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Accenture

How can you attract new customers (and retain the old ones) if you don’t rise above the message clutter? How can you capture, remember, and – most importantly – act upon multiple interactions if your sales, service, and marketing functions aren’t working in tandem? The answer is simple: You can’t.

The Evolution of Customer Relationship Management

By the time customers walk into your business - or log-on to your website or call your sales center - most already know what they want and how much they're willing to pay. With easy access to mountains of information, today's customers do their homework, and they now have the upper hand in most purchase transactions.

In response, sellers are bending over backwards to improve offerings and services. However, rather than adopt a streamlined "you-want-it-we've-got-it" approach, sellers have created a marketplace where products and services are sold, serviced and marketed in an increasingly fragmented and ultimately frustrating way.

Never before has so much "clutter" bombarded consumers from so many online and offline sources. Trying to be all things to all buyers, sellers face a harsh reality that brings an old adage to life: You can please some of the people most of the time and most of the people some of the time, but you can't please all of the people all of the time.

It wasn't supposed to be this way. Customer Relationship Management (CRM), which swept through the business landscape in the early 1990s, brought the promise of helping sellers please most of the people most of the time. Riding the coattails of customer satisfaction would come increased organizational efficiency and, better still, increased revenues.

That dream has been slow in coming. While incremental improvements have occurred, CRM has not yet delivered its ultimate promise - the transformed customer experience. Why not? The answer boils down to the fact that companies simply haven't done enough to unleash CRM's potential to transform the customer experience.

Yes, companies have implemented call centers and sales force automation software and customer sales representative training. However, while improving the sales and service components of customer transactions, companies have largely ignored the very piece required to attract customers in the first place. It's the piece that ensures sales and service efforts are effective and integrated. It's the piece that allows sellers to segment and analyze their customer information in order to create a more personalized, long-term relationship. It's the piece called "marketing" (see Figure 1).

Figure 1 - Completing the CRM vision

We're not saying that the last decade's investment in CRM has been wasted. Quite the contrary: what began as a solution for providing more efficient customer transactions evolved into a process by which companies could foster more meaningful customer interactions (see Figure 2). This was the right direction to take. However, companies haven't reached the end of the CRM road. Today, the challenge is to take this evolution one step farther - to focus on building lasting and profitable customer dialogues at all interaction and transaction touch points to build customer and brand value.

Figure 2 - The evolution of CRM
(see larger image)

In hindsight we can see that, as CRM evolved, many companies assumed that just bolting on new technology (e.g., client/server, call centers, salesforce automation software, data warehouses, etc.) or adding new services would enhance customer relationships. This assumption was as pernicious as it was false. After all, you can't sell what people don't want to buy, no matter how efficient and service-oriented your sales channel. And as for gathering customer insights, be careful what you wish for. Many companies faced the unsettling paradox of having advanced data availability and analytic techniques that quickly outpaced their ability to absorb and apply the information. They were left with sophisticated tools that offered little real value.

We believe the third wave of CRM will bring about the ultimate transformation of customer experiences - not just by strengthening sales and service or even promoting interactions with your customers - but by creating a series of "intelligent conversations" that build over time into a long-term, meaningful dialogue.

In this next evolutionary phase of CRM, information will be exchanged and acted on in real time. Consumer history will be recorded (and remembered) and the expectations of both parties will be met. Naturally, not every conversation will be profitable. But the series of conversations and the ongoing knowledge transfer will continue to grow, creating a memorable and differentiated customer experience, and, in the long run, a profitable relationship.

The bottom line is that few companies today are optimizing CRM to create lasting customer relationships and build superior brand value. As a result, companies are not realizing maximum returns on their CRM investments.

But they will. And marketing will show them the way.

