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Developing a crm strategy
- 1. Jennifer Kirby Developing a CRM Strategy
- 2. These slides are for internal use only. External use of Gartner copyrighted material must be approved in writing by Gartner Vendor Relations. Please e-mail your usage request to quote.requests@gartner.com for approval. Key Issues • What is a customer relationship management (CRM) strategy? • How does a CRM strategy fit in with other business strategies? • Only 10 percent to 15 percent of companies know the value of their customer base — yet, this is an important intangible asset and drives the detailed tactics of the CRM strategy. • The benefits of CRM come through increased service and communication; to build real loyalty, how is this managed effectively?
- 3. These slides are for internal use only. External use of Gartner copyrighted material must be approved in writing by Gartner Vendor Relations. Please e-mail your usage request to quote.requests@gartner.com for approval. What Is a CRM Strategy? • “It boldly states the ideal customer base and how an organization intends to get and keep it. I’ve never yet seen one that does this to any depth.” — CRM Consultant • “…It’s the decision about which customers are to be managed, via which channels for which products and services: It means revisiting the marketing strategy.” — CRM Guru • “A CRM strategy is not an infrastructure road map.” — CRM Program Manager • “We need to understand what customers we have, and who we want, then we can put in place a strategy for developing the value of each segment” — CEO
- 4. These slides are for internal use only. External use of Gartner copyrighted material must be approved in writing by Gartner Vendor Relations. Please e-mail your usage request to quote.requests@gartner.com for approval. How do we develop the customers’ loyalty and value to us by developing our value to the customer? How do we acquire valuable customers who will value us? How can we retain or win back customers of value? How do we create awareness of what we offer to potential customers of value? How do we do this efficiently? MarketingSales Service Develop Retain Acquire Target Customer Life Cycle Enquire Welcome Manage Problems Win Back A CRM Strategy: Developing the Customer Asset Base
- 5. These slides are for internal use only. External use of Gartner copyrighted material must be approved in writing by Gartner Vendor Relations. Please e-mail your usage request to quote.requests@gartner.com for approval. CRM Strategy: Top Ranking Objectives 27 26 47 16 37 47 B2B B2C Annual loss in a typical company Customer loss: 10% to 30% Employee loss: 15% to 20% Investor loss: 50% Reduces annual profit by 20-50% Percent of Companies Ranking as Top Priority Retention Development Acquisition
- 6. These slides are for internal use only. External use of Gartner copyrighted material must be approved in writing by Gartner Vendor Relations. Please e-mail your usage request to quote.requests@gartner.com for approval. CRM Strategy: Case Study No. 1 • Segment the customer base in deciles of value. • Develop customer profitability. The most-valuable segment by 3 percent, the next three segments by 20 percent, and decrease the losses on the rest — develop services used, lower distribution cost, increase prices and discount according to potential value. • Acquire new customers of the most-valuable type with targeted selling. • Implement retention programs for the most-profitable customers. Household Deciles Ranked by Profit ($1,000) ($2,500) 0 $5,000 $10,000 $15,000 1 2 3 4 5 6 7 8 9 10
- 7. These slides are for internal use only. External use of Gartner copyrighted material must be approved in writing by Gartner Vendor Relations. Please e-mail your usage request to quote.requests@gartner.com for approval. CRM Strategy: Case Study No. 2 • Understand and segment the customer base . • Retain the most-valuable customers after finding out why they defect. • Win back valuable ex-customers. • Develop the loyalty of current customer segments — use differentiated service according to need. • Improve the profitability of unprofitable customers. Brand Value Value-tailoring Value-added Communication
- 8. These slides are for internal use only. External use of Gartner copyrighted material must be approved in writing by Gartner Vendor Relations. Please e-mail your usage request to quote.requests@gartner.com for approval. OPERATIONAL STRATEGY BUSINESS STRATEGY BUSINESS MODEL CUSTOMER STRATEGY MARKETING STRATEGY MARKETING STRATEGY BRAND PROPOSITION: The Company DNA IT STRATEGY PRODUCTION STRATEGY FINANCE STRATEGYFINANCE STRATEGY R&D STRATEGY HR STRATEGY CRM Strategy Is an Element of Business Strategy
