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CRM-focus marketing: 1) sees marketing as an organizational competence rather than a department; 2) focuses on communication execution as marketing expense is now a huge percentage of operational costs; 3) establishes insight-based interaction with consumers with marketing being integrated more closely with operations and managing data and processes that enable communications.

Definitions of CRM

CRM is a business strategy comprised of process, organizational and technical change whereby a company seeks to improve the management of its own enterprise around customer behaviors. It entails acquiring and deploying knowledge about customers and using this information across various touch points. This should result in increased revenue and operational efficiencies. The idea of revolutionizing your business around CRM is deceptively simple. Instead of pushing products at an amorphous mass, the market, you start with customers. You manage relationships with them, meeting their needs with your services. In other words, you go from product push to customer pull.

Elements of CRM

Successful customer-oriented companies put the customer at the heart of all their business processes. Everyone, yet no one, owns the customers. Through the CRM, the company will manage the entire chain of relationships from acquisitions, retention, cross-sell, up-sell, channel effectiveness, and customer experience management and win-back. Basically, the whole of sales and marketing and also includes customer service, field service support and brand management. One of the key challenges for marketers is the marriage of marketing, technology and data needed to make customer management work.

CRM focuses on the notion of managing customers over time. This begins with the system capturing the customer details at the first sales. Subsequently, we need to treat the customers differently over time in order to generate repeat business.

Another focus is the improvement of the interaction interface with the customers. Each organization can present a choice of channels to interact with the customer, but the customer database must be independent of any one channel. Successful CRM systems will allow "live" processing of customer enquiries irrespective of the channel chosen–retail, telephone, internet, sales force or whatever. Given the low level of service standards often found in practice, this channel-free "customer management" may be a source of competitive advantage.

Underlying Principles of CRM

CRM theory recognizes the economics of customers over the lifetime of their contact with the business. Acquisition is expensive and usually loss-making; it’s hard to attract new customers. High retention rates are crucial for long-term profitability; repeat customers usually cost less to service and buy more. Although not always so, the core principles are sound.

The point about CRM is that it focuses the business on managing these economics, eventually leading to a change mentality: measure profit by customer, not by product. Mature satisfied customers give more referrals. Referred prospects in turn convert at a higher rate than prospects recruited "cold". In addition, most loyal customers buy more from you when they get to know you better. They are also less price-sensitive.

Customer management is not just about profitability; it is also about market leadership. Nowadays to win the battle for market share and become market leader, you have to win the battle for high-value customers. You have to win that segment of customers, be it 2000, 5000, 50000 or 100000, that make all the difference. A brand leader always finds ways to bond better with that small group. When very few customers decide on whether you gain market share or lose market share, the vital question is often "How does your company bond with them?" This is the realm of CRM because bond building requires databases, data mining, customer analytics and campaign management.

A second consideration in today’s world is that there are no product advantages anymore. It is a world of product parity. There is no such thing as a product brand any more; every brand is a service brand. So customer experience drives success, they drive brand equity, they drive the bottom line. Companies have to be customer-centric. Companies need to deliver information about the customers to everyone who is in touch with the customers over the net, via the call center, or at the branch office. CRM technologies are needed to provide each touch point, 24×7. Technology and ideas alone do not move people. The technology is simply the enabler. Marketers still need to move the people.

Revolutionizing the Business with CRM

To make CRM a success, various steps must be taken. This includes buying the right technology, making organizational changes according to the market context, and leading a culture change. This culture change must orientate people towards the outside, so that what is done is driven from the outside in, rather than the other way round. Of these three things, the technology is all too often the one that receives the most attention.

The most common fault is to buy the technology and then think the job done. Organizational and strategic barriers are more important than technical barriers, but this is still not generally understood. Too many companies have bought the technology but avoided the more difficult organizational and cultural changes needed to make the most of the technology. Too often, big firms fragment into departments that exist as separate silos that communicate poorly with each other.

CRM requires an organizational change inside the company, away from products or silos and towards customer service delivery. Organizational changes mean people having to change who they work for and where they work. This in turn means the inevitable political jockeying for position that always happens at senior levels of the firm. Cultural changes are often even more difficult. If you have worked in a large firm, you will know how difficult it is to ask someone to change the way they work, the things they do on an everyday basis. Without a shared, culturally bound vision, the implementation of CRM systems might fail because of political infighting over the ownership of the systems and data.

