Definition
The better a business can manage the relationships it has with its customers the more successful it will become. Therefore IT systems that specifically address the problems of dealing with customers on a day-to-day basis are growing in popularity.CRM is not just the application of technology, but is a strategy to learn more about customers’ needs and behaviors in order to develop stronger relationships with them. As such it is more of a business philosophy than a technical solution to assist in dealing with customers effectively and efficiently. Nevertheless, successful CRM relies on the use of technology.
This guide will outline the business benefits and the potential drawbacks of implementing CRM. It will also offer help on the types of solution you could choose and how to implement them.
Why CRM?
In the commercial world the importance of retaining existing customers and expanding business is paramount. The costs associated with finding new customers mean that every existing customer could be important.
The more opportunities that a customer has to conduct business with your company the better, and one way of achieving this is by opening up channels such as direct sales, online sales, franchises, use of agents, etc. However, the more channels you have, the greater the need to manage your interaction with your customer base.
Customer relationship management (CRM) helps businesses to gain an insight into the behavior of their customers and modify their business operations to ensure that customers are served in the best possible way. In essence, CRM helps a business to recognize the value of its customers and to capitalize on improved customer relations. The better you understand your customers, the more responsive you can be to their needs.
CRM can be achieved by:
- finding out about your customers’ purchasing habits, opinions and preferences
- profiling individuals and groups to market more effectively and increase sales
- changing the way you operate to improve customer service and marketing
Benefiting from CRM is not just a question of buying the right software. You must also adapt your business to the needs of your customers.
Business benefits of CRM
Implementing a customer relationship management (CRM) solution might involve considerable time and expense. However, there are many potential benefits.
A major benefit can be the development of better relations with your existing customers, which can lead to:
- increased sales through better timing due to anticipating needs based on historic trends
- identifying needs more effectively by understanding specific customer requirements
- cross-selling of other products by highlighting and suggesting alternatives or enhancements
This can lead to better marketing of your products or services by focusing on:
- effective targeted marketing communications aimed specifically at customer needs
- a more personal approach and the development of new or improved products and services in order to win more business in the future
Ultimately this could lead to:
- enhanced customer satisfaction and retention, ensuring that your good reputation in the marketplace continues to grow
- increased value from your existing customers and reduced cost associated with supporting and servicing them, increasing your overall efficiency and reducing total cost of sales
Once your business starts to look after its existing customers effectively, efforts can be concentrated on finding new customers and expanding your market. The more you know about your customers, the easier it is to identify new prospects and increase your customer base.
Even with years of accumulated knowledge, there’s always room for improvement. Customer needs change over time, and technology can make it easier to find out more about customers and ensure that everyone in an organization can exploit this information.
Types of CRM solution
Customer relationship management (CRM) is important in running a successful business. The better the relationship, the easier it is to conduct business and generate revenue. Therefore using technology to improve CRM makes good business sense.
CRM solutions fall into the following four broad categories.
Outsourced solutions
Application service providers can provide web-based CRM solutions for your business. This approach is ideal if you need to implement a solution quickly and your company does not have the in-house skills necessary to tackle the job from scratch. It is also a good solution if you are already geared towards online e-commerce.
Off-the-shelf solutions
Several software companies offer CRM applications that integrate with existing packages. Cut-down versions of such software may be suitable for smaller businesses. This approach is generally the cheapest option as you are investing in standard software components. The downside is that the software may not always do precisely what you want and you may have to trade off functionality for convenience and price. The key to success is to be flexible without compromising too much.
Bespoke software
For the ultimate in tailored CRM solutions, consultants and software engineers will customize or create a CRM system and integrate it with your existing software. However, this can be expensive and time consuming. If you choose this option, make sure you carefully specify exactly what you want. This will usually be the most expensive option and costs will vary depending on what your software designer quotes.
Managed solutions
A half-way house between bespoke and outsourced solutions, this involves renting a customized suite of CRM applications as a bespoke package. This can be cost effective but it may mean that you have to compromise in terms of functionality.
How to implement CRM
The implementation of a customer relationship management (CRM) solution is best treated as a six-stage process, moving from collecting information about your customers and processing it to using that information to improve your marketing and the customer experience.
Stage one - Collecting information
The priority should be to capture the information you need to identify your customers and categorise their behaviour. Those businesses with a website and online customer service have an advantage as customers can enter and maintain their own details when they buy.
Stage two - Storing information
The most effective way to store and manage your customer information is in a relational database - a centralised customer database that will allow you to run all your systems from the same source, ensuring that everyone uses up-to-date information.
