What is CRM in 2011?
So, what is CRM in 2011?
Despite being a discipline which is over 20 years old (1), there is still much confusion in the business community as to what CRM actually is. So what is CRM in 2011? Some think of it as a software platform, some think of it as data and emails, others think of it as customer retention, while yet others think of it as customer service. The answer is they are all right….and wrong.
Why so?
Before I get into this, I want to share a few definitions of CRM from some of the leading thinkers on the subject:
“A philosophy and a business strategy, supported by a technology platform, business rules, processes and social characteristics, designed to engage the customer in a collaborative conversation in order to provide mutually beneficial value in a trusted and transparent business environment.”
Source: Greenberg.P (2010), CRM at the Speed of Light
“Customer relationship management (CRM) is a business strategy to select and manage the most valuable customer relationships. CRM requires a customer-centric business philosophy and culture to support effective marketing, sales, and service processes. CRM applications and integrated data solutions enable effective customer relationship management”
Source: Perez.J.M (2009) Customer Relationship Management in the Age of the Socially-Empowered Customer
“CRM is a business strategy which proactively builds a bias or preference for an organization with its individual employees, channels and customers resulting in increased retention and increased performance”
Source: Carlson Marketing Group
All of these definitions are great. They clearly incorporate the fact that CRM is about managing customer relationships, incorporates all business units and require a CRM strategy before a technical implementation. However I think it can be put a little more simply:
“CRM is about driving mutually beneficial interactions with your target audience in order to create a positive relationship, so that they drive greater value*” LBi CRM, 2011
Therefore:
- CRM incorporates all stages in the lifecycle from awareness, through consideration, purchase, loyalty and advocacy
- CRM incorporates every channel from direct communications such as email, to broadcast and social media and technologies
- CRM incorporates every Department from Marketing to Sales to Service and Technology
This is because all of the above present opportunities to deliver mutually beneficial interactions, create a positive relationship and as a result to drive customer value.
*I use the term value here since CRM is about driving behaviour beyond simply spend or share of wallet and incorporates the value generated from social influence, advocacy and word of mouth.
Why Strategy comes first and technology comes second
What this means is that is absolutely critical to define your CRM Strategy before identifying what technology you need and how it should be configured. Based on a 2009 survey from Forrester 47% per cent of all CRM Solution projects fail to meet their objectives. There are 2 key reasons for this:
1. There is no clearly defined CRM strategy in advance of deployment of the solution
2. As a result the wrong solution is chosen and deployed
When we say CRM strategy what we are talking about is the relationship management strategy. That is
- How we will respond to a customer’s engagement with us, be that direct or indirect (by direct I mean how we will respond when a particular customer calls the centre or emails sales with a particular query. By indirect I mean how we will respond if a customer makes a certain action from which they don’t necessarily expect a response eg views specific content on a website)
- How we will use data gathered from multiple sources to power our side of the conversation
- What are the most important things to capture and drive dialogue about
In effect answering the question: How will we drive mutually beneficial relationships with our audience?
Data
Often it comes back to data. Why? Because data drives relevance and in a social world – data drives the conversation. Data is going to be ever more important in 2011 and data scientists are going to have a seat on almost every table, as Mashable have so eloquently elaborated (3). Having an understanding of customer’s interests, preferences, habits, channel behaviours and interaction history can have a massive impact on what the brand says and how the brand interacts. Truly understanding the customer is critical to driving a mutually beneficial relationship and key to driving value. Segmentation, personalisation (across multiple channels including email, website, client service and sales) and test and learn approaches all enable brands to optimise how they interact with individual customers. Having a clear understanding of the customer’s part in their conversation with us, enables us to respond in the right way.
Take the following example:
Jon goes into a bakery and requests croissants. The bakery has made lots of French bread recently, which is it is keen to sell. The bakery ignores Jon’s request and tries to sell him French bread. Jon leaves the bakery.
Now this seems rather absurd. However this is exactly what is happening with many brands currently. A customer goes onto a brand website, expresses interest in a product (e.g. croissants) and then all customer communications and interactions are about another product (e.g. French bread). We have come across this many times across many industries. Brands that are better set up to use available customer data will deliver much greater business performance. In fact a recent QCi study shows a clear relationship between CRM performance and business performance (2). The better CRM performer you are the better your business performs.
So what about Social media?
Social media is an important component of CRM, since it presents the opportunity to engage collaboratively with prospects and customers in ways that other channels do not. Social Media is truly interactive. Social media usage in CRM or the now commonly used term “Social CRM” can be broadly classified into 3 distinct areas:
1. Promotion: Using advocates to promote product to non-owners. Ocado, O2 ratings and reviews and Logitech are good examples here.
2. Service & Support: Proactively support communities with service issues. BT and many of Right Move’s clients are good examples here.
3. Innovation: Use customer communities to develop innovative product ideas. Mystarbucksidea is great example of this.
However what is clear is that Social CRM does not replace traditional CRM – it merely becomes part of the wider channel mix, which in combination enables a mutually beneficial relationship to be nurtured over time. LBi believe in blending traditional and social CRM thinking to deliver a holistic approach to CRM strategy and implementation, communications and data planning and CRM solution and data management.
So what does this mean?
Those who think CRM is a software platform / data and emails / customer retention / customer service – are right, because all of these elements are important parts of CRM. However, CRM incorporates much more than just these individual elements; it encompasses and brings together every channel (including social), all lifecycle stages and all internal departments.
CRM is an industry which is thriving as consumers become more demanding and expecting of high quality brand engagements (and as companies have to work harder to make their marketing budget deliver). To achieve this requires CRM technology; however it is important to define the CRM strategy before CRM technology is implemented. Data is absolutely critical to delivering mutually beneficial relationships because it enables relevance. Managing complex and varied datasets is critical to successful CRM. Finally Social Media is a valuable channel which CRM does and will continue to utilise, however Social CRM does not replace Traditional CRM. In fact Social CRM is a small part of a much bigger CRM picture.
Tom Burrell is a Senior CRM Consultant at LBi London, with a strong interest in Social CRM, CRM Technology and using insight to optimise customer conversation. He is also a passionate Villa Fan!
Follow him on twitter @TomBurrell
Follow LBi UK CRM on twitter @LBiCRM
References
(1) http://blogs.techrepublic.com.com/tech-manager/?p=1750
(2) CMAT is a range of tools and methodologies that provide a detailed, objective benchmarked assessment of an organisation’s capability to effectively manage its customers. A Qci study (leading research and analysis consultancy) examined 21 companies CMAT performance (12 of which were from financial services sector). A panel of independent experts then examined business performance of the same 21 companies against sales growth, profitability and asset growth. These experts were not made aware of the organisations CMAT score. Analysis clearly showed that those with higher CMAT score achieved higher business performance. Payne, A (2009) Achieving Excellence in Customer Relationship Management
(3) http://mashable.com/2010/12/20/data-predictions/
Tags: CRM, CRM Data, CRM Strategy, CRM technology, CRM Technology Failures, Data, LBi CRM, Mashable, Paul Greenberg, Social CRM, Traditional CRM, Value, What is CRM