Senior managers need to focus on the underpinning strategy behind CRM decision or its implementation. In most of the companies today, senior management is actually impeding the success of CRM projects. In many companies, senior managers were not thought to give clear, visible leadership in achieving excellence in customer management. Only a handful has regular contact with customers. CRM is a leadership issue. Most EMEA (Europe, Middle East, Asia) companies view it as "useful, but not critical". Indeed more were likely to see it as a technology function, an IT tool, than as a critical function, "a way of life". This mindset sends a message to employees that the CRM effort is not a company priority.

Senior managers list a number of obstacles to successful CRM implementations.

• Approaching CRM on a piecemeal basis rather than a holistic investment.
• Continued emphasis on customer acquisition at the expense of retention. Acquisition has often thoughtlessly achieved dominance because its budgets are controlled by one department–marketing. Acquisition spending is mainly media based which is relatively straightforward to organize. Retention spending on the other hand requires cross-departmental resources in terms of people and processes.
• Culture change. Changing the mindset of the organization from being product, production or sales led to being customer (service) led, is a long hard road that must be driven from CEO downwards. It is often a battle of transaction versus relationship cultures that most starkly divides companies. If you are cutting retail service while at the same time preaching customer relationships, don’t be surprised if the troops are cynical.

Having buy-in and support of the leadership team is not enough. Employees need to use CRM in their everyday activities too. One reason projected CRM returns are not being fully realized is because three-quarters of US and European companies do not fully use CRM once it is implemented. Companies today underestimate the importance of employee alignment with a true relationship approach, viewing it as a distant second to customer alignnment. Employee committment to CRM has been historically tepid in many organizations. In order for CRM to take root in the hearts and minds of employees, some critical stakeholder issues need to be addressed. A CRM strategy forces an organization to rethink its functions, roles and performance metrics, and most importantly, it emphasizes the interdependencies between functions and people. CRM implementation will suffer unless employees are trained and empowered to manage customers within an organizational structure that is customer-focused and flexible. The importance of a strong governance structure cannot never be overestimated.

Companies that are aligning CRM goals with the objectives of employees are actually realizing the most success with CRM. It is employees that are actually realizing the most success with CRM. It is the alignment of all communities with the relationship philosophy so that each stakeholder community can realize the value that this will add, which critically determines the likelihood of a successful implementation.

Implementing CRM

First, channels such as the web, call center, email, mail and text all have managers that tend to defend their turf very carefully. Yet all these need to amalgamated into one integrated customer file for CRM to stand any chance of being effective.

Second, in order for CRM systems to work well, they require access to financial data to give marketers the opportunity to share decision making on high-value customer account enquiries. Linked to this are database marketing systems, inventory systems to ensure that stock is controlled and call center management systems in order to ensure that customer queries about products, support calls and the like are factored into the decision making. Finally, enterprise resource planning software must be integrated into the mix to ensure these systems talk to each other.

The third complex dimension is the different product lines. These need to similarly amalgamated so that cross-sell opportunities can be identified. However, in many companies, each product has its own manager who often competes with other product managers for access to the customer. This is almost certain to happen in sectors where product or brand managers dominate. Internally competitive brands fighting each other’s cultures are highly embedded and hard to shift. IF they are not resolved, the resulting nonsense can hugely damage the relationship effort.

The three main steps can therefore be summarized as:

• Stage 1: customer data from each channel are grouped into one data record. This is complex and takes time to establish.
• Stage 2: database marketing predictive techniques are used to sell to customers efficiently. This is transaction marketing.
• Stage 3: introduces IT-enabled CRM. Here CRM systems are part of a major, company-wide committment to creating and maintaining relationships with customers.

Strong companies segment their customers by value, by how much they are worth to the firm. They also segment by lifestyle, what the firm can offer to to each group. They work to understand customer motives, hence getting into benefit-led marketing. A customer proposition is generated and segmented accordingly. Weaker companies are poorly focused, they organize their data by product not customer, do lots of number-crunching with tangible outputs. They present a fixed customer proposition, taking no account of changing circumstance.