- 9. These slides are for internal use only. External use of Gartner copyrighted material must be approved in writing by Gartner Vendor Relations. Please e-mail your usage request to quote.requests@gartner.com for approval. BRAND PROPOSITION Promised Customer Experience Step No. 1: Define the Vision What and who are you? What value will you deliver? Unifies Internal Delivery Step No. 2: State the Culture: What internal capabilities are needed to deliver the value? Step No. 3: Express the Image How will the the value of the brand be communicated? The Brand Is the Company DNA
- 10. These slides are for internal use only. External use of Gartner copyrighted material must be approved in writing by Gartner Vendor Relations. Please e-mail your usage request to quote.requests@gartner.com for approval. Corporate DNA Example: Mickey’s Signature
- 11. These slides are for internal use only. External use of Gartner copyrighted material must be approved in writing by Gartner Vendor Relations. Please e-mail your usage request to quote.requests@gartner.com for approval. Mickey’s Signature No. 2
- 12. These slides are for internal use only. External use of Gartner copyrighted material must be approved in writing by Gartner Vendor Relations. Please e-mail your usage request to quote.requests@gartner.com for approval. One Mouse, Different Signatures
- 13. These slides are for internal use only. External use of Gartner copyrighted material must be approved in writing by Gartner Vendor Relations. Please e-mail your usage request to quote.requests@gartner.com for approval. Corporate DNA Consistency
- 14. These slides are for internal use only. External use of Gartner copyrighted material must be approved in writing by Gartner Vendor Relations. Please e-mail your usage request to quote.requests@gartner.com for approval. • Vision: Market Position • Market Definition and Audit • SWOT Analysis • Target market segments • Objective for each market segment: Penetration, Development, Maintenance and Productivity • Measures: Market share, brand equity and market penetration Based on product life cycle • Vision: CVP • Customer Definition and Audit • Capability Analysis • Target customer segments by value • Objective for each customer segment: Acquisition, Development Retention and Efficiency • Measures: Satisfaction, loyalty, cost to serve and employee satisfaction Based on the customer life cycle How do we take advantage of market opportunities and mitigate competitive threats? Marketing Strategy How do we get closer to the customer to deliver value to them and create value for us? Customer Strategy Interweaving the Marketing and Customer Strategy
- 15. These slides are for internal use only. External use of Gartner copyrighted material must be approved in writing by Gartner Vendor Relations. Please e-mail your usage request to quote.requests@gartner.com for approval. Relationship Investment Guide High Low ClaimedImportance Hygiene Factors Overspending Hidden Opportunities Motivators Real Relevance Well above average Above average Average Below average Poor9 19 22 12 5 3 2 4 Trim Study/Invest Maintain Efficiently Invest Low Hig h
- 16. These slides are for internal use only. External use of Gartner copyrighted material must be approved in writing by Gartner Vendor Relations. Please e-mail your usage request to quote.requests@gartner.com for approval. Protect Position Invest to Protect Invest to Win Over Damage Limitation Counter Competition Invest to Build Win the Opportunity Careful Management Manage for Profitability Build Selectively Manage for Revenue Manage for Revenue Manage for Profitability Manage for Profitability Manage for Revenue Consider Divesting Strength of Relationship (Value to Customer) Customer Potential (Value to Company) FragileHighly Secure Secure Vulnerable Transactional Some potential Large share of wallet Key Customer Asset Audit
- 17. These slides are for internal use only. External use of Gartner copyrighted material must be approved in writing by Gartner Vendor Relations. Please e-mail your usage request to quote.requests@gartner.com for approval. Real Examples of CRM Objectives • Return retention to the industry average and then improve to 3% • Measure the propensity to churn, expected lifetime value, and propensity to accept discounts and special marketing offers • Empower CSRs to decide who to keep according to specified criteria • Establish who end users are to build broker loyalty • Build a customer information culture to increase customer advocacy • Improve communication with customers/partners • Reduce staff turnover in call center • Introduce an effective global sales process • Find CRM initiative with highest payback and use to fund others • Retain our most valuable customers for revenue in the short term • Establish our customers’ optimum potential for selective development • Acquire strategically important customers in the new market • Expand cross-selling opportunities with supporters
