Customer Relationship Management (CRM)

CRM (Customer Relationship Management)

Customer Relationship Management, or CRM, is an essential part of modern business management.

This CRM article is provided by Ellen Gifford, who specialises in helping organisations develop excellence in CRM, and this contribution is gratefully acknowledged.

What is Customer Relationship Management, or CRM?

Customer Relationship Management concerns the relationship between the organisation and its customers. Customers are the lifeblood of any organisation be it a global corporation with thousands of employees and a multi-billion turnover, or a sole trader with a handful of regular customers.

Customer Relationship Management is the same in principle for these two examples - it is the scope of CRM which can vary drastically.

Focuses

Successful organisations use three steps to build customer relationships:

determine mutually satisfying goals between organisation and customers
establish and maintain customer rapport
produce positive feelings in the organisation and the customers

Conditions

The organisation and the customers both have sets of conditions to consider when building the relationship, such as wants and needs of both parties;

organisations need to make a profit to survive and grow
customers want good service, a quality product and an acceptable price

Good CRM can influence both sets of conditions.

Why CRM?

CRM is a new concept to many organisations.

If it's new to you, here's why most forward-thinking organisations devote lot of energy and resources to the set up and management of a CRM capability.

CRM can have a major impact on an organisation through:

shifting the focus from product to customer
streamlining the offer to what the customer requires, not want the organisation can make
highlighting competencies required for an effective CRM process

The ultimate purpose of CRM, like any organisational initiative, is to increase profit. In the case of CRM this is achieved mainly by providing a better service to your customers than your competitors.

CRM not only improves the service to customers though; a good CRM capability will also reduce costs, wastage, and complaints (although you may see some increase initially, simply because you hear about things that without CRM would have stayed hidden).

Effective CRM also reduces staff stress, because attrition - a major cause of stress - reduces as services and relationships improve.

CRM enables instant market research as well: opening the lines of communications with your customers gives you direct constant market reaction to your products, services and performance, far better than any market survey.

Good CRM also helps you grow your business: customers stay with you longer; customer churn rates reduce; referrals to new customers increase from increasing numbers of satisfied customers; demand reduces on fire-fighting and trouble-shooting staff, and overall the organization's service flows and teams work more efficiently and more happily.

Features

The old viewpoint in industry was: 'Here's what we can make - who wants to buy our product?'

The new viewpoint in industry is:

'what exactly do our customers want and need?' and
'what do we need to do to be able to produce and deliver it to our customers?'

This is a significant change of paradigm and a quantum leap in terms of how we look at our business activity.

What Do Customers Want?

Most obviously, and this is the extent of many suppliers' perceptions, customers want cost-effective products or services that deliver required benefits to them. (Benefits are what the products or services do for the customers.) Note that any single product or service can deliver different benefits to different customers. It's important to look at things from the customer's perspective even at this level.

More significantly however, customers want to have their needs satisfied. Customers' needs are distinctly different to and far broader than a product or service, and the features and benefits encompassed. Customers' needs generally extend to issues far beyond the suppliers' proposition, and will often include the buying-selling process (prior to providing anything), the way that communications are handled , and the nature of the customer-supplier relationship .

Modern CRM theory refers to the idea of 'integrating the customer'. This new way of looking at the business involves integrating the customer (more precisely the customer's relevant people and processes) into all aspects of the supplier's business, and vice versa. This implies a relationship that is deeper and wider than the traditional 'arms-length' supplier-customer relationship.

The traditional approach to customer relationships was based on a simple transaction or trade, and little more. Perhaps there would be only a single point of contact between one person on each side. All communication and dealings would be between these two people, even if the customers' organisation contained many staff, departments, and functional requirements (distribution, sales, quality, finance, etc).

The modern approach to customer relationship management is based on satisfying all of the needs - people, systems, processes, etc - across the customer's organisation, such as might be affected and benefited by the particular supply.

Customer-Focused Solution

So what do we need to make this quantum leap of customer integration?

A new way of thinking:

change in paradigm
change in the messages sent and received
change in the overall culture

And a new way of doing things:

processes that are capable and effective
structures and systems that support a business centred on its customers
connectivity (end-to-end processes) both internally and externally (eg., with suppliers)

Customers' Expectations

If an organisation cannot at least meet its customers' expectations it will struggle.

Ideally a business organisation should exceed its customers' expectations, thereby maximising the satisfaction of its customers, and also the credibility of its goods and services in the eyes of its customers.

