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What is customer relationship management? Many marketers wish they knew. It is such a misused term that that even call center headphone suppliers are calling themselves "CRM vendors," according to Gartner Group's Jeff Golterman. And that's the least of the problems, according to the panelists in a special DIRECT roundtable on the subject.
Here's another: While companies have invested millions in CRM technology, few have made the internal changes that are needed to pursue a true customer-centric strategy.
Our panelists, who included leading strategists and practitioners, debated terminology, problems in implementation, turf issues and the role of content in CRM. They ended by telling what companies had done to earn their loyalty.
Schultz: What is CRM, and should we still be using that term?
Golterman: We think of CRM as a business strategy whose outcome is to optimize revenue and profits with customer satisfaction and value. There are many layers to it ！ metrics, behaviors, processes and technologies. It's really the combination of those things that effect a profitable customer relationship.
Goff: I don't think it's important what you call it ！ it's what direct marketers have done for a long time, not necessarily well.
Riches: There is a problem with how people are defining it today. Everybody wants a piece of CRM; it's sexy, it's the new thing. But CRM is not about sales or about any one thing. It's about being able to link right across all the touchpoints with the customer, and to use technology as the backbone to enable you to do this. Then it is to devise your strategies, looking across all of those touchpoints, and build that relationship according to what you learn.
Nykamp: It's much broader than direct marketing. It's pulling together sales, service and marketing. In terms of functional departments, sales and service are much larger than marketing. They have a bigger voice than marketing and have larger budgets. For many of our clients, a lot of CRM is not driven by marketing ！ it's driven by the sales force and customer service departments. For one of my B-to-B clients ！ one of the largest energy companies in the world ！ CRM was all about retooling their sales force and tying that to customer service. Marketing was a nice, but fairly small, piece of the puzzle.
Riches: The Internet has acted as the catalyst in many respects. Companies like Hasbro always thought of the retailer as the customer, but the Internet forced them into a relationship with consumers. In a way, they're now working backwards.
"CRM is broader than direct marketing. It's pulling together sales, service and marketing."
！ Melinda Nykamp
Goff: One of the things most marketing organizations have not yet done is take a look at all of the customer service contact and marry it to a marketing contact. Fifteen years ago it was a big deal to track promotions; you tracked responses. Today we are also tracking what goes on in customer service, but most direct marketers have not managed to link that to marketing activities.
Nykamp: If you're a direct marketer, has your world really changed? Not from what I see. Maybe we're making a little more of an investment and making sure our marketing promotions are tied to a back-end, cross-sell program in the call center tied to what's on the Web. I don't see that as anything more than souped-up direct marketing, but it is bringing together touchpoints that direct marketers would have thought of bringing together anyway. The real upside is the business-to-business side where the sales force has never worked with marketing, and the call centers are truly a different animal. There's usually a support side as well. That's where CRM is something new and different.
Schultz: Is one-to-one really possible?
Golterman: We'd say no.
Nykamp: It depends on what industry you're in. If you're selling Boeing 747s, it's a one-to-one relationship.
Peak: It all comes down to customer perceptions. There are certain levels of personalization the customer doesn't want to have to pay for.
Schultz: How far have companies come in implementing CRM?
Golterman: When we surveyed folks in 17 industries about 500 different companies in the United States, we found that although 75% of them described themselves in the midst of a CRM initiative, only 25% of them had actually organized themselves to implement CRM. The others had not organized themselves around the appropriate target customer segments. Firms like Citicorp-Travelers have gone through tremendous pains to shift themselves from a product-focused firm to a regionally focused firm to a customer-focused organization. That's the biggest step, to be able to think about those customer segments or the synergies with all the product stovepipes. In a sense, many firms are not even prepared to take advantage of the investments in technology.
Peak: That's an extremely big step for companies that have been around for a long time. The people who need the CRM strategy the most are the ones most ingrained in that product-silo structure.
"There are certain levels of personalization the customer doesn't want to have to pay for."
！ Bradley K. Peak
Goff: But all organizational structures are a tradeoff, and an organization that attempts to reorganize around customer bases has to deal with the problems of delivering multiple products to that customer base. It's not necessarily an easier problem to solve than the opposite problem.
Peak: It's also a big P&L issue with all the monies coming from products and the silos. If you don't lay your organization on its side, what is the mechanism to get that funded?
