Frustrated and dissatisfied, customers are bolting from e-commerce Web sites, depriving companies of billions in current and future revenues.
The lesson: when a customer-relation mechanism is inadequate and unresponsive, something's profoundly wrong-and it's about a lot more than just the Web site.
So-how many customers can your company afford to lose?
Under the best of circumstances, keeping clientele isn't easy. Every five years, U.S. companies lose half of their customers. What's more, it costs them five to ten times more to attract a new customer than to hang onto a current one. And loyal customers will, in the long run, buy more and pay a premium for doing business with those they trust and like.
Unquestionably, success and competitive advantage accrue to businesses that build long-standing relationships with quality, solid client service, goodwill and an earned reputation. But no matter how effective your company has been at doing this, it's all now at risk if your enterprise has not invested sufficiently in customer relationship management (CRM) capabilities.
A changed relationship
Blame it, if you need to, on technology's compression of time and distance, culminating in the Internet's power to deliver nearly instant access to companies and information. This has not only elevated customer expectations, it has also tilted the balance of power in the buyer-seller interaction. Now customers choose when, where and how they'll relate with a company and they want their interactions to be convenient and efficient.
"In today's e-commerce world, there are fewer barriers to customer defections than ever before. The Web makes finding a better offer as easy as clicking a mouse," warns Nelle Schantz, senior marketing strategist at the SAS Institute.
"Customers," adds Nancy Brumfield, chief marketing officer at Quintus Corp., "expect companies they do business with to know them and have access to information about their transactions through any communication channel they choose to use-traditional telephone, e-mail, the Web, fax or even a wireless device."
Companies can no longer afford to treat their customers as a single homogeneous entity. Fortunately, current technologies have achieved a price/performance point that enables businesses to acquire, consolidate, analyze and manage the information necessary to identify customers' real needs and interests and respond to them in timely fashion. So regardless of whether yours is a business-to-business or a business-to-consumer enterprise, business-as-usual simply doesn't make it anymore.
This is perhaps most apparent on the Internet. For too many potential customers, the entire Web site experience is impersonal and alienating, a condition made much worse when a company has not integrated its online operations with its conventional operations, such as the call center. And it's starting to show.
City of Houston Picks Unisys for New Call Center Project
The City of Houston is the fourth largest city in the United States, with an estimated population of two million. The city government provides the citizens of Houston with a multitude of services including police, fire, airports, libraries, water, sewage, garbage, maintenance and health resources. City offices receive hundreds of thousands of calls from citizens each year.
Currently, City of Houston call-taking functions are decentralized. Each city department has established multiple telephone numbers that citizens must use to relay specific inquiries and complaints and each handles non-emergency requests from citizens in various ways.
Premium, Consistent Level of Customer Service
The city knew that it wanted to provide a premium, consistent level of customer service to city residents. In January 1999, Mayor Lee P. Brown appointed a task force coordinated by Donald K. Hollingsworth, director of the Mayor's Office for Public Safety and Drug Policy to study the feasibility of activating the abbreviated telephone number 3-1-1 for citizens to access non-emergency municipal services.
The task force determined that citizens of the City of Houston would benefit from one easily remembered number, in contrast to more than 700 telephone numbers published in the local telephone directory "government" pages.
When operational, the newly created 3-1-1-call center will house more than 100 call takers. These telecommunicators will handle customer inquiries and concerns via voice, fax, Internet, e-mail and Web chat. The goal is for the telecommunicators to provide resolution to citizen concerns in the first call, using a knowledge database and work order management system that Unisys will integrate and deliver. The City of Houston chose Unisys Corporation as its systems integrator for the 3-1-1 project.
Unisys has Proven History
"The City of Houston evaluation committee unanimously scored Unisys the most qualified candidate to deliver a solution for the complex tasks specified in a Request for Proposal," says Michael J. Antash, 3-1-1 Core Implementation Team project manager.
"Unisys possesses a proven history in developing customer call centers for a variety of industries, and is a world leader in delivering system integration solutions."
The 3-1-1 center will be responsible for handling all non-emergency requests from citizens, reducing the strain on the emergency phone system, improving overall service to City of Houston residents, and enhancing the relationship between citizens and government.
For more information on Unisys' call center and system integration solutions, visit www.unisys.com
Online retailers' inadequate customer service cost them more than $6 billion in sales last year, reports market analysis firm Datamonitor-an amount that will top $173 billion over the next five years unless things change. Datamonitor estimates that better customer service would have boosted the average company's online sales by close to 35 percent. The Gartner Group suggests that this is the price of insufficient CRM functionality and points to some damning survey results of its own: just 28 percent of Web sites acknowledge receipt of an e-mail, only 24 percent can do instant messaging and a mere 10 percent permit customers to track inquiries to resolution.
