must deliver financial results for the organization. This metric should be viewed from the fundamental level. What is the ratio of dollars spent on people, training, systems, etc. vs. the customer benefit? Establishing profitability measures for each CRM program at the outset keeps the initiative on track with well-defined benchmarks.
The task is clear. Standards of measurement must be applied to each CRM initiative prior to deployment. The Internet medium poses both opportunities and challenges in terms of CRM. The Internet allows customer data to be more easily collected, tracked, and analyzed, which demands that ISPs continue to act cautiously and responsibly with the information. Any company embarking on CRM to better service its customers must make an ongoing corporate commitment to customer privacy and protection as a hallmark on which customers can rely.
In addition, Internet customers are clearly in control with myriad choices, more freedom, and higher demands and expectations about how they want their information and transactions handled. As customers become more savvy and experienced - so, too, must businesses.
One of the challenges in marrying the Internet with CRM programming is the vast amount of data itself. Companies must understand where and how to gather the data - how much data should be collected, how much should be analyzed, how should the data be stored? Building state-of-the-art data warehouses to collect and mine data fields is a journey, not a destination - the job will never be finished - as new customers sign up each day, and customers' needs are constantly changing.
One Step at a Time
As with all sectors of technology, CRM will evolve over time. Effective CRM programs aim to be in step with each customer along the way. Neither racing ahead nor lagging behind, CRM can help companies focus on building business relationships that maximize value to each customer, without pushing the customer along at a set pace. Each customer is allowed to develop a unique experience. For example, just because two customers originally signed up with the same ISP on the same day does not mean they are both at the same place in their experience. It is the role of CRM systems to understand customers' unique needs and provide the most relevant, highest quality service possible.
CRM is leading business toward a future where interaction with each customer is personalized and meaningful to his or her specific needs. Customers will be understood as individuals - allowing companies to anticipate their demands and address them accordingly.
Today the marketing world is filled with telemarketing initiatives, blind sales calls, and junk mail. Though companies invest thousands of dollars in these efforts, most customers do not appreciate or respond positively to non-personal communications. Down the road, those mass-market tactics will not survive. To be successful, each interaction that a company has with a customer will need to be structured and specific. Each interaction should be personally valuable - resulting in higher levels of service and convenience for the customer.
1 + 1 + 1 = Profitability
There are lots of trends and subjects of debate in the CRM industry. Measuring ROI and realizing profitability through CRM programs are, at a minimum, short-term priorities. CRM gives every company more opportunities to succeed and more opportunities to fail with customers. As companies collect customer data and learn more about each customer, the higher the stakes, the higher the service, and the higher the risk of success and failure. To illustrate this quandary, Accenture predicts a typical $1 billion business unit could add $40 million in profit by enhancing CRM capabilities by at least ten percent. On the flip side, Accenture also predicts that 70% of CRM projects will fail, due to cultural reasons, not technological. Companies can build or buy the best CRM tools on the market, but if there are no metrics and no vision to measure results, success will not be seen, and support will diminish.
Today, companies on the leading edge of customer service are committed to seizing the opportunity that CRM presents and overcoming the obstacles. Innovative companies will continue to succeed and generate profits by valuing each customer - 1 by 1 by 1.