Golterman: Many have looked at e-business as a way of doing that. They have split out separate funding under this very nebulous term. And they have taken people from different product silos, divisions and regions, and put them within this organization with a pool of funds. But often the vision falls short of the entire enterprise.
Riches: In a very big company that has a very well-established culture and is very rigid, it's almost impossible to cause change in an evolutionary way. They say, let's have an experimental unit that we put outside that isn't fettered by all the chains that we put upon our product divisions. This is an incubator, an investment area, and if it fails, it doesn't matter. Really big companies may shoot the incubator down but it will have had a lasting impact on the senior management.
Schultz: What are some of the other roadblocks to CRM?
Riches: The one thing that worries me about CRM is that the customer actually does not want to be owned by anybody, much less managed. The customer wants to be enabled to reach you any way they want, at any time, to buy whatever product they fancy. What the Internet has done in a way is to spoil the space for direct marketers because we managed the privacy issue quite well until the Internet came along.
Golterman: Gartner Group did some five- to 10-year planning scenarios around two variables in this area of client relationships. One was privacy and the other was the strength or weakness of the economy. A year-and-a-half ago we were within a quadrant that showed we were in a strong economy, had not really had a privacy backlash yet within the United States, and had access to lots of customer data. Now we've published research that shows with the weakening of the economy and the slight backlash we're beginning to see, we've actually moved to a different quadrant. This is going to have a huge impact on CRM and investments. Relationships become so much more precious in a weaker economy.
Nykamp: The last two years have seen ridiculous spending on CRM initiatives with absolutely no business case. We walk into situations where they have a $20 million, $30 million or $40 million CRM budget with absolutely no measures of success and no expectation of what they're going to get from it. To me that is the real danger. It's sort of like dot-coms gone too far. Companies are becoming much more judicious about it. They know it's a good thing but they need to define what it is, how much they're spending and what they're going to get back. For the last couple of years, CRM spending equated with customer satisfaction. But if you look at all the past customer satisfaction work that's been done, much of it has no measurable result. CRM may be all about keeping the customer happy, but at the end of the day it's also about improving the bottom line. It has to be a two-way street.
Golterman: One of the data points that came out of our survey is that 10% of firms truly understand their customers' value propositions ！ hence, the investment in technologies that affords greater customer insight. In a very broad perspective we look at the positive impact the technology can have on a CRM initiative really in three areas, the three I's: Insight, Interaction, Integration. The first one, insight, is exceedingly important. I can't smother the client or the customer with marketing impressions. I can't overspend ！ I need to do that profitably.
Goff: Direct marketers are much more pragmatic than that. We don't spend a lot of time soul-searching about customer insight. We try to understand it because it drives our copy approaches. But mostly we measure who orders and who doesn't. If they keep ordering, we keep promoting them. If they stop, we hold back.
Nykamp: CRM gets lost in all these soft words: customer intimacy, customer satisfaction, customer loyalty, customer understanding, etc. Where marketers fall on their faces is in tying that to the bottom line ！ is it more revenue, less cost or a combination of those things? The soft stuff can certainly be in there, and it's a nice opening to the business case to say customers will be happy. But when you get to the hard numbers of it, it's about how we can move the needle in terms of acquisition, potential cross-sell, upsell or some other incremental means of revenue. You can't go two-and-a-half years on a CRM initiative without any results. If something is going to take that long, you better have a lot of little successes on other things along the way ！ little tactical wins.
Riches: My experience with a couple of companies has been that [CRM] takes longer, costs more and is far more disruptive than anybody ever tells you it's going to be. A lot of people are still kind of reeling from that. So the thought of the enterprise-wide CRM endeavor as it should be in all its glory is somewhat daunting. Along the way, you've got to make some money and make sure things keep rolling.
Golterman: I know a publishing firm that will spend about $23 million over three years. That's across people and technology, and change management at the technology, business and behavioral levels. They went out and did something I thought was very wise, which was to understand the current cost-benefit analysis of doing business as we are today. They had a CRM vision, but they started within the value proposition ！ it was going to be delivered by increased customer retention rates [achieved by] integrating field sales and their call centers. They're predicting a six-cent contribution to earnings per share over three years.