Being customer-centric
Yet solid customer relations have never been more important. Price is no longer a differentiator. Competition is keen. A company's survival depends on its ability to forge a customer-centric business strategy designed to (re-) develop an intimacy with customers using today's technology tools as well as modern mass production and distribution systems.
"A customer-centric service strategy," says Mark Tapling, president and CEO of ServiceWare Technologies, "does not force customers to understand your org chart to get great service."
Mark Smith, CEO of Quadstone Corp., agrees: "While it may seem obvious that a company should be customer-centric, many companies have become distanced from the consumer through new technologies which have dramatically increased the self-service element of product and service purchase and fulfillment. Often companies are organized into discreet divisions and/or channels that have no idea whether their customers hold products from other divisions/channels of the company."
Enterprises without a potent CRM strategy that overcomes this detachment risk losing both new and current customers to more dexterous, customer-centric rivals.
"Being customer-centric," notes Mark LaRow, vice president, applications, at MicroStrategy, Inc., "used to mean 'listening to the customer' or 'delighting the customer' with superior service. Now it means entering into a dialog with the customer about topics that are important to the customer so that long-term loyalty and trust are engendered. Over time, that interest results in a long-term business relationship. The goal is not to 'align marketing, sales and service' but rather to collapse them into a single dialog with the customer."
What CRM can do
"CRM is not a single application," points out James Powell, industry vice president, communications and energy, at NCR Corp. "It's a series of applications working on discrete business processes, collaborating to provide a complete view of how the customer interacts with a company's products and customer-facing applications."
CRM can help your business accomplish this in four ways, by:
Automating and streamlining sales and customer support functions. Detailed customer information-including econometric, demographic, lifestyle and psychographic data-can be collected, and workflow technology can be used to enhance productivity and responsiveness and deliver new levels of service.
Managing the flow of information and transactions in and out of the customer-facing "front office." Proliferating customer channels or "touchpoints" include not only the corporate Web site but also e-mail, the call center, the help desk, the sales force, partners and distributors/retailers. Each of these channels often appeals to a different community of customers and has different costs associated with its use. Thus some customers are more profitable than others who buy the same products-because they use less costly channels for their transactions.
Analyzing customer data gathered from throughout the enterprise. This makes possible the creation of customer profiles and highly targeted marketing and selling known as micromarketing or "a market of one."
Planning and managing marketing and sales strategies and campaigns. Based on the detailed information gathered from customer touchpoints and then segmented and analyzed, marketing and sales efforts can optimize channel use to achieve the highest possible "share of customer" as well as the highest possible profitability per customer. The results of these efforts are then analyzed and evaluated so that you can continuously identify your most profitable customers, products and channels, then allocate resources accordingly.
The CRM lifecycle
"By organizing the company in such a way that customers can handle all their business through whichever channel they choose," says Quadstone's Smith, "companies are not only getting closer to offering the service levels consumers demand but can also reap the benefits of having a holistic view of the customer that allows them to understand customer behavior and profitability across channels. This spawns opportunities for companies to cross-sell, up-sell and incentivize use of channels that may improve overall profitability."
The best of CRM benefits derive from a synergy created by several technologies-including data warehousing, online analytical processing, data mining, marketing automation and various front office applications like sales force and call center automation. So a committed CRM strategy can require substantial investments in technology infrastructure and an ability to integrate a variety of disparate systems, including those automating back end enterprise functions like supply chain management.
E-commerce Body Count
Fewer than five percent of visitors to a typical e-commerce Web site stick around to buy anything, says McKinsey & Co. For every completed online purchase, four get aborted. Fully half of first-time visitors to e-commerce Web sites leave because the site is too tough to navigate, notes Forrester Research.
Result: 4Q1999 U.S. retail e-commerce spending was only 0.6 percent of total retail sales. In Canada it was even less-just 0.4 percent.
While CRM systems and infrastructure are complex, the CRM dynamic is elegantly simple. It is, essentially, a three-stage repeating cycle of analyzing detailed customer data, planning sales and marketing campaigns based on what's learned from data analysis, and properly executing the plans during customer interaction. The data derived from these interactions then feeds successive rounds of even better analysis, campaign planning and new interactions.
"Let me give you an example of how this all comes together," says Curt Girod, cross industries vice president and general manager at Unisys. "We have a branch automation tool used for retail banking automation which integrates all the channels or areas of contact, including fax, e-mail, the Web, ATMs and conventional tellers.
