05-03-2010 Serious About a Relationship? White Papers Register for our new sletter: Webinars Search Home > Six Ways to Use C RM Systems to Prepare for Economic Recovery C ustomer Relationship Management: C oping With Budget C uts Nine Cycles of (Business) Life and C ustomer Relationship Management Not that either assertion is w rong. A Buyer’s Guide to CRM Functionality Answer a few questions to download a FREE whitepaper now. Do you currently have a CRM system? : If yes, what type is it? What type of features do you require: Sales Automation Customer Service/Support Marketing Automation Customizable Channel/Partner Management Integration to other systems — Select One — How many people will use this system? : — Select One — How would you like users to access the CRM? : Through web brow sers With mobile devices Please explain why you are seeking a CRM system and any other requirements you have: Through company netw ork only Both these latter tw o mantras of Customer Relationship Management, or CRM, are achievable by certain companies in certain circumstances.However, their use as a sweeping generalisation by marketers keen to convince the main board to invest millions in CRM software, is unjustified.
On the other hand, while it may have looked as though a majority of CRM projects in 2001 teetered on the brink of failure, this is no longer the case four years later. Recent research from Lloyd James Groupindicates a 5-10% drop in available data on the market. And opt-out rates from the Electoral Register (a major prospecting resource for marketers) now stand at 29%.This has occasioned a small but significant shift of marketing investment aw ay from new customer acquisition, and tow ards existing customer development. Research from Pitney Bowesindicates that by the end of this year, 51% of marketing investment w ill go into customer marketing, and 49% into prospect marketing. Another research project from the beginning of 2005 — this time from Group 1 Softw are — showed that an overall majority of top UK companies — 53% – obtain a return on their investment in customer management.
We are at a w atershed moment, in that these few statistics indicate that a majority of organisations w ill now be relying on effective CRM to manage customers, revenues and profits. CRM is now working more often than it is crm2day. com/…/t6_librarynews_1. php? i… 1/4 05-03-2010 failing! Serious About a Relationship? The Research So, after four years where every analyst in sight has poured vilification on the ability of organisations to obtain value from their CRM projects, it seemed time to challenge this scepticism further.One-off technology costs can be w ritten off; ongoing people costs cannot.
So a company that puts CRM into the title of one of its senior managers is a brave company indeed nowadays. TotalDM therefore decided to commission research amongst the UK’s top 500 companies (completed May 2005) to find out how many of them had that most expensive of people, a Head of CRM. The study also investigated w hether that CRM Head also had another main job, such as Marketing Director or Customer Services Director.This was felt to add colour to whether the role was being treated as a wholly absorbing directorial function, or w hether it was diluted by combination w ith another discipline. And thirdly, the research also broke the findings down to compare different industry sectors. The penetration of Heads of CRM was felt to be a good proxy for the commitment that these large industry sectors w ere showing, not only to the notion of CRM, but to its successful practice, and its permanence within the organisation.
Convincing metrics demonstrating return on investment from CRM strategies and systems are now demanded by colleagues, analysts, markets and shareholders. So if an official and directorial role had been created form CRM, this w as felt to be compelling evidence to an organisation’s seriousness about methodical customer management and development. Heads of CRM Penetration Our barometer of ‘CRM Commitment’, in the form of the proportion of the UK’s top 500 companies w ith a Head of CRM, comes in at approaching half (44%).This lags the statistics quoted in our introduction concerning “return on customer investment” or “customer development spend versus prospecting spend”, both of w hich have achieved an overall majority score in top companies. We may conclude, therefore, that in many cases, measurable return on CRM investment has to be proved before a company will appoint a Head of CRM into a senior directorial role (regardless of whether this is an internal promotion or an external hire). In this sense, our Heads of CRM penetration is acting as a real indicator of commitment.CRM initiatives have been taken, hard bottom-line results measured, and ongoing metrics put in place, before CRM management is afforded senior status.
Further insight is available by drilling into this overall 44% commitment to understand w hether Heads of CRM had been appointed in a dedicated role, or whether this was seen as inextricably conjoined to another function. The resulting breakdown showed that just one third of Heads of CRM occupied a dedicated function. A further generous third combined the role with a senior Marketing position.And another quarter directed both CRM and Customer Service functions. These combinations make sense, in that Marketing and Customer Service are the areas of responsibility in which customer management and development strategies have mainly been implemented.
It also provides corroboration that many organisations see the functions inextricably linked — a holistic view that shows real progress in the maturity of thinking about CRM in the country’s top commercial organisations.Given that these combined roles were at the senior management level, it is significant that 89% of Heads of CRM evidently have an influential voice around the board table in the UK top 500. Industry Sector Findings Looking at individual sector penetration levels, we can immediately see that Banking and Telecoms stand out from the crowd. These are both industries naturally rich in customer data — particularly transactional data. This means that the essential building block information for analysing customer value and behaviour is ready-made and at the organisation’s fingertips.In the Telecoms sector — especially mobile which suffers from 30-40% customer defection every year — the real and present danger of customer mobility galvanises service providers towards effective CRM. It is an absolute imperative to try and separate customers into types, ranging from serial switchers to lifetime loyalists.