Goff: You don't say, "Let's buy a CRM system then figure out when it's going to pay for itself." You say, "Let's figure out how we can improve the way we interact with customers, and then what systems gaps we have here that we've got to fill."
Nykamp: That sounds smart but that's not what most companies do. From my standpoint, dollars are going to shift from technology to services. Up to now, most of our clients' CRM budgets ！ 90% ！ have gone into buying the next big software package because you can buy your way into that. You can't buy any of the other pieces that you need for CRM, like customer intelligence or structure or business processes. A lot of companies took the easy route by buying the technology first then hoping the business would come with it. I think that the spending on CRM has sort of passed its peak.
Peak: This is a chance for IT to get its day in the sun. You can't have a chief marketing officer telling data architects how they should architect systems.
Goff: But IT people were designing systems without the whole process being driven by marketing people.
Golterman: The vendors are going to the chief executives for global deals. Siebel, Oracle, Nortel ！ they're all doing the same thing. They're out selling the executives because you guys are not there, and they're influencing the people above you. The CIO is putting up this chart that looks like an asteroid just blew up, and says, "I'm going to clear all that away with one ！ maybe five ！ solutions and our costs are going to go down dramatically." And the CEO buys it. What's missing is that the chief marketing officer, the chief sales officer, the chief officer for customer care, are not in that meeting.
Goff: That CEO ought to be fired.
Nykamp: The other reason why the technology folks own a lot of the CRM initiatives and budgets is that there isn't any one department. Marketing's over here and trying to figure out how to work with sales, and then we have to talk to those customer service people. These three business-side departments don't have their act together. Technology is centralized.
Golterman: You know who did a great job? Pfizer Pharmaceuticals. Fifteen years ago, they [organized it] by each regional pharmaceutical division. So you had a business person running that region who was responsible for new drug launches and hitting their market share numbers by certain dates. The integration of the targeting, the marketing databases, the messaging to sales, the chain management, the training, the field salesmen ！ all that was wrapped together and decided upon by that business person, not by a technology person. And as you can read, they've been infinitely more successful with their CRM initiatives than many other firms.
Riches: It sounds to me like they've still got silos.
Golterman: Yes, because the pharmaceutical industry is highly regulated ！ there's not as much of the notion of global accounts. So they are siloed from a regional standpoint absolutely. But they control the business processes, the metrics, the behaviors and the technology.
Nykamp: Just one contrarian point of view. We have CRM initiatives run by IT groups that have been very successful. So while we can all say the business side ought to own this, the reality is the business side usually consists of several product groups, sales, service and marketing.
Riches: You say the business departments are in charge of the business strategies. IT can't hold the line there.
Nykamp: Having them as a centralized function can be better than having spaghetti soup.Content
Levey: How important is content in CRM?
"Relationships become so much more precious in a weaker economy."
！ Jeff Golterman
Riches: If you mean content in the sense that content can be actually served up as a service, it's tremendously important. The customer service people have been the Cinderellas, often stuck in a corner of a large company. They handle the phone calls and everybody thinks of them as a call center but not as an active part of retaining the customers and building a relationship with them. A lot of what is actually being delivered on the Web should be delivered by customer service.
Golterman: A lot of call centers are based on efficiency metrics, cost per call and cost per day versus customer satisfaction. But a lot of financial services firms are looking at the upsell, cross-sell capability. And we see an entire re-skilling of the call center ！ a tremendous cost. That person just can't be the classic $19K a year get-the-answer-and-get-the-client-off-the-phone-real-quick kind of person. They have to be a solution provider. Content plays a tremendous role not only in enabling these folks, but in having the right content in the hands of the field sales initiatives. Marketing plays a tremendous role in designing that content around customer-value propositions using sales automation tools to push that out.
Peak: A lot of companies that have put up Web sites found out they were just sending their customers to somebody else. A customer would go to that site expecting to be able to do something ！ to do a transaction or to find something they were looking for ！ and they got a sales message. So they just clicked on the next site down on their search list, which is probably a competitor. The same thing is true of the call center. If I call up a company and I'm expecting something and don't get it, I can get that happy competitor's call center.
Levey: It's interesting that when we brought up content your first reaction was reactive interaction. What about using content or customer information in terms of initiatives?
