Change Implementation Techniques for Creating a Sense of Urgency

Technique 2.61 Customer Relationship Management (CRM)

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Introduction

. CRM aims to align business processes with customers' strategies to build customer loyalty and increase profits over time. Note that technology and software are conspicuously absent from the definition

. When CRM works well, it allows organisations

- to gather customer data quickly

- to identify the most valuable customer

- to increase customer loyalty by providing customised products and services

- to reduce the cost of serving current customers

- to make it easy to acquire new customers

. CRM is more than just technology. The 5 imperatives of CRM are

i. acquiring the right customer

ii. crafting the right value proposition

iii. instituting the best processes

iv. motivating employees

v. learning to retain customers

. On the other hand,

"...CRM initiatives not only have failed to deliver profitable growth but also damaged long-standing customer relationships..."

Darrell Rigby et al, 2002

. The 4 questions (Is it strategic? Where does it hurt? Do we need perfect data? Where do we go from here?) that all organisations need to ask before they start their CRM initiative are considered in the context of the customer strategies and organisational structures to support these strategies. More detail on each question:

1. Is it strategic?

Check that the right targets are in place as CRM involves complicated business and technology issues and requires significant investments of time and money which should focus on processes vital or critical to an organisation's competitiveness

2. Where does it hurt?

Need to examine carefully an organisation's customer relationships management cycles that will define where the important bottlenecks are that undermine overall performance. This is where the focus of CRM should be. The relationship cycle has 5 elements (targeting and marketing; development of offering; sales; superior experience; retention and win-back)

i. targeting and marketing involves

- segmentation

- behaviour modeling

- scoring and targeting

- campaign management

- pricing

- promotion

- win/loss analysis

ii. development of offering involves

- concept development

- feature and function prioritisation

- customer panel management

- cost-position requirements management

- competitive intelligence and research

iii. sales involves

- sales forecasting

- lead management

- bid and quote management

- pipeline management

- cross selling

- personalisation

- order management

iv. superior experience involves

- pre-sales experience

- offering delivery

- interaction management and help desk

- queue management and escalation

- service broadcasting

v. retention and win-back involves

- share of wallet analysis

- loyalty program management

- retention management

- win-back campaign management

- collaborative innovation

3. Do we need perfect data?

An advantage of CRM is its ability to deliver real-time information, ie a clear picture of what's happening in the market at any particular moment. On the other hand, perfect information comes at a high cost. Few organisations need perfect information throughout their customer relationship cycle. Real-time information should be driven by real-time business opportunities and need to be customised for each individual business, ie need to have 'good enough' information

Need to differentiate between "routine aches" (perhaps we might address this issue in the next plan) and "perilous or strategic pains" (fixing this problem will double our profits). The latter are more important to fix

How to identify them:

Routine Aches

Strategic Pain Points

The problem is well-known but minor even though it affects some vociferous customers

Problem is sometimes hidden but has a critical impact on the satisfaction and loyalty of the most valuable customers

Solutions are quickly and easily copied by any competitor

Solving the problem cost-effectively requires a substantial and sustainable competitive advantage

The problem could have been fixed a long time ago without CRM system

Solving the problem cost effectively requires the speed, accuracy and effectiveness of CRM technologies

Solving the problem would fix one immediate problem

The solution will become a rallying point for the organisation

Solving the problem is not vital to the organisation or culture

Solving the problem would create important new capabilities that would open up additional opportunities

Solving the problem would deliver soft, unquantifiable benefits

Solving the problem would deliver tangible financial returns that would justify the investment - even in difficult times

Solving the problem would not make much of a splash in the organisation

Solving the problem would represent a highly marketable success, both inside and outside the organisation

4. Where do we go from here?

Each step in building the system represents a carefully planned, well-defined advancement in strategic thinking. Furthermore, using rigorous analysing data systems to identify new, well-defined opportunities to extend the technology's power. Usually these opportunities lie in activities adjacent to the customer relationship cycle. Remember:

"...In evaluating and designing CRM systems, business needs should take precedence over technological capabilities. Managers should not be distracted by what CRM software can do; they should concentrate instead on what it should do - both for the companies and their customers......apply CRM with greater precision, targeting gaps in the customer relationship cycle where performance suffers. By setting priorities for information requirements carefully making sure that they are guided by a overall customer strategy.......Highly disciplined CRM efforts......have a greater impact and would lower investment and involve less risk..."