With average margins slim, and a twelve month period before return on cost of acquisition starts in earnest, the sector has to take CRM seriously. Banking, on the other hand, is subject to low rates of customer churn (although these are rising slowly).Therefore, the majority of business development comes from selling more products to the existing customer base. Intense analysis of customer types is required to identify which customers are likely to be interested in further products, usually introduced ones such as insurance or investment services. ‘Vanilla’ lending, to individuals and businesses, holds little development potential. In fact, in this current period following an economic slowdown, and where the mortgage lending market has contracted, banks are actively tightening their credit policies.So reliance on development income from an extended product range is even more crucial.
The outcome is that banks are data rich, and CRM-aware because they have to be. The fact that an overall majority (Group 1 puts it at 53%) are also obtaining a reasonable return on customer investment, means that the much maligned millennial investment in CRM systems by retail banks may not have been such an unw ise move after all. Next come tw o consumer-focused industries — Retail and Travel and Hotels — along with one B2B sector — Construction.Construction — w hether commercial, public sector or consumer — operates w ith a low volume of clients, but a high level of contact and engagement w ith those clients throughout a project.
Performance-related pay and legally crm2day. com/…/t6_librarynews_1. php? i… 2/4 05-03-2010 Serious About a Relationship? enforceable penalty clauses are the industry norm. In fact, construction can be regarded as an industry that is able to maintain one-to-one customer relationships on a personal basis w here other industries have to automate contact because of their customer volumes.How often, though, is the Construction industry held up as an example of good practice? This may be an area that CRM theorists and pundits may choose to explore further. Retail scores significantly above average for CRM Commitment, but not as high as Banks and Telecoms companies.
Two factors are at work here. The first is that whereas the top scoring sectors are naturally data-rich, Retail is fundamentally rich in transactional data, but poor in information on customers’ other behaviour, tastes and preferences.Historically, the sector has relied on high street position and above-the-line advertising to maintain and grow business.
This has changed in recent years, with Retail now the fifth largest user of direct mail. Nevertheless, we must recognise the second factor — namely that the sector is completely polarised when it comes to gathering information on customers and using it to implement data-driven marketing (the key building block of any CRM programme). The industry is split evenly betw een believers (w ho run loyalty programmes to gather such data) and non-believers (who do not).The non-believers inevitably pull the sector average dow n to a creditable score rather than a meteoric one. It should nevertheless be recognised that Retail practitioners who have invested in CRM are some of the most shining best-practice examples across the top 500 companies as a whole. Travel & Hotels seems to be coming back into play as effective CRM players. If we again refer to the Group 1 Software research, Travel came third amongst all the sector studied for their ability to obtain return on customer investment.
This is a rapid return to form for the sector, seen in the 1980s as pioneers of loyalty and database marketing initiatives, but w ho slipped to the back of the pack in the 1990s and the early years of the new millennium. Perhaps the cut throat competitiveness of the industry post BSE and 9/11 has had an affect, w ith recent natural disasters continuing to disrupt formerly predictable trade. Our research would appear to confirm that large players at least in the sector have w oken up to the need for more effective customer management, and have made that responsibility a mainstream directorial task.It is fascinating that FMCG and Media & Entertainment achieve scores for CRM Commitment at about the all-sector average. This was entirely unexpected. FMCG brands, music labels, publishers, broadcasters, cinemas, and so on are, after all, the mainstay of the above-the-line advertising industry. Yet we have stated that the fundamental building block of CRM strategies is data-based, direct strategies, marketing and communications, where the individual characteristics, tastes and preferences of the customer are recognised, and only relevant products, offers, incentives and rewards put in front of them.In the popular imagination, the FMCG sector tried the direct approach w ith Heinz’s radical embracing of DM, and that this ended with the same company’s eventual admission that the strategy had been a failure.
Nevertheless, this highly publicised venture into data-driven marketing has quietly inspired the whole FMCG sector to take direct marketing seriously. This is not a process that takes place at the individual level, and the customer annual value would be far less than the cost of communicating with them on a one-to-one basis.On the other hand, understanding the handful of segments into which an FMCG brand portfolio owner’s customers fall, and treating them more relevantly, can produce directly attributable uplift. Above-the-line cannot be used to achieve such segment differentiation, as it robs the marketer of keeping one segments messages and style discrete from the others. And the last thing that a portfolio manager wants to do is to create brand schizophrenia from such leakage.
So promotional and field marketing feedback is used to capture customer data, w hich is then used to establish a low-cost but valued dialogue with the customer.This had been particularly effective where the w eb can be used to provide ‘useful’ information such as recipes, healthcare advice, tourism information, housecare tips, or whatever is relevant to the brand — but served up to different segments in a relevant style, or with varied content. FMCG is evidently doing plenty of CRM, even if only at the broad segment level — old/young, married/single, male/female, and so on. For Media and Entertainment, the customer value is often much higher than for an FMCG brand owner, and also the business is by definition doing something which is both content-rich and is often chargeable.For instance, we can look at the w ay new spaper and magazine publishers are developing their products. Much effort has gone in to capturing customer data — the Telegraph was a pioneer in this respect — and then in the knowledge of customer interests and tastes, different content served up to them. Because — w hether we are talking about publishers, broadcasters, music companies, cinemas, or whoever else in this sector — the product intimately tied up with the user’s leisure interests, then additional premium content can usually be produced at little extra cost, and offered to customers through some sort of club mechanism.