Customers normally become delighted when a supplier under-promises and over-delivers. To over-promise and under-deliver is a recipe for customers to become very dissatisfied.

Rule No 1 - You cannot assume that you know what a customer's expectations are ... You must ask.

Rule No 2 - Customer expectations will constantly change so they must be determined on an on-going basis.

The expectations of different customers for the same product or service will vary according to:

social and demographic factors
economic situation
educational standards
competitor products
experience

Therefore, given all these variable factors, it is no surprise that one size certainly does not fit all.

Ask your customers what is important to them. Find out why your customers do business with you. There are a wide variety of relationship drivers. For example:

quality
price
product
location
customer service

When you ask you might discover some factors that you'd perhaps never even considered, for example:

health and safety support
systems compatibility
contract structure
distribution flexibility
technical support
troubleshooting and problem-solving, to name just a few

What service features will keep your customers loyal to you? Find out.

Process

CRM can be regarded as a process, which has:

identifiable inputs
identifiable components
identifiable characteristics, which define CRM for your organization and customer base
capacity for improvement and evolution over time

Managing Customers

Why manage customers?

Customers are the usual source of income for an organisation (if not then they will certainly leverage your income, as in the case of readers of a free publication which is funded by advertising. As such there are two types of customers: the readers and the advertisers).

Customers are also an exceptional source of information - information which is vital to enable a business to succeed; ie., giving customers what they want.

Managing customers entails:

knowing what customers want and need - which enables you to focus your production and service efforts
knowing which products or customers have most growth potential - which enables you to focus on developing highest potential
knowing which products or customers are most or least profitable - which enables you to focus on maximising profit
knowing which customers will be advocates and supporters - which enables you to provide references, case studies, and to safely test new products and services

Achieving Good CRM

Achieving effective Customer Relationship Management requires many organisations to adopt a new perspective. Consider the following:

traditional customer service is something you 'do to' the customer
modern Customer Relationship Management is 'done with' the customer

The second statement is emphasises the big differences between conventional traditional customer service, and the modern progressive CRM approach.

Your relationships with customers should be ongoing, cooperative, and built for the long term.

Organisations who have many transitory relationships with customers consequently have to spend a lot of money on finding new customers.

The cost of keeping existing customers is a tiny fraction of the cost of acquiring new customers.

Pareto's Law ('The Pareto Principle')

Pareto's Law is commonly known as the 80:20 rule. Typically in any organisation:

20% of customers account for 80% of your turnover
20% of customers account for 80% of your profits
20% of customers account for 80% of your service and supply problems

It is important to know is which customers fit into which category and then to manage them accordingly.

Highly satisfied customers who perceive a high value in your products and services commonly make excellent advocates for your organisation - nurture these customers and give the special treatment.

Dissatisfied customers who perceive a low value in your products and services are potential saboteurs. These customers could have little or no loyalty and may actively 'engage' against your organisation.

Therefore, you should seek to rebuild relationships and trust, and a new basis for a future relationship, or manage the separation with dignity, professionalism and integrity.

Building Relationships

The essential CRM focus of any organisation should be on developing core competencies, and an overall strategy of building customer relationships. In this way, all efforts in the organisation can be aligned to:

customers and the culture of exceeding of customer expectation
understanding and managing the people impact on the culture of the organisation
customers being recognised and treated as partners
the value of relationship-building being valued
service being seen as a value-adding activity
reward and recognition being based on customer focus ie., 'going the extra mile'
evidence of corporate support for service activity

Characteristics of Excellent CRM

The following characteristics are associated with delivery of excellent CRM:

reliability
responsiveness
accessibility
safety
courtesy
consideration
communication
recognising the customer
competence

'Moments of Truth'

'Moments of truth' are encounters with customers which cause them to form a view of the organisation based on how they are engaged, particularly compared to their expectations.

Expectations can be met, exceeded or disappointed. Moments of truth can therefore be positive, in the case of meeting and exceeding expectations, or negative, in the case of disappointment. Monitoring the 'moments of truth' allows the company to focus on improving areas responsible for negative customer experiences.

Remedial action to prevent repetition is crucial. A single mistake is forgivable. A repeat rarely is.

If you put things right your customers will see that they are important to you. Put things right and you will be seen as a supplier who knows how to manage quality.

Organisations that fail to put right things that go wrong, might as well say to the customer, "You are not important to us". Failing to put things right and to prevent re-occurrence says of the organisation "We are not capable of managing quality service."

