Mining those customer files

Pro

1 April 2005

From a standing start a few years ago, CRM has lately become the most common TLA (three letter acronym) in IT and you would be forgiven for thinking that it must be absolutely the hottest thing in technology. But in fact that’s a bit of a myth-the first of many attaching to this newly familiar set of initials-because Customer Relationship Management after all is not technology but what a business aspires to. If you’re in business you have customer relationships-good, bad or whatever. The important point is how well you manage them.

Keep it simple

A CRM system tracks and analyses everything to do with a customer. Take an example: A delivery is running late so the shipping system alerts a customer rep who in turn contacts the customer and turns a potential complaint into a smart service. Your business may well benefit from some of the various bits and pieces of technology that are marketed with a CRM label. But small businesses in particular could-and often do-achieve the same results with some good sales and service people using their wits and remembering what their customers want and prefer, possibly with the aid of just pen and paper.

The second myth about CRM is that it involves smart new technology. That’s partly true. CRM systems are usually made up of well-proven technology applied and working together in new and smarter ways. But if you push in past all the pretty curtains and frills for a moment, any CRM application is, at heart, a straightforward database with customer and prospect information, plus sales and credit history and other trading details to whatever level of detail the business needs. So the front end-and many would say fundamental part-of any system of looking after your customers is for keeping track of who they are and what sales or communications have passed between you.

That sounds awfully like Contact Management: And there are some well-proven software products in the market to do that and they have become very sophisticated over the years. The principal dedicated contact managers are ACT! and Goldmine, both of which are easy to set up and use and, naturally enough, have developed the CRM aspect of their performance in the last couple of years. Microsoft Outlook will also do a more than fair job of the contact tracking, especially through e-mail and the Web, but it would not claim to be a full-fledged CRM system.

The roots of CRM

CRM software really began after the Web started to make an impact on business and when it became obvious that the traditional ways of knowing your customers and markets were not applicable. Feedback from reps on the road or counter staff or even telesales can be excellent.

But if your customers are just names and addresses and code numbers, there is no feedback and the bare statistics tell you little. ‘Bought twice in a month last year and has not ordered since’ or ‘Returned goods average 13 per cent of sales’ are important-but frustratingly barren of clues to the all-important question ‘Why?’

Very smart systems were developed to capture, record and analyse every scrap of data about remote customers. Siebel Systems is regarded as the pioneer, soon joined by SAP and Peoplesoft and others in the top end, high powered enterprise management systems market. In other words, the Big Boys’ Club. But it soon became obvious to everyone in marketing that Web sales and e-commerce were no more going to replace traditional channels than computers have produced the paperless office.

So today we are talking about mixed customer channels: Direct, by Web or face to face retailing; and indirect through resellers of all kinds. It turned out that the smart features of the first generation of CRM systems that were developed to deal with faceless e-commerce were equally appropriate for the traditional channels-and some of them were incorporated in the next generations of ACT! and Goldmine plus a wide range of sales administration software. A new approach is that of Salesforce.com, which offers a sales automation and CRM product as a Web service for €70 a month.

The current generation of CRM products all recognise the full mix of customers, relationships and channel types. They try to integrate a wide range of tools to make up a comprehensive system of managing all of the ways in which we deal with customers. There is actually nothing like a hard definition of CRM software, more a marketplace consensus as to what we mean.

The goal is, clearly, to cultivate customer loyalty, with the obvious implications of higher retention rates-especially of the most profitable customers-and therefore higher profits from the same volume customer base. The central concept is ‘the market of one’: It has become a bit of a cliché but is still totally valid to describe the aspiration of tailoring your products and services so well that they are actually individualised for each customer.

CRM vs contact management

Is there a difference between fully-fledged CRM and contact management? There certainly is, although products from either end of the spectrum have to contain elements of the other.

Putting it all too simply, both classes of product betray their origins. Contact management grew as a personal/company tool in keeping track of customers efficiently with pop-up customer records, automated letters, reminders and call scheduling, and so on. CRM ‘proper’ has its roots in sophisticated data mining technology, international call centres and multinational businesses. It is by no means still just for big corporations. But the systems are definitely for professional implementation and affect most of the processes in a business-so they tend to cost more per user.

The products that grew through the contact and sales management channels may not be as sophisticated (at the top end of possible performance) but they are user-friendly and can grow and be tailored with the business.

There is no simple rule of choice either, not least because most expert observers have concluded that either approach delivers return on investment and improved profitability in proportion to the commitment of management to making them work. Just like all known business solutions!

 

AT A GLANCE

  • CRM (Customer Relationship Management) systems are intelligent databases that react to customer queries and have the potential to help businesses cultivate more profitable relationships with their customers.
  • CRM systems may not be suitable for all small businesses but there are examples in which they can work very well. Talk to the likes of Siebel, Salesforce.com, SAP and Sales Outlook, tell them about how your business functions, get their feedback, their costs and then make a decision based on the potential value of a CRM system to your organisation.
  • Read between the lines and avoid the ‘hard sell’, because very often employee attention to detail and the computer tools you already own (such as e-mail) might be sufficient to help you serve your customers well.
  • Contact management applications like ACT! and Goldmine are more suitable for most small businesses. They allow you to track dealings with customers easily so your team can serve them better.
  • Contact management tools are relatively inexpensive and are easily installed out of the box requiring minimum support.
  • Large-scale CRM systems can be expensive as they involve software consultancy fees that can run into thousands of Euro.

 

Business benefits of CRM

  • Use CRM and contact management tools to serve your customers better and more quickly and build long lasting relationships in the process.
  • Use CRM tools to glean more information about online customers.
  • Use a contact management system to co-ordinate sales activities by synchronising each employee’s customer information and activities and sharing them with other members of staff.
  • Make your staff more flexible and responsive to customers’ needs by equipping them with remote access to customer orders, complaints and credit notes in a contact management database.
  • Generate more revenue by keeping your customers satisfied.
  • Make you staff more productive by giving them comprehensive and often instant access to information on existing and potential clients.
  • Create new revenue streams from the information extracted about customers from an intelligent CRM application.

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