The promise of customer relationship management is great — collecting real-time information that allows you to provide the right product, price, and service to customers across channels, departments, and divisions. Only a few years ago, the combination of new technological solutions and lagging sales enticed firms from a variety of industries to launch full-scale customer relationship management (CRM) initiatives. CRM quickly became synonymous with technology, and so mesmerizing was its appeal that it was expected to drive the business. Soon, however, stories of high costs and failed implementations permeated the CRM industry.
These days, CRM has reached a seasoned maturity. Gone are the promises of perfect, real-time customer service combined with floods of information about customers. Successful users of CRM technology have found that delivering on the technological promise is a serious challenge that requires the integration of processes, people, and data. These factors are all fundamental to the success of traditional catalogers, so it is not surprising to find that CRM is alive and well in the direct marketing industry.
THE HERO’S TEST
New England Business Service (NEBS) is an excellent example of a firm with a successful business-to-business CRM strategy. NEBS began with the factors that contributed to its previous success — relevant products, communication, and service — and focused on their improvement. “We didn’t purchase a technology and then look for a business problem to solve,” says Kirk Etten, divisional vice president for database management services. “Rather, we focused on a business opportunity and recognized that we needed enablers to successfully execute our strategies.”
Focusing on a specific area has been notably effective for NEBS. The firm began with a test that offered a new level of service to its highest-value customers. The test, Etten says, “challenged the way we approached the business — results and measurement were determined after one year in the program rather than campaign by campaign.”
The test was successful, generating an overall 5% improvement in the best customers’ performance. This convinced the company to roll out the program. Employing an analytical and pragmatic approach, NEBS used the results from the test to guide its expansion. The company increased its investment in its best customers, its prospects with the highest potential, and its most profitable products, while balancing its investment in lower-value customers, prospects, and products. This strategy has stimulated a 6% increase in profits over the last four years. Prospecting has become more effective, with a 50% increase in projected payback.
NEBS has learned that success requires balance. “Our approach is to design for the long term but implement for short- to mid-term business needs,” Etten says.
Understanding that every program is an opportunity to learn about its customers and its business, NEBS constantly tests its CRM efforts. This discipline, and the requirement that every investment be measurable, has resulted in a return on investment that is often elusive in the CRM industry.
UGLY DUCKLING TURNS INTO SWAN
CRM success stories are not limited to business-to-business marketers, of course. O+F found several business-to-consumer companies successfully integrating CRM into their corporate strategy. The results have been so strong that these companies consider their use of CRM a competitive advantage and declined to be identified, though they were also excited by their success and willing to share general information about their implementation of CRM.
The CRM solutions chosen varied from company to company, but the key strategies remained the same:
- Evaluate the existing process to identify improvement opportunities.
- Identify options with the most potential.
- Test each option with a small segment of the customer base.
- Roll out the most successful tests while continuing to test new programs.
- Focus the efforts on the entire organization.
Every company interviewed has developed a customized solution that integrates new technology with existing processes and systems. All believe that the key to their success was their ability to integrate technological solutions with existing infrastructure, thereby reducing the overhead, risk, and aversion that accompany a complete conversion to a new system.
For example, Company A, a catalog/Internet organization with $25 million in annual sales, has combined proprietary merchandising and marketing databases with a legacy order management system. Company A’s customer base is modeled with a combination of profile and regression techniques integrated with transactional data. The company began with small tests and rolled out quickly, and has generated an ROI, with a return realized on the first full-scale mailing.
Company B, a multichannel retailer with annual sales of $200+ million and growing, is integrating external solutions with internal systems, analyzing the buying patterns of customers who respond to specific campaigns and offers. This allows Company B to plan follow-up campaigns to maximize its return on new acquisitions and reactivations.
Challenges for Company B have included a network that wouldn’t support the increased workload and the departmental transfer of information. Eliminating constraints resolved the problem, and a full ROI is expected within the next year.
All of the executives interviewed consistently made several points that they believe constitute the basis of CRM success. First, the corporate infrastructure has to be well established before any CRM strategy can be successful. Next, always remember that the technology comes second. Define the needs first, and then choose the technological solutions best designed to accomplish those objectives. The ability to integrate new technology with legacy systems is critical to a successful implementation.
Third, design for the long term and implement for the short term. Invest heavily in the planning process, and the implementation will practically fall into place. Every plan has to be flexible and the implementation must be consistent across channels, divisions, and departments.
Finally, CRM is an evolutionary process. It is not an initiative that you can implement and leave unchecked. You must identify and measure key standards throughout the process.
READY, SET, CRM
The key to successful integration is having the right processes and data in place before starting, says Andy Bober, manager of the customer intelligence strategy team at Cary, NC-based technology firm SAS Institute. “Technology isn’t a substitute for making the processes work initially,” he says. He cites 1-800-Flowers as an excellent example of a company well prepared for a CRM implementation. It already had a customer-focused organization before it sought a solution that would allow it to expand on that success. The mindset is customer service first, which creates a solid foundation for the continuous improvement benefits that CRM offers.
CRM success is possible for any company committed to enhancing its customer relationships. The fundamental business processes that create successful direct marketing companies also establish the foundation for a successful CRM strategy. Every company, regardless of size, can enhance its marketing and service by integrating a CRM strategy with its existing processes and systems.
Debra Ellis is a principal with Wilson & Ellis Consulting in Barnardsville, NC. She can be contacted at DEllis@wilsonellisconsulting.com.