Bear in mind also that research has proven time and again that when an an issue of poor service to a customer is satisfactorily resolved by a supplier, the customer increases their loyalty to the supplier to a higher level than existed prior to the problem.

An approach to managing 'moments of truth' involves 'continuous improvement'. This entails processes that continually monitor, check and resolve negative moments of truth by ensuring alterations happen to the customer process, and integrating theses changes into 'business as usual'. Here are the elements of such an approach:

define the cycle of service
identify negative moments of truth
define the reasons (ie., root causes - not symptoms)
develop solution/s
test solution(s)/review/amend
implement
monitor impact on the cycle of service

This is similar to the EPACA model - the helix of continuous improvement.

Negative moments of truth carry a lot of weight with the customer and will adversely affect the relationship.

To maximise positive moments of truth - set standards in your processes.

Standards using SMART criteria Standards (which may also be objectives) can be established using the SMART framework.

Specific
Measurable
Agreed
Realistic
Time-bound

CRM and Communications

Communication is central to any successful relationship. In terms of Customer Relationship Management, communication needs to be consistent and high quality; as determined by:

on time
focused
relevant
reliable
coherent

Importantly also, for effective communications it's the message and meaning that is received that counts , irrespective of what the communicator thinks they've said, or written.

Communications must be judged most vitally by the reaction of the receiver. If the reaction is not good then the communication is poor.

The information contained in a CRM system allows communication to be directed at the correct audience, in the correct way. The communication system must also encourage and facilitate honest and actionable feedback.

Feedback from customers - especially complaints - are essential for good organisational performance and ongoing development. Most organisations avoid, discourage and hide from complaints. Don't. Complaints are free guidance for improving your quality, and free opportunities to increase customer loyalty.

People and CRM

As with any other business process your people have a huge impact on the success of the CRM process.

Successful and effective Customer Relationship Management people tend to display the following key characteristics:

positive attitude
people orientation
organisational skills
analytical skills
customer focus (natural empathy)
understanding of the link between CRM and profitability

On the subject of empathy: Empathy is about understanding , not necessarily agreeing . Effective customer focus enables the organisation and its staff to see both sides, and to work with the customer to arrive at a mutually satisfactory and sustainable solution. Agreement alone amounts to capitulation, which is neither practicable nor sustainable.

Benefits of Effective CRM

There are significant business benefits which accrue from an effective, integrated Customer Relationship Management approach. These include:

reduced costs, because the right things are being done (ie., effective and efficient operation)
increased customer satisfaction, because they are getting exactly what they want (ie., exceeding expectations)
ensuring that the focus of the organisation is external
growth in numbers of customers
maximisation of opportunities (eg., increased services, referrals, etc.)
increased access to a source of market and competitor information
highlighting poor operational processes
long term profitability and sustainability

Forward thinking organisations understand the vital need to maintain a strategic focus on CRM and to resource and manage it appropriately.

This guide to CRM methodology and application is provided by Ellen Gifford, which is gratefully acknowledged.

Aside from being a UK-based specialist in CRM with many years' experience large and small organisations, Ellen is also a trainer in Neuro Linguistic-Programming (NLP) ; management development, and personal coaching.

As an advocate of all aspects of interpersonal skills and their importance in modern organisations, Ellen started her own business, The Learning Path, in 1998, to concentrate on providing training in these areas, in which the complementary disciplines of NLP and CRM provide an innovative and effective approach to Customer Relationship Management and to achieving sustainable organisational performance improvement.

For further information about using Customer Relationship Management and NLP to improve organisational performance you can contact Ellen via:

email: ellenbb@thelearningpath.co.uk
phone: +44 (0) 1527 585310
website: www.theleaningpath.co.uk

CRM Software Solutions and ICT

Software and ICT play a significant part in enabling an effective CRM capability, especially in large organisations.

There are many and various systems available, and it is important to have a clear idea of your requirements during the software solution selection process, which for most organisations will also involve the selection of ICT service provider too, since any software solution, for all but very small companies, generally requires support for specifying, implementation, training and maintenance.

Siebel, Sage (who now provide the well-known Accpac and ACT! CRM solutions), and Front Range (whose product is Goldmine) are all significant and proven CRM software products companies.

There are many others, and very many more ICT service providers through whom distribution and support is normally arranged.

As with any ICT project, ensure you work with reliable and knowledgeable advisers, with access to cost-effective proven solutions, who can help you to build and implement an effective CRM software and ICT capability.

Related Materials

Next: Responding to Customer Complaints