- 18. These slides are for internal use only. External use of Gartner copyrighted material must be approved in writing by Gartner Vendor Relations. Please e-mail your usage request to quote.requests@gartner.com for approval. CRM Metrics CorporateMarket Share Key measures to support corporate financial and market goals Customer Strategic Key measures for monitoring the customer strategy Operational Key measures for monitoring the customer processes Infrastructure Key measures for monitoring efficiency and inputs Revenue Growth Profit Growth Margin Growth Cost Ratios Customer LoyaltyExample Lifetime Value Customer Profitability Cost to Serve Acquisition Development Retention Risk Profile Staff Satisfaction Response Levels RFM Measures Conversion Ratios Complaints NPD Times Staff Turnover Cross-Sell Ratio Recommendation Levels Channel-Specific Measures Call Answering Times Customer Data Accuracy Response Times “Do Not Mail” Markers Staff Qualifications Staff Sickness Example Example Example
- 19. These slides are for internal use only. External use of Gartner copyrighted material must be approved in writing by Gartner Vendor Relations. Please e-mail your usage request to quote.requests@gartner.com for approval. CRM Strategy — Tactics • CVP • Product • Price • Communication: public relations, advertising, sales, promotion, merchandising and direct marketing/messaging • Channel • CVP by segment • How customized for each segment • How differentiated for each segment • Service/customer care by customer segment/life cycle • Contact by life cycle/segment • How media and content is personalized in communication for each segment • Which channel is used by which segments for what (touchpoints) • Management by segment: who, where, how Marketing Strategy Customer Strategy
- 20. These slides are for internal use only. External use of Gartner copyrighted material must be approved in writing by Gartner Vendor Relations. Please e-mail your usage request to quote.requests@gartner.com for approval. Tactics for Retention and Building Loyalty Behavior Attitude and Behavior • Rational value • Creates stickiness • Makes sales • Retention, attraction, increased sales • Real loyalty? • Rational and emotional value • Creates loyalty • Creates relationships • Retention, attraction, customer share, recommendations, lower costs and wider margin Loyalty Scheme CRM Strategy Reward schemes Incentives Cross-selling Product bundling Product & price Brand values Contact Customer care Contracts Products & price
- 21. These slides are for internal use only. External use of Gartner copyrighted material must be approved in writing by Gartner Vendor Relations. Please e-mail your usage request to quote.requests@gartner.com for approval. Build Communities Customer Care: The Social Bond That Binds • Improve perceived service and you improve loyalty. • The customer does not care how much you know about them, until they know how much you care. • Stop thinking you are servicing a product — service the customer. • Feeling recognized, valued and cared about is the basis of the bond that is loyalty. Advice & Information Collaborate & Involve Understand & Empathize Anticipate the Crisis
- 22. These slides are for internal use only. External use of Gartner copyrighted material must be approved in writing by Gartner Vendor Relations. Please e-mail your usage request to quote.requests@gartner.com for approval. • Upward movement of wallet share is a trigger for additional resource. • Greater customer spend rewarded with greater levels of account management. Low Medium High <10%10-50%>50% One:One to Few:One One:Few One:Many One:Few to One:One Key Account Teams Market Value of Customer CompanyShareofWallet Contac t Center Dedicated Hunters Relationship Manager Personalized Self- Serve Relationship Models: Resource Allocation by Segment
- 23. These slides are for internal use only. External use of Gartner copyrighted material must be approved in writing by Gartner Vendor Relations. Please e-mail your usage request to quote.requests@gartner.com for approval. CRM Strategy: Capabilities Marketing Strategy Support • Human resources • IT • Knowledge — research Customer Strategy Support • Skills and competencies • Internal communications • Organization • IT infrastructure • IT architecture • Research, analysis and planning • Knowledge management • Customer data strategy • Business process architecture
- 24. These slides are for internal use only. External use of Gartner copyrighted material must be approved in writing by Gartner Vendor Relations. Please e-mail your usage request to quote.requests@gartner.com for approval. Recommendations • Establish your market position against requirements and competitors. Define a “value,” different, customer proposition • Make the brand the company DNA to deliver the proposition • Segment the market for share of wallet and lifetime value • Establish the motivating factors for customer loyalty: Where do you need to excel and where can you cut cost? Any gems? • Value your customer base potential — not just on current profit. • Develop skills in the new areas of customer relationship building — service, contact strategies and relationship models. Understand what technology enables you to do.