The Return of Marketing

In tandem with CRM, the discipline of marketing has undergone its own, albeit less pronounced, evolution during the past decade. While CRM sales and service applications took center stage, marketing - or the personalization and communication of brand and value - waited quietly in the wings. As CRM initially focused on improving channel efficiency and customer satisfaction, marketing's role was to assist these efforts through product sales and customer acquisition. When customer interactions became as important (if not more so) than customer transactions in the mid-1990s, marketing took its first timid steps into the CRM spotlight.

At that time, customer insights were considered critical to the personalization of specific interactions. By managing each customer segment based upon their unique wants and needs, marketing further improved the cost effectiveness of call centers and sales forces and, more importantly, assisted in customer retention and cross-selling.

However, despite the advantages of building customer mind-share, the operational role of marketing remained largely that of a supporting cast member. What was missing was an emphasis on harnessing customer insights at all customer interaction points and, more importantly, translating those insights into better customer treatment, regardless of the customers' preferred interaction channel. Marketing was hindered by an ever-growing number of fragmented contact points, and the more creative and analytical aspects of marketing, which would make better use of deeper customer insights and create seamless experiences across customer channels, were only paid minimal lip service.

Today, that is changing. Companies realize that marketing contributes most when it converges completely with traditional CRM "sell" and "serve" applications. Marketing insights and analysis can be used to develop fact-based business cases. Seamless marketing campaigns, relying on deep customer insights drawn from individual (yet integrated) customer interactions, can be targeted to increase brand value and dramatically boost profits. In short, marketing is now being "revitalized," taking its rightful place on the CRM stage.

We have seen CRM shift its emphasis from transactions to interactions to lasting relationships. It is these relationships, enabled by operational, creative and analytical marketing excellence that now enable companies to build true brand equity and correctly predict consumer behavior. When integrated fully with sales and service efforts, marketing completes the CRM solution that provides the customer a seamlessly integrated experience across all channels.

The New CRM Imperatives

Who are your most profitable customers? When, where and why are they going to connect with you? Does your Web customer have the same needs, values and expectations as your offline buyer? How do you have intelligent conversations (that build to a profitable dialogue) with customers who can use multiple channels to interact with product and service providers, how and when they please? These are the questions marketing has set out to answer. And it is the answers to these questions that will drive the profitable dialogue you need.

As it turns out, creating profitable customer dialogues is easier said than done. There is no "one-size-fits-all" solution. Gone are the days when the "one-to-all" mentality prevailed - when "spray-and-pray" marketing ruled and unidirectional communications were sent to masses of faceless customers. Just 20 years ago, 80% of a target audience in many countries could be reached with one, 30-second, off-peak television slot. Today, achieving that sort of market penetration would take 200 to 300 prime-time TV spots. Take into account that 3,000 one-way messages bombard the average consumer every day, and it's easy to see how tough it is for marketers to cut through the clutter and make their messages heard.

To be heard, they must escape the message quagmire. Fortunately, their customers are ready to lead them out. This should come as no surprise. After all, customers already control the purchasing experience. Let them control the marketing experience as well. By this, we mean that you should use every interaction with a customer - from a phone call to a Web click to an angry letter complaining of shoddy service - to gather insights and propel your messages to the next level.

These insights build on one another to create intelligent - and profitable - dialogues between you and your customers. With these conversations leading the way, CRM will regain its position as the key revenue generator for all businesses by refocusing on the holistic, symbiotic relationship of companies and their customers. Most importantly, it finally brings together a company's efforts in marketing, sales and service that, traditionally, would have been pursued in separate, ad hoc ways.

As noted, many companies are struggling to realize more value from their CRM investments. Some have simply surrendered. Unable to commit additional resources to what is seen as a losing game, they choose instead to cut their losses and be content with minimal gains in efficiency and customer service.

These companies, however, are in the minority. While all companies are now more cautious with future investments, a recent study from IDC estimates that the CRM market will continue growing at a 25% rate annually, and will surpass $148 billion by 2005.[2]

Those that continue to invest in CRM are more than hopefully optimistic. They realize something must be done to stem the tide of customer defection and eroding brand value. They know that it costs six times more to attract a new customer than to keep an existing one, and that their returns on marketing investments (soon to total more than $1 trillion by Global 1000 companies) continue to decline, taking them longer and longer to reach the break-even point (see Figure 3). Given this environment, it is easy to understand why executives are pressured to make the right CRM investments.

