The better a business can manage the relationships it has with its customers the more successful it will become. Therefore IT systems that help support dealing with customers on a day-to-day basis are growing in popularity. Customer relationship management (CRM) is not just the application of technology, but is a strategy to learn more about customers' needs and behaviours 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 behaviour 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 recognise the value of its customers and to capitalise 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 by 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
- identifying which of your customers are profitable and which are not
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 costs associated with supporting and servicing them, increasing your overall efficiency and reducing total cost of sales
- improved profitability by focusing on the most profitable customers and dealing with the unprofitable in more cost effective ways
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 organisation 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 customise 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 customised 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) strategy 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 1 - 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 2 - 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 3 - 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 4 - 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 5 - 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 6 - 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.
If you are collecting, using and processing personal information covered by the Data Protection Act you must comply with the data protection principles.
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. Rules should be flexible to allow the needs of individual customers to be met.
Questions for CRM suppliers
For many businesses customer relationship management (CRM) can be a large investment. Therefore it is vital to choose your supplier carefully. Making the wrong choice could be expensive and even jeopardise your business. Before implementing a solution based on CRM technology, you might want to ask any potential suppliers the following questions:
- How long has the supplier been established?
- What are the specific costs associated with the product, ie a one-off purchase price, an annual renewable license, a charge per user etc?
- Does the supplier offer any form of evaluation software so that you can try before you buy?
- How much is charged for technical support?
- Does the supplier provide consultancy and, if so, at what rates?
- Is the system scalable? If your customer base grows will the system expand to cope?
- Can the supplier recommend any third-party developers that make use of their core CRM products?
- Is there an active independent user group where experience and ideas can be freely exchanged?
- Can the supplier provide references for businesses in your industry sector that use their software?
- Does it offer training in the CRM solution and, if so, at what typical cost?