Editor's Notes
- What is a CRM strategy? This is common question, and it does not help when answers differ. There is a lot of confusion between a CRM business strategy and a CRM implementation strategy or plan. A CRM strategy is the blueprint for how you are going to achieve the ideal customer base. To do this means revisiting the marketing strategy. What products/services are you going to sell, to whom, at what price and through what channels. In a CRM strategy, this is extended to how is the enterprise going to build customer loyalty once it has got its target customer. How is it going to build that “feel good factor” of a customer’s connection with the company and it’s belief in the company’s proposition, and brand? That “feel good factor” means the customer stays longer, buys more, recommends the company to others more often and is willing to pay a premium price. To achieve this, it is highly likely that new capabilities will be needed — in analysis, metrics and service. New technology will be required, customer contact processes will need revamping, staff will be asked to act in different ways and data will need managing to a much greater degree. However, a plan for building these is not the customer strategy, it’s the road map for building enabling capabilities. The one supports the other, and an enterprise should write the top level road map into the CRM strategy — but don’t confuse them. The customer base needs to become an asset, and financial analysts are starting to value it as such — although only 10 percent to 15 percent of companies know this. That is what a CRM strategy does.
- Developing the customer asset base, then, is not just a matter of developing and automating current sales, service and marketing capabilities and processes. Rather, it necessitates understanding how an enterprise is going to achieve financial goals through targeting, acquiring, developing and retaining customers of value efficiently — this is a CRM strategy. Once done, relevant processes can be put in place. A CRM strategy must look at the customer from a life cycle perspective, not a sales, service or marketing capability perspective — that leaves out the rest of the company. Processes that support the customer life cycle take center stage to deliver the objectives of a CRM strategy. Which means that all areas of the company play a part. “If you are not serving a customer, serve someone who does.” Organizational structures, training programs, attitudes, behavior, metrics and compensation plans all need to change to reinforce the life cycle view. These are some of the capabilities needed to support the CRM strategy. A customer base only becomes an asset when it has a degree of loyalty, and the only way to do that is to acquire customers who value your proposition; welcome them (a key point in a relationship); get to know them and develop all around value (enterprise to customer, customer to enterprise); manage problems (another key relationship point); understand when they might defect and stop it; or win them back if they do. Loyalty and value are achieved by delivering through a strategy supported by the right enterprisewide capabilities and processes.
- Research shows that the top ranking CRM strategy objectives are retention, development and acquisition — in that order — with cost reduction coming in last. There is no point in undertaking a CRM initiative just to reduce cost if it is not going to achieve other customer related benefits. Retention through increased loyalty is the overall No. 1 objective, whatever the business; acquisition and development objectives differ between business-to-business (B2B) and business-to-consumer (B2C) companies. In a 2001 Andersen study of CEOs, 53 percent of B2B companies and 45 percent of B2C companies thought they were doing an excellent job with customer retention. However, a survey by the CRM Forum/CRM Institute of CRM practitioners, also in 2001, showed less confidence that goals were being achieved. Enterprises need to introduce to measures to ensure everyone knows what is going on with customer objectives. Typically, companies lose a large proportion of customers, staff and investors each year — this reduces profits by 20 percent to 50 percent. If a company lost any other asset, would it treat it so lightly? Overall, its seems that the prime objectives of companies in their strategies is, first, relationship enhancement; second, business development (acquisition); and third, cost reduction. The CRM Forum/Institute study found that significantly greater emphasis was put on relationship enhancement and business development by companies than by suppliers or consultants.
- So, what is a CRM strategy? The above is an outline plan for a B2B telecommunications company. It states the strategic objectives, with some indication of how this is to be to achieved. The details of these objectives now must be worked out. This is a good start to developing an asset base of value, but it appears quite inward-focused. It requires more of a vision for what is to be delivered to customers. With a more-complete vision of the value to be delivered as well as to be received, the detail of the strategy can be worked out. From that detail, it will become apparent what capabilities the company needs to deliver the strategy, and this can then be prioritized in the infrastructure road map to achieve the strategy.