Nykamp: We know all the outbound messages you ever received and all the messages you received when you went to the Web site. It's just like we need customer information of all the touchpoints so if you visit the store, go to the ATM, wherever you are, we know who you are. But we also know the history of what we served you in the way of content.
Peak: We're way behind the customer. Their expectation at this point is that they can define content. We're not able to do that for them.
Golterman: There was a fellow named Jerry Johnson who started a company in the early '80s called CWC, Clear With Computers. Jerry was a tractor salesman for John Deere, and he took his laptop out and used it to write orders. CWC wound up being the first personalization sales configuration engine in that space. You could sit down with a customer and they could say, "We're shipping cement or feathers on this truck." Marketing's role was to drive all this content out of the brochures into this dynamic, beautiful image of a truck on the screen, and you could change the truck and move it around and color it. Then other companies were launched ！ Calico, Trilogy and a whole bunch of others ！ to provide sales tools for personalization. You can figure deals. You can even see what your commission is on the truck and if you're giving it away.
"I don't think it's important what you call it ！ it's what DMers have done for a long time, not necessarily well."
！ Neal Goff
Schultz: A lot of CRM seems to come out of the old direct marketing 80-20 rule. Are companies in danger of losing the other 80% because they're not servicing them properly?
Nykamp: A lot of CRM efforts go awry with the feeling that we have to include all our customers in this. We need to treat all our customers better and provide good service to everyone. The ones that succeed are the ones that come up with tiered investment strategies. It is trying to figure out who are we going to spend $5,000 a year on, who we are going to spend $50 a year on. If they get that piece right, they're over a huge hurdle.
Riches: Of course, the problem is obviously the mindset that all customers are equal and I have to give every customer the same level of care and attention. And they get quite irritated if you want them to actually focus more on cross-sell or upsell. I think culturally that's a very difficult thing for them to do.
Golterman: A financial services firm has a snapshot of potential customer profitability. When somebody hits the automatic call distributor, it pops up who it is. They will actually make them wait longer if they're not as valued a customer. A high-value customer will get a service level, a five-second connect. Another one, it might be more like 30, 35 seconds. If they don't know about the customer, they put them through a triage process where they ask them what they're interested in, what kind of assets they are looking to place, and they'll actually be able to open up the calendar of the local person in the nearby brokerage office and set up an appointment for them right on the calendar.
Negus Viveiros: Which companies do you have your best relationships with? And what did they do to earn your continued loyalty?
"A lot of what is being delivered on the Web should be delivered by customer service."
！ Wendy Riches
Nykamp: United Airlines, because they have figured out what's valuable to me. This is a very mass brand, they have a lot of customers and they've realized that those customers need very different things. It's all about speed and convenience of transaction, and about limited interaction. So they've bundled something together ！ what they call the 1K. I fly 107,000 miles and spend $60,000 to $80,0000 a year on United Airlines trips. They realized that they can spend some money ！ say, $5,000 ！ on me. There's a lot of things they could have done for $5,000, including calling me on the phone, but they realized that what's important to me is very different than what's important to my mom. Even in the worst of times, when the product wasn't great during the summer, it's been amazing what they've tried. I get my recent mail, I get business cards from pilots, if I forget my coat they send it to me ！ you name it.
Riches: Against all odds, mine has to be my bank, Chase Manhattan. First of all, they let me access them as I want. I can do Internet banking, reach them on the telephone or write to them, although I never have. This, for me, is happiness. They have actually twice said, "You could rationalize your accounts this way and you would pay a lower interest rate." That is customer service.
Goff: One that comes to mind is Kozmo.com. It's wonderful, but as a business person I know that is not a standard business model and they provide a level of service they actually can't afford. They used to pick the videos up, and now they don't do that anymore. They put dump boxes around. And they now have upped the minimum order. When I saw that I wasn't angry at all. I said, "Ah, they've got a shot at surviving now."
Golterman: One is Charles Schwab. I think their ability to understand my needs, my family's needs and tailor both the interactions and keep on top of us when we're late in getting back to them, provides a level of customer service.
Peak: Anybody who's ever treated me special, I tend to form a relationship with, and that's the way my relationship is with Avis. They may know me well enough to know there are times when I actually have to have a car, and I didn't order one and I need one. They also know when not to overkill, too. Come on, the only time you're interested is when you're on the road, so you don't want to join some special points club when you're not.
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