Figure 3 - Return on marketing investments

Unfortunately, these pressures and lagging ROI will continue as long as companies fail to quantify how their CRM and marketing investments support customer strategy and contribute to overall brand value. In the current CRM environment, it is extraordinarily difficult to perform such calculations. Many CRM functions remain isolated from one another, and attempts to devise an integrated review of past efforts often result in chaos. Without this sort of analysis, however, it will always be difficult to understand what is working, and what is not.

Building New Capabilities

We believe that to continue attracting and retaining the most valuable customers, companies must act aggressively to increase the economic value of both their brand and customer relationships. In addition, they must sustain bottom-line performance in the face of skyrocketing marketing costs. To realize these goals, companies must continue their efforts to maximize their investments in the sales and service technologies that help reach, understand and interact intelligently with customers. But they must also extend this traditional scope of CRM to reach a higher standard of excellence in three distinct disciplines: analytical, creative and operational marketing (see Figure 4).

Figure 4 - The revitalization of marketing

Once these improved marketing processes are linked with core CRM capabilities, companies will be able to drive seamless, consistent and real-time response across marketing, sales and customer service. The result will be a sustainable process that not only enables lasting customer relationships but also harnesses that elusive construct: superior brand value.

Traditionally, marketing within CRM solutions has been characterized by operational marketing, otherwise known as customer management. While operational marketing has contributed to improved customer service, it has neither reversed the declining return on marketing investments, nor reduced the message clutter and fragmentation that threatens customer loyalty. Moving forward, it is imperative that the creative and analytical marketing disciplines are brought into the fold. To do so most effectively, it is equally important that leaders understand the value of each of the disciplines, as well as the components of each.

Analytical marketing utilizes those processes and sophisticated technologies that allow businesses to direct their overall marketing investment across the brand and customer. In a sense, analytical marketing tools are the "nuts and bolts" of the marketing engine. Without them, the marketing effort flounders and, as we have seen, doesn't get you where you need to go.

Specifically, analytical marketing converts customer data, gathered at various touch points, into relevant insights that direct market segmentation activities and feed into more effective campaign design. Through predictive modeling, analytics lead to a more robust understanding of customers and markets and an improved ability to make strategic and operational decisions about customer treatment. The ultimate outcome is increased profitability, based on customer differentiation, and more informed decisions related to the development of product, pricing, promotion, packaging, and channels.

Analytical marketing also allows companies to test the effectiveness of various CRM efforts. Without analytics, companies will keep investing in CRM without ever knowing where their money is having the greatest impact. In short, analytical marketing puts customer insights to work for the organization and prevents the company from delivering the wrong content to the wrong person at the wrong time.

As the number of customer channels has exploded, so has the need for creative marketing, which involves all the activities associated with building and sustaining a compelling brand and ensuring that customer interactions reflect a satisfying brand experience.

In the past, creative marketing efforts have been applied to CRM efforts in much the same way as technology. That is, in the rush to meet perceived demand, creative marketing campaigns were slapped onto the larger CRM initiatives in a haphazard and fragmented way. It's been far too easy for companies to develop a host of messages - from ad campaigns to customer service representative scripts - that are unintentionally inconsistent. Such inconsistent messages delivered via a number of different channels - when coupled with poor understanding of why brand and message consistency is so critical to the customer experience - often produce fragmented experiences that frustrate the customer. And a frustrated customer is one who probably won't come back.

Fortunately, companies are changing the way they approach creative marketing. By integrating its processes with those of analytical and operational marketing, and by focusing on the total customer experience, creative marketing can now be used to build a unified brand across all of a company's online and offline channels. In other words, creative marketing is no longer considered an "afterthought."