- This strategy for an airline company, although still at the outline level, starts to recognize that the company needs to deliver customer value. Again, it needs more of a vision about the brand values and customer proposition. However, that should come through the understanding of the customer base — as long as it goes hand in hand with an understanding of the market.
- Successful companies know precisely what value they are delivering to who, and how. They have a vision (or mission), know the differentiating market position they are aiming for against competitors and what their brand proposition is. They then implement a business strategy to achieve this. The goal is to achieve stakeholder value and build competitive advantage. To support objective, they have chosen a business model for how they are financed, what type of organizations they will have, and the way they will work with suppliers, partners and other stakeholders. Increasingly, companies are then using their brands as the “corporate DNA” to ensure they deliver what they promise, they are known for delivering it, and they create an organization that gives a consistent customer experience. To achieve the business strategy, a number of operational strategies implemented. The detail of the business strategy, then, becomes the objectives of the operational strategies. If the business strategy states that it wants to increase profitability by creating customer loyalty, then it has to weave a customer management strategy into its marketing strategy, to ensure the extra emphasis on customer. This then must be supported by other operational strategies (e.g., human resources and IT). The marketing strategy is about building the market position against competition. The customer strategy is about building the customer asset base.
- To make the brand the company DNA, the key vision (or mission) must be ascertained. What is the key deliverable and social worth of the company? From this and in consultation with consumers, customers and stakeholders, the key differentiating brand values (or brand proposition) can be worked out. What will make the company stand out from its competitors in the market? The desired customer experience can be researched, detailed and captured in the customer value proposition (CVP). The use of the CVP (value to the customer) in achieving the customer objectives of acquisition, development and retention (customer value to the enterprise) is what the CRM strategy sets out. However, the company must be unified to deliver a consistent CVP. In the past, brand has simply been an expression of a product or company image. However, brand now needs to play a greater identifying and unifying role. Increasingly, companies are moving to corporate unifying brands rather than a mass of product brands. Therefore, a brand: Should define the promise to customers and potential customers about the likely customer experience they will get by dealing with that enterprise, especially in relation to the competition. Should act to unify the enterprise’s operations in delivering a consistent customer experience. For example, if the brand promises to deliver innovation, then everything the company does should demonstrate that it is innovative — this gives a direction to people across the enterprise about what is expected of them.
- For example, Disney has used its brand as company DNA. A family with two children goes to Disneyland, and one of the children decides he wants Mickey Mouse’s autograph and rushes over to Mickey. Mickey Mouse signs his souvenir.
- Later that day, the second child also decides they want Mickey’s autograph. She seeks him out, and he signs again. Both children are happy.
- What they don’t know is that there are six Mickey Mouse character actors at Disneyland, and when they get home and compare signatures, they find that the signatures are not consistent. They doubt whether the other had met the “real” Mickey; then, they wonder whether both Mickey’s were fake. Disney is not delivering the real Mickey Mouse of the promised brand experience.
- To prevent this sort of brand confusion, Disney train its Mickey actors to sign the same Mickey Mouse signature. It also trains them to walk the same way and, obviously, gives them the same clothes to wear. Being consistent in the CVP is key to trust. Trust in delivery of the brand proposition is at the heart of all successful brands.
- The first part of a CRM strategy audits where the enterprise is and what are its objectives. Many companies have a marketing strategy (or should have), and this is what needs to be revisited to develop the CRM strategy. The aim of marketing since its rise as a business discipline has always been to put the customer at the front of the “production function,” so instead of “produce-sell-customer.” the business process is “understand customer needs-produce-sell-customer.” However, as companies grew, they could only do this at an aggregate, mass market level at best. What has changed now is that technology is enabling us to do this at a far more granular or even personal (if required) level. In addition, customers are demanding more value and, increasingly, service is the key to sales. The technology is there, but business practices and strategy are not making the most of it. The development of the CRM strategy from the marketing strategy is outlined above. The marketing strategy is concerned with placing the organization in its chosen field in relation to competitors. The customer strategy is concerned with placing the organization in a good light with its customers. The marketing strategy audits the market position, and then defines objectives based on this and the product life cycle. The customer strategy audits the customer base, and then defines objectives based on this and the customer life cycle. The outcome of the customer audits should show the situation with regard to the customer base, and the CRM capabilities of the company.