The richness of content tends to produce a wide variety of niche interests. So the sector provides a multiplicity of markets, all of which can be monetised (charged for) simply because enthusiasts are alw ays interested in extra content. In short, then, both the FMCG and Media & Leisure sectors may not be as mature sectors in the art of CRM compared w ith Banking and Telecoms — yet they both hold enormous potential for return on investment from CRM techniques, and have evidently made steady progress in this respect to date.As regards the below -average performers, just a few summary comments are required. Estate Agents have only very infrequent engagements with customers, but might be well advised to make their outlets more clubbish in order to keep regular contact w ith prospective customers. Utilities have not yet really started to stretch their brands into multiple nonutility product provision, and are focusing their energies on improving their core product infrastructure. Insurance remains 70-80% intermediated, and automotive also remain dependent on the dealer channel.
Nevertheless, both these sectors have to address the evident need to connect with the end customer, provide them with value and relevance, appeal to crm2day. com/…/t6_librarynews_1. php? i… 3/4 05-03-2010 Serious About a Relationship? them at times w hen they are most likely to buy, but also support their channel partners in the process. That is of course, not forgetting the value of CRM to their channel.
In the case of insurance, their brokers are their customers. Keeping the relationship with them is as important as their consumers.Of the remaining sectors, IT is the surprise poor performer on CRM commitment. Especially since the provision of w arranties, helplines, additional services, training and content provision are all highly profitable prospective lines of business. There remains a problem w ith the way software, in particular, is sold — in that charges are mainly up-front then followed by low ongoing maintenance charge (if at all). That means that all the commercial interest lies in closing the sale, and none in cherishing the customer relationship.The more that the IT industry moves to the model of software rental, or ASP provision, or full solution leasing, the more this will encourage proper CRM strategy and commitment.
Certainly this is the w ay the IT market is moving, and stick-in-the-mud traditionalists who do not take account of the trend w ill not survive. Gartner, Gartner Says More than 50 Percent of CRM Implementations Considered Failures from Customer’s Point of View,10th September 2001 Lloyd James Group, In Search of Quality, April 2005 Experian, Electoral Register fully loaded, Jan 21 2005 Pitney Bowes/MarketingUK, The Customer:Prospect Ratio, March 2004Other Latest News of this Category: CRM for Financial Planners Sybase Targets Mobile CRM CustomerCentric Intros Salesforce App Online Customer Service Strategies CRM Spotlight: IBM Buys Initiate Se ct io ns: ? Ne ws? | ? E v e n t s? | ? Ca re e rs? | ? L i b ra ry ? | ? M e m b e rs? | ? E x p e rt s Co rn e r? | ? Hi g h l i g h t s? | ? e -Ne wsl e t t e rs? | ? Di re c t o ry ? | ? S e a rch Libra r y by D o c Ty pe : ? A c a d e m i c P a p e rs? | ? A rt i cl e s? | ? C a se S t u d i e s? | ? P re se n t a t i o n s? | ? Wh i t e P a p e rs Libra r y by I ndust ry : ?Fi n a n c e ? | ? G o v e rn m e n t ? | ? He a l t h c a re ? | ? Re t a i l ? | ? T e l c o ? | ? Ut i l i t i e s To pics 😕 B i l l i n g & A c co u n t M a n a g e m e n t ? | ? B u si n e ss I n t e l l i g e n c e ? | ? Ca l l Ce n t e rs? | ? Co n t e n t M a n a g e m e n t ? | ? Cu st o m e r A n a l yt i c s Cu st o m e r I n t e l l i g e n ce ? | ? Da t a M i n i n g ? | ? e -B u si n e ss? | ? e CRM ? | ? E m a i l M a rke t i n g ? | ? E m p l o y e e Re l a t i o n sh i p M a n a g e m e n t ? | ? E n t e rp r i se Re so u rc e P l a n n i n g ? ? K n o wl e d g e M a n a g e m e n t ? | ? P a r t n e r Re l a t i o n sh i p M a n a g e m e n t ? | ? Re l a t i o n sh i p M a rke t i n g ? | ? S a l e s A u t o m a t i o n ? | ? S u p p l y Ch a i n M a n a g e m e n t ? | ? We b S e rvi c e s A b o u t ? | M e d i a K i t ? | CRM G l o ssa ry ? | S y n d i ca t i o n ? | Re p ri n t s? | Co rp o ra t e M e m b e rs? | S i t e M a p ? | C o n t a ct Us? | T e rm s? | P ri v a c y © 2 0 0 1 -2 0 0 8 CRM T o d a y – A l l Ri g h t s Re se rve d . crm2day. com/…/t6_librarynews_1.
php? i… 4/4