"Now, the first big challenge for a bank is how to deal with customers in a consistent, integrated way. This product does that on the front end. But we've also integrated that on the back end to Siebel's best-of-breed, world-class engine for the CRM piece. And, finally, we've got a module-a customer profitability system-which analyzes everything an individual customer does at the bank, associates the direct cost and benefits of serving that customer, and then determines the profitability to the bank of servicing that customer.
"So, what do all these integrated pieces deliver? Well, a bank representative interfacing with a customer can-no matter where the point of contact occurs-immediately look at the entire relationship with the bank through the CRM system. And, using the customer profitability statement, the bank's rep can at once determine what kind of customer they're dealing with. Is it a profitable customer and, therefore, the teller should be waiving fees-or should the bank charge fees since the profitability statement shows the customer as not profitable? Moreover, what kinds of up-sell or cross-sell would be appropriate for the bank's rep to suggest?
"The point," Girod explains, "is that the front end interface to the client, together with the CRM system, provides a total customer view by peeling back into the legacy systems. Every customer gets personalized, customized service immediately. Moreover, it allows for a one-to-one personalized pro-active response by the bank's rep."
Chances are there's a competitor near you developing this kind of CRM functionality. International Data Corp. (IDC) sees worldwide spending on CRM services reaching more than $125 billion by 2004, up from about $34 billion in 1999.
CRM ROI
The benefits of implementing CRM can be significant.
A consumer goods manufacturer says it increased its average customer profitability by 4 percent after integrating its customer data analysis functions with campaign management and sales applications, enabling it to target its most profitable customers. By retraining staff and investing in call center applications, a financial services company hiked its average revenues per customer by seven percent. And one IT services provider attributes a five-cent increase in its earnings per share to its CRM initiative.
Pre-CRM, reports Collectibles.com, this e-commerce arm of broadcaster Shop At Home brought in about $125,000 per month in revenues. Then the firm put together a CRM application that presents shoppers with personalized views, including purchase recommendations, by pulling customer and product information from its back office Oracle Database. One month's revenues leapt to $2 million on a gross profit margin of better than 30 percent.
According to research conducted jointly by IDC and Cap Gemini, 44 percent of U.S. and European companies expect CRM software to help them increase turnover by 10 to 20 percent, and almost a quarter of those companies expect CRM software to boost turnover by as much as 20 to 50 percent.
"The compression of time and distance really is the ultimate source of competitive advantage," Michael Dell, chairman and CEO of Dell Computer Corp., has said. "As this happens businesses become more efficient and better able to meet customers' needs. In our case, we use customer information to fundamentally build a better product and service."
These days, half of Dell's technical support activities, half of its sales and 75 percent of its order status transactions occur over the Web. Using the telephone, these transactions would not only take longer but cost between $3 and $10 each; on the Web, that cost typically drops to nearly zero.
The roads to CRM
There are a number of ways to implement CRM:
Invest in an end-to-end solution. CRM companies like Kana Communications and E.piphany have been acquiring other companies to expand their CRM suites. Nortel, which has bought Clarify, has struck deals with Intel, Microsoft and SAP with an eye to achieving new levels of interoperability and network expertise.
Add CRM capabilities to an enterprise resource planning (ERP) system. Major ERP vendors understand that their back office systems need front office links and they're investing heavily in getting them. According to the Meta Group, Oracle and SAP each have as many as 800 developers working on CRM apps. Oracle now offers a CRM suite with mobile capabilities, having integrated several CRM modules into its eBusiness Suite 11i and inked a CRM call center alliance with Cisco.
Epicor, which is a leader in providing ERP solutions to mid-market companies, has gradually integrated CRM, business intelligence, e-business and advanced planning and scheduling components to its core capabilities. Epicor's front office applications include Clientele, which provides an integrated set of sales, marketing and customer support tools.
Purchase best-of-breed solutions for specific areas of functionality and then integrate them using middleware and systems integrators. Many believe that, especially in the age of the Internet, no single vendor can provide all the functionality a large organization requires. They recommend picking best-of-breed solutions and then getting integrators like Silverline Technologies and Unisys to put it all together with the existing infrastructure. Not everyone agrees, however.
"The best-of-breed theory is to some extent reaching a point of diminishing returns as the cost of system integration and risk of SI projects skyrockets," contends Steven Kowarsky, executive vice president of CosmoCom, Inc. "Practically speaking, sales automation, marketing automation and customer support are now available as a single unified solution from the best CRM vendors. Companies should purchase 'best-of-breed' CRM and a 'best-of-breed' unified contact center-which is designed from the ground up to address all media and all channels as a single system-and focus their integration efforts to these two systems."
Outsource to a growing pool of CRM-oriented application service providers (ASPs) and managed service providers (MSPs). ASPs can offer access to the best software available for a monthly access fee. Best-of-breed CRM suppliers like 2Way Corp. also offer hosting alternatives.