- The first thing to do for the customer strategy is establish exactly what customers value and what the CVP is going to be. What will satisfy the customers and, more importantly, what will generate the “feel good factor” and trust that engenders loyalty? A company can generate satisfaction without any loyalty — and many do — but understanding what motivates loyalty is still very important. To do this, a company needs to examine its customers using a range of factors about itself and its service delivery. It has to look at rational factors against need, and the more emotional and subjective factors of brand image, values and service quality (e.g., the style of communication and the amount of customer care shown). It is delivering on the emotional factors, once everything else is satisfactory, that makes customers more committed and loyal. Establishing the key factors of satisfaction and loyalty can be done in a market research study that produces a relationship investment guide (RIG). This guide will show the claimed importance of a range of rational and emotional service delivery factors (including things like brand values and satisfaction with account manager contact time) and plots this against the real relevance of the factor on the customers’ behavior. The end result shows the factors that will motivate loyalty where investment is needed, factors that engender satisfaction so they only need to be done to a certain “hygiene” level, those that really don’t matter and where costs can be cut back, and, finally, any hidden factors that the enterprise had not realised were important. All of this can be shown against competitors, and detailed by customer segment.
- The next thing to establish is the state of the customer asset base. How strong is the relationship with the customer — How much do they value you? — against how valuable you consider them to be. The result is a customer asset matrix that combines the supplier’s view of customer value segments (which are derived by combining current profitability and expectations of future potential) with a measure of the current strength of the relationship from the customer’s perspective (arrived at by looking at satisfaction and loyalty). The intersection then determines the customer objective and strategy by segment, and the detail from the RIG allows you to determine the tactics of how to achieve it. Measurements of current and future profitability are often the first things companies turn to in estimating relationship value, even though the allocation of costs may be difficult. However, understanding the strength of relationship from the customer’s perspective is equally important, and methods to do this are increasingly available and rigorous. Consequently, in 2002, the majority of investment by leading proponents of CRM in the banking, insurance and telecommunications industries will be in metrics such as customer lifetime value and share of wallet. By year-end 2003, leading enterprises will have increased investment focus towards measuring satisfaction and loyalty.
- The above examples are real CRM objectives from a variety of different companies. They cover large global organizations, government departments and even a football club. They come from B2B- and B2C-focused enterprises. The scope of the objectives is broad ranging, from specific performance related goals such as reducing turnover in a call center to building a customer information culture to increase customer advocacy. In reality, most enterprises require multitiered and interlinked objectives so each employee and management layer can see how they link back to the larger corporate objectives. Without this linkage, the involvement of employees will be minimal, and success in meeting objectives less likely. Critically, the majority of the objectives above have no defined means of quantification and, therefore, measuring progress and achievement will be difficult. Less than 5 percent of those enterprises that Gartner talks to and and are currently engaged in a CRM initiative have metrics associated directly with CRM.
- Companies must set measurable specific CRM objectives and strategy monitor indicators if they are to become customer-centric. CRM metrics not only allow the level of success to be gauged, but they also provide the feedback mechanism for iterative development of strategy and tactics. In addition, they can act as a great tool for change management and are vital for changing the ways employees’ incentives are structured. CRM metrics must follow and measure a company’s own CRM strategy — which means they will be unique to that company. CRM metrics should not be viewed as an amorphous whole. There is a hierarchy of linking metrics required depending on their purpose and who is using them. Gartner proposes four levels of metrics: corporate, customer strategic, operational and infrastructure. Examples are outlined above. Two primary challenges exist in developing CRM metrics: 1) understanding the linkage points between the levels and 2) avoiding overcomplexity and oversimplicity. From the figure above, it can be seen how the customer objective metrics acquisition, development and retention (in the customer strategic layer) link the financial targets to the rest of the company’s key performance indicators. This is one of the benefit of having a CRM strategy, and it makes the company more customer-centric.