Stage three - Accessing information
With information collected and stored centrally, the next stage is to make this information available to staff in the most useful format.
Stage four - Analysing customer behaviour
Using data mining tools in spreadsheet programs, which analyse data to identify patterns or relationships, you can begin to profile customers and develop sales strategies.
Stage five - Marketing more effectively
Many businesses find that a small percentage of their customers generate a high percentage of their profits. Using CRM to gain a better understanding of your customers’ needs, desires and self-perception, you can reward and target your most valuable customers.
Stage six - Enhancing the customer experience
Just as a small group of customers are the most profitable, a small number of complaining customers often take up a disproportionate amount of staff time. If their problems can be identified and resolved quickly, your staff will have more time for other customers.
Potential drawbacks of CRM
There are several reasons why implementing a customer relationship management (CRM) solution might not have the desired results.
There could be a lack of commitment from people within the company to the implementation of a CRM solution. Adapting to a customer-focused approach may require a cultural change. There is a danger that relationships with customers will break down somewhere along the line, unless everyone in the business is committed to viewing their operations from the customers’ perspective. The result is customer dissatisfaction and eventual loss of revenue.
Poor communication can prevent buy-in. In order to make CRM work, all the relevant people in your business must know what information you need and how to use it.
Weak leadership could cause problems for any CRM implementation plan. The onus is on management to lead by example and push for a customer focus on every project. If a proposed plan isn’t right for your customers, don’t do it. Send your teams back to the drawing board to come up with a solution that will work.
Trying to implement CRM as a complete solution in one go is a tempting but risky strategy. It is better to break your CRM project down into manageable pieces by setting up pilot programs and short-term milestones. Consider starting with a pilot project that incorporates all the necessary departments and groups but is small and flexible enough to allow adjustments along the way.
Don’t underestimate how much data you will require, and make sure that you can expand your systems if necessary. You need to carefully consider what data is collected and stored to ensure that only useful data is kept.
You must also ensure you comply with the eight principles of the Data Protection Act that govern the processing of information on living, identifiable individuals.
Avoid adopting rigid rules which cannot be changed to be more flexible to the needs of individual customers
Here’s how CRM software improved one business
Case Study
Based in Runcorn, Cheshire, with 60 employees, Chance & Hunt specializes in supply chain management for the international chemical industry. Here managing director Joan Traynor describes the benefits that Customer Relationship Management (CRM) software has brought to the business.
What I did
Define objectives
“Four years ago we began looking at new ways to manage our existing databases, which were largely running in isolation from each other.
“Our key objectives in selecting a solution were to enhance customer relationships, cut costs and grow sales. With the help of a student working with us in a Knowledge Transfer Partnership we researched CRM systems and selected the right software package for us.
“Our decision was partly based on the fact that the new software would work with our existing platform, so we wouldn’t have to start completely from scratch.”
Implement and monitor the solution
“The software was relatively easy to install, although we were lucky that we had the expertise in-house. The process involved training for all staff, since user buy-in is crucial. If employees aren’t motivated to keep records up to date, you won’t get anywhere. In that respect, it’s important that everyone knows the project has management commitment too.
“We monitored success using key performance indicators, such as the number of customer complaints, and by conducting customer surveys. Complaints are down and customers report improved responsiveness. It’s definitely had an impact on sales as well, since our team now has all the customer information they need at the touch of a button. We also monitor employee usage of the system during staff appraisals.”
Keep evolving
“One thing we’ve learnt about CRM software is that it’s about evolution rather than revolution. We developed our system in bite-sized chunks, learning as we went along.
“When we started, we captured fairly basic information like customer details, buying history and sales visits. The system has since been adapted to include a range of additional functions. For example, we are now able to access the system from a handheld PDA or call up a list of customers located en-route to a sales call.
“The great thing is that most of the improvements have been suggested by users. Because they can see the advantages of the system and that it’s easy to use, they’re keen to take ownership.”
What I’d do differently
Structure the data
“Early on, we were mostly searching for individual customer records, so it didn’t seem to matter how records were grouped. As things developed we wanted to be able to search a variety of indexes, for example by product name, location and so on. Structuring data by defined ‘headings’ from the start would have helped us when we came to refine the system later.”
This article brought to you by ICON Technology Solutions. Find us at www.icontsi.com. Oklahoma, Arkansas, and Kansas’ 1# Netsuite integrators of on-demand web-based CRM, ERP, and Accounting SaaS solutions.