Implementing a CRM strategy involves figuring out what combination of these vendors will work best. Given the large number of vendors and the many kinds of CRM products available, this can be tough.
Web sites like MASG.com can help. MASG.com offers access to a detailed, searchable enterprise application and manufacturing solutions database of over 950 vendor profiles and product descriptions to help you find your way. The site breaks out more than 90 application areas and includes an online buyers guide, product and vendor rankings, case studies, research reports, white papers and tip sheets. You can also create detailed specifications and send them to vendors along with RFPs.
What CRM costs
All the competition hasn't made any of these avenues to CRM inexpensive.
A software product focusing on just one aspect of CRM-say, e-mail response management or marketing automation-typically carries a pricetag in the $100,000 to $500,000 range.
A full CRM package from a vendor like Siebel, Vantive or Nortel's Clarify can cost upwards of $1 million and as much as $3 million; the necessary integration and consulting work can then double that amount. And while in-house development of CRM may be less expensive for those with adept IT staff, complicated integration and upgrades often erase the savings.
According to Insight Technology, a consulting firm that has surveyed more than 200 CRM projects, companies spent an average of nearly $9,900 per user per year on hardware, software, customization, support and training. Those who achieved the best returns on the CRM investment spent quite a bit more: just over $16,000 per user per year.
For those preferring to pay as they go, ASPs and MSPs present a viable alternative. One ASP supporting IP telephony and multimedia applications across distributed call centers offers fees that start at about $400 per user per month. Another ASP reports that most of its customers pay monthly fees between $50,000 and $150,000 per month.
Kana Helps eBay Deliver World Class Service
eBay? is a global marketplace for the sale of goods and services between individuals and small businesses. On any given day, users generate approximately $14.5 million in gross merchandise sales across thousands of categories.
Given its popularity and diverse constituency, eBay has a daunting challenge: Respond to the 150,000 e-mail inquiries received weekly from community members. Amazingly, most responses are provided in less than 12 hours. How does eBay handle this enormous volume?
eBay uses Kana Response, an award-winning e-mail response management product from Kana's enterprise relationship management (eRM) solution that allows corporations to take advantage of high-volume e-mail communications. The system's routing and tracking features organize and streamline the response process, increasing the message throughput of any customer service organization.
Templates Offer Wealth of Knowledge
Prepared response templates are maintained centrally in the Kana Response category hierarchy. With simple mouseclicks, Customer Service Representatives (CSR) can quickly locate and insert accurate boilerplate information into their personalized responses. Kana Response can even auto-suggest the appropriate response template based on message content analysis. The wealth of knowledge in the category hierarchy automates information-sharing among team members and reduces the training burden for new employees.
And analysis of the content and patterns of customer communication improves business decision-making processes. Keith Antognini, director of customer support, regularly presents information and analysis from Kana Response reports to the eBay executive team.
"Our ability to closely monitor and interpret customer metrics with Kana Response is incredibly important. In today's business environment, retaining customers through world-class service is an absolute requirement," Antognini says.
eBay's CSRs provide critical input to product teams on emerging customer needs and concerns. With Kana Response, they can do so more comprehensively, with less effort and increased validity.
"The real win," says Antognini, is this ability "to report, with real scientific evidence, the issues that are coming from the customer... we're using that data to drive product enhancement and future product development."
Is Antognini happy with his decision? "Absolutely," he says. "The service and support have been really, really incredible-from A to Z. And I'm a tough customer."
For more information about Kana visit www.kana.com
Given the deep-pockets commitment that CRM demands, it's not surprising that outsourcing claims the bulk of corporate spending on CRM services; in 1999, outsourcing accounted for two-thirds of the $34-plus billion spent on CRM services, says IDC. And even by 2004, outsourcing will still claim 60 percent of CRM services spending.
Summing the CRM parts
"CRM," says John Dinning, vice president of marketing for NCR Corp.'s CRM division, "must become the ability to manage the entire organization to deliver on satisfying customer needs." Whether you're wondering where to begin or how to keep going, read on. This special Strategic Directions supplement examines the key pathways through today's ever more confusing CRM labyrinth, including:
Making Customer Information Work for You Where does all the data go? And how does it get analyzed into something useful?.
Channeling and Campaigning: Front Office Challenges Sales automation, customer interaction centers, marketing automation and more.
e-CRM: What the Web's Got to Do with it Some say your Web site will be your CRM hub.
Closing the CRM Loop All the reasons why your survival depends on integration of your front and back office.
The Outsourcing Alternative Pluses and minuses.
Getting There from Here Best practices from the survivors.
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