- The next part of the marketing and customer strategies details how the objectives are going to be achieved and what tactics will be used. The customer strategy customizes the marketing strategy for relevant customer segments. It also uses more heavily the service, contact and management aspects of the relationship. It cannot be stressed enough that technology is enabling enterprises to do a lot more by way of CRM than was ever possible before. Added value service and customer care over the customer life cycle is a much greater part of the CVP. Whereas in the past there were only one of two channels do deal with, now there are many, and the number is growing — these are the new customer touchpoints. They need to be used to advantage, and service delivery must to be consistent across all channels. No longer will customers use just one channel; now, they will want to use a variety of channels — e.g., awareness may be created by broadcast media, enquiries may then come via the telephone or Web, the sale may be clinched face-to-face, while developing the relationship may be via all of these and more, such as Short Message Service messaging and interactive TV. Resource management over these channels needs to be looked at carefully if delivery of service is not to become prohibitively expensive.
- If an enterprise want to develop customer loyalty, it has to have a CRM strategy that includes the factors that will engender loyalty over the customer life cycle — knowing, communicating, respecting and caring for customers. Many companies try and encourage loyalty through a scheme or pricing. This can certainly bring about seemingly loyal behavior, but for real, lasting,effective attitudinal loyalty and retention, the best course of action is a CRM strategy. Only use a scheme when an enterprise must retain customers in the short term and can afford the cost. What drives long-term customer loyalty is: A company with clear brand values customers associate with, and a CVP that is delivered. Proactive contact with customers in an appropriate way, both for the relationship and the product. A company that shows through service that it cares and is not just out to make sales at any cost. Five times more people defect from companies because they feel they have been pushed around and badly treated than because of poor products. Loyalty schemes on their own are expensive and will not encourage loyal attitude, and some enterprises have already found this and pulled out. Other schemes have been revamped to be used as part of a CRM strategy. They have capitalized on the valuable data these schemes produce and use it to direct their strategy and improve their customer care and contact — to great effect.
- Two tactics that really improve the customer relationship are a contact strategy over the life cycle to get to know the customer and customer service or customer care. This will be used far more in the future. Build Communities: Understand and support the different value groups in the customer base. Anticipate the Crisis: A crisis is a moment of truth for a lot of customers. Anticipate what crises might arise so employees are ready to handle them with care. Encourage people to complain to you first. Advice & Information: A U.K. pharmaceutical company set up a customer care center that listened to what doctors wanted and acted; this included staff training so that they could help doctors rather than just sell. Many companies are setting up Web sites that give personalized advice and information Collaborate & Involve: When Felix cat food rebranded, they included customers in the relaunch, informing them that Felix had gone on holiday and would come back changed — this generated a lot of ideas and involvement, and a great feeling of “my brand.” Understand & Empathize: Novartis found that menopausal women taking hormone replacement therapy felt isolated, so they formed a self help group that led to a 25 percent increase in use of its product. Finally, entertain, be imaginative, understand psychology, and keep an eye on costs and benefits.
- Those enterprises who have fully embraced segment-based CRM strategies have found it requires changes to the organizational structure, management structures and budget allocation. One insurance company described the organizational structure changes to be the most slow-moving. They anticipate that with two layers of management adjusting to the new customer-centric structures per year, it will take five years to adjust. It is easy to visualize the benefits of changing sales resources to account ratios so that the largest customer accounts have the most support and greater customer spend is rewarded with greater attentiveness (if this is what the customer wants). However, the hidden danger is that customer movements across segments are more dynamic than product changes in many vertical sectors. As such, the real challenge of segment-based strategies and resource allocation is the ability to dynamically alter budgets, behaviors and management attention as individual customers move between segments. The chart above shows some of the relationship models enterprises are using when allocating their resources to improve service to the customer.
- The final part of the CRM strategy gives a guide to the other operational strategies about their objectives if they are to support the customer strategy, which is central to the business strategy. Initially, this will include the implementation plan for the new customer capabilities. However, it can now be seen that this, in itself, is not the customer strategy.