Rather, creative marketing efforts develop in tandem with analytic and operational marketing, as well as other sales and service, efforts. By enabling more effective selling and customer operations, creative marketing efforts go straight to the bottom line. And by delivering a seamless customer experience across all touch points, creative marketing leads to improved customer service (and satisfaction) and improved brand value.

In short, creative marketing is a more rigorous discipline than many people realize - one that defines a compelling brand position, translates this position into a comprehensive, integrated brand-building effort across all channels, refines the brand campaign to reflect customer response and ultimately measures the creative impact on brand value.

As mentioned earlier, when people think about a marketing investment to improve CRM capabilities, they are usually referring to operational marketing. Its efforts encompass all the activities that relate to creating a positive customer interaction. Once again, customer insights play a large role here, as do data mining and data warehousing, which continuously harvest customer information from a variety of contact points. Leveraged by creative and analytical marketing capabilities, this information is assessed and converted into meaningful insights that drive ongoing, personalized marketing efforts.

Online booksellers, for example, who remember past transactions and, based on your preferences, provide book recommendations on your next visit, are exhibiting integrated marketing at its best. Similarly, call center representatives who have access to your previous transactions and interactions are better prepared to provide you with the product or service you would be most interested in - and most likely to buy.

The goal of operational marketing is to enable ongoing "conversations" with individual customers across all channels. But these conversations will only become an ongoing dialogue if you know and understand your customer segments (which analytical marketing addresses) and are telling your customers what they want to hear (which creative marketing addresses).

In summary, each of these marketing disciplines depends on the others in order to provide real value:

o Analytical Marketing drives market segmentation and identifies your most profitable customers. Information from each customer interaction channel is collected, analyzed and used to develop predictions of your individual customer's behaviors.

o Creative Marketing relies on analytical tools and customer insight capabilities to improve marketing programs, optimize the overall marketing investment and deliver the brand promise.

o Operational Marketing relies on customer insight information to personalize interactions, differentiate sales and service across segments, drive continuous improvement across customer interaction processes and generate revenue lift.

When these marketing disciplines work in tandem with your existing sales and service capabilities, your entire CRM effort becomes revitalized. Information becomes dynamic. Insights become powerful barometers of customers' likes and dislikes. Comprehensive marketing campaigns become targeted and compelling. The result is a customer base that is pleased with the unique and personalized interactions you provide. Customer loyalty rises, as does your brand value and, ultimately, your revenue.

Dismantling Old Barriers

Picture the following scenario: the operations group of Company X is responsible for integrating multiple customer contact centers. The IT department has budgetary responsibility for CRM software implementation. Product management develops products and services, and then throws them over the wall to marketing, which will communicate to the customer. Nowhere in this flurry of disjointed activity is a process or organization structure defined that enables the delivery of a seamless, consistent customer experience across all channels.

Unfortunately, this scenario is all too familiar in the many companies that structure themselves around internal silos. Clearly, there's a need for CRM leadership to break down these sorts of silo barriers to align the organization with CRM strategies and goals. Failure to tightly tie CRM activity to operational and financial performance results in uncertainty about how much value CRM can contribute - not to mention which CRM activities are really adding value.

Over the last 10 years, many organizations have made the necessary investments to get their sales and service operations off the ground. These CRM components will give these organizations a head start in achieving their CRM goals. What is needed now is a transformation (or revitalization) of the analytical, creative and operational marketing capabilities that will strengthen the brand position, drive customer value and spark intelligent, profitable conversations with every customer, across every channel.

At the end of the day, to achieve the potential that CRM offers, organizations must transform and integrate their sales, service and marketing capabilities. When they do, they will finally have transformed the customer experience.

References

1 Jupiter Vision Report, "E-Mail Customer Service: Taking Control of Rising Customer Demand," 8/31/2000.

2 IDC report, "Worldwide CRM Services Market Forecast & Analysis: 2000-2005," 2001.