Dianne Ledingham et al, 2004

What Customer Relationship Management Really Comprises

CRM Imperatives

Acquiring the right customer

Crafting the right value proposition

Instituting the best processes

Motivating employees

Learning to retain customers

You Get It When

You've identified your most valuable customer

You've studied what products or services your customers need today and will need tomorrow

You've researched the best way to deliver your product or services to customers, including the alliances you need to strike, the technologies you need to invest in, and the service capabilities you need to develop or acquire

You know what techniques your employees need to foster customer relationships

You've learned why customers defect and how to win them back

You've calculated your share of their wallets for your goods and services

You've surveyed what products or services your competitors offer today and will offer tomorrow

 

You've identified HR systems you need to institute in order to boost employee loyalty

You've analysed what your competitors are doing to win your high-value customers

 

You've spotted what products or services you should be offering

   

Your senior management monitors customer defection metrics

CRM Technology Can Help To

Analyse customer revenue and cost data to identify current and future high-value customers

Capture relevant product and service behaviour data

Process transactions faster

Align incentives and metrics

Track customer-defection and retention levels

Target your direct marketing efforts better

Create new distribution channels

Provide the information to the front line

Deploy knowledge management systems

Track customer-service satisfaction levels

 

Develop new pricing models

Manage logistics and the supply chain more efficiently

   
   

Catalyze collaborative commerce

 

(source: Darrell Rigby, et al 2002)

Why do CRM initiatives fail?

The 4 common challenges are

i. implementing CRM before creating a customer strategy

ii. rolling out CRM and expect your organisation to change to match it

iii. assuming that more CRM technology is better

iv. stalking, not wooing, customers

. The 4 most common challenges revolve around regarding CRM as a software technological technique which will manage customer relationships. But remember:

"...CRM is the bundle of customer strategies and processes, supported by the relevant software, for the purpose of improving customer loyalty and, eventually, corporate profitability..."

Darrell Rigby et al, 2002

Challenge 1 - Implementing CRM before creating a customer strategy

. There is a need to first develop and implement traditional customer acquisition and retention strategies as effective customer relationship management is based on good old-fashioned segmentation analysis and the determining of specific marketing goals.

. CRM technology is not a marketing strategy. Remember: technology that affects customers must always be aligned with an overarching strategy, such as

- determining by segmentation the type of customers you want (the most profitable ones for your organisation)

- solving desirable customer-related problems

- finding out what these desirable customers want

Based on the above, CRM eventually becomes part of the solution but it cannot drive the strategy or process.

. There are 6 important questions that need to be answered to create an effective customer acquisition and retention strategy

1. how much of the value proposition needs to be changed to create customer loyalty?

2. how much customization is appropriate and profitable for current strategy?

3. what is the potential value of increasing the loyalty of those customers? How much does it vary by customer segment?

4. how much time and money can be allocated to CRM right now?

5. if we believe in customer relationships, why are we taking steps toward a CRM program today?

6. what can we do next week to build customer relationships without spending a cent on technology?

The answers to these questions will determine the role CRM could play in your organisation. The first step is to build the data and courage to tell the organisation where its customer strategy is taking it

Challenge 2 - Rolling out CRM and changing your organisation to match

. Installing CRM technology for creating a customer focus is the most dangerous challenge.

"...if a company wants to develop better relationships with its more profitable customers, it needs to first revamp the key business processes that relate to customers, from customer service to order fulfillment. Having a strategy is not enough. A CRM rollout will succeed only after the organisation and its processes - job description, performance measures, compensation systems, training programs, and so on - have been restructured in order to better meet customers' needs. It's also important to evaluate existing departmental, product, or geographic structures. Believing that CRM affects only customer-facing processes......executives often did not see the need for changes to internal structures and systems before investing in CRM technology......according to a survey......87% failure of their CRM programs owing to lack of adequate change management. The most successful companies......have worked for years at changing their structures and systems before embarking on CRM initiatives...."

Darrell Rigby et al, 2002

Challenge 3 - assuming that more CRM technology is better

. Sometimes it is assumed that CRM has to be technology-intensive. On the other hand, customer relationships can be handled in many ways, such as by motivating employees to be more aware of customer needs, and do not necessarily need a high-tech solution.

. The question that needs to be asked is

"...where do your CRM needs fit on the technology spectrum?......to find out, start by vetting the low-tech alternatives first......a deliberate ramping up of technology will allow managers to sequence individual software solutions so that step reinforces the next..."

Darrell Rigby et al, 2002

. Managers need to experiment to identify the best ways to strengthen their relationship with the most important customer - independent of technological sophistication

Challenge 4 - Stalking, not wooing, customers

. Need to check with customers to identify how you can improve your service to them

. Remember: relationships are 2-way streets. For example, trying to build relationships with disinterested customers will result in your being perceived as a nuisance or stalker

Summary

"...successful CRM depends more on strategy than on the amount you spend on technology. Strategy is about allocating scarce resources to create competitive advantage and superior performance. The only way you can make CRM work is by taking the time to calculate the customer strategy, which helps employees understand where they are going and why, and to align your business processes before implementing the technology..."

Darrell Rigby et al, 2002

. CRM has

"...a big impact: it has decreased media..a more targeted use of marketing..."

Catherine Fox, 2006c

. CRM is a powerful facilitator and another technique in the process of customer management

(sources: Darrell Rigby et al, 2002; Dianne Ledingham et al, 2004; Catherine Fox, 2006c)

 

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