What is CRM



What is CRM?

By Stewart Deck

What is CRM?

CRM stands for Customer Relationship Management. It is a strategy used to learn more about customers' needs and behaviors in order to develop stronger relationships with them. After all, good customer relationships are at the heart of business success. There are many technological components to CRM, but thinking about CRM in primarily technological terms is a mistake. The more useful way to think about CRM is as a process that will help bring together lots of pieces of information about customers, sales, marketing effectiveness, responsiveness and market trends.

What is the goal of CRM?

The idea of CRM is that it helps businesses use technology and human resources to gain insight into the behavior of customers and the value of those customers. If it works as hoped, a business can:

• provide better customer service

• make call centers more efficient

• cross sell products more effectively

• help sales staff close deals faster

• simplify marketing and sales processes

• discover new customers

• increase customer revenues

That sounds rosy. How does it happen?

It doesn't happen by simply buying software and installing it. For CRM to be truly effective, an organization must first decide what kind of customer information it is looking for and it must decide what it intends to do with that information. For example, many financial institutions keep track of customers' life stages in order to market appropriate banking products like mortgages or IRAs to them at the right time to fit their needs.

Next, the organization must look into all of the different ways information about customers comes into a business, where and how this data is stored and how it is currently used. One company, for instance, may interact with customers in a myriad of different ways including mail campaigns, Web sites, brick-and-mortar stores, call centers, mobile sales force staff and marketing and advertising efforts. Solid CRM systems link up each of these points. This collected data flows between operational systems (like sales and inventory systems) and analytical systems that can help sort through these records for patterns. Company analysts can then comb through the data to obtain a holistic view of each customer and pinpoint areas where better services are needed. For example, if someone has a mortgage, a business loan, an IRA and a large commercial checking account with one bank, it behooves the bank to treat this person well each time it has any contact with him or her.

Are there any indications of the need for a CRM project?

Not really. But one way to assess the need for a CRM project is to count the channels a customer can use to access the company. The more channels you have, the greater need there is for the type of single centralized customer view a CRM system can provide.

How long will it take to get CRM in place?

A bit longer than many software salespeople will lead you to think. Some vendors even claim their CRM "solutions" can be installed and working in less than a week. Packages like those are not very helpful in the long run because they don't provide the cross-divisional and holistic customer view needed. The time it takes to put together a well-conceived CRM project depends on the complexity of the project and its components.

How much does CRM cost?

A recent (2001) survey of more than 1,600 business and IT professionals, conducted by The Data Warehousing Institute found that close to 50% had CRM project budgets of less than $500,000. That would appear to indicate that CRM doesn't have to be a budget-buster. However, the same survey showed a handful of respondents with CRM project budgets of over $10 million.

What are some examples of the types of data CRM projects should be collecting?

• Responses to campaigns

• Shipping and fulfillment dates

• Sales and purchase data

• Account information

• Web registration data

• Service and support records

• Demographic data

• Web sales data

What are the keys to successful CRM implentation?

• Break your CRM project down into manageable pieces by setting up pilot programs and short-term milestones. Starting with a pilot project that incorporates all the necessary departments and groups that gets projects rolling quickly but is small enough and flexible enough to allow tinkering along the way.

• Make sure your CRM plans include a scalable architecture framework.

• Don't underestimate how much data you might collect (there will be LOTS) and make sure that if you need to expand systems you'll be able to.

• Be thoughtful about what data is collected and stored. The impulse will be to grab and then store EVERY piece of data you can, but there is often no reason to store data. Storing useless data wastes time and money.

• Recognize the individuality of customers and respond appropriately. A CRM system should, for example, have built-in pricing flexibility.

Which division should run the CRM project?

The biggest returns come from aligning business, CRM and IT strategies across all departments and not just leaving it for one group to run.

What causes CRM projects to fail?

Many things. From the beginning, lack of a communication between everyone in the customer relationship chain can lead to an incomplete picture of the customer. Poor communication can lead to technology being implemented without proper support or buy-in from users. For example, if the sales force isn't completely sold on the system's benefits, they may not input the kind of demographic data that is essential to the program's success. One Fortune 500 company is on its fourth try at a CRM implementation, primarily because its sale force resisted all the previous efforts to share customer data.

What industries are leading the way in CRM implementations?

As in most leading-edge technology implementations, the financial services and telecommunications industries set the pace in CRM. Other industries are on the CRM bandwagon include consumer goods makers and retailers and high tech firms.

Which industry is behind the curve?

Heavy manufacturing.

its sale force resisted all the previous efforts to share customer data.

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As the largest health insurance provider in New York, Empire manages more than 29,000 corporate employer accounts, of which about 26,700 are small to midsize companies employing 50 people or fewer. Empire services these "community rated" employers via some 1,800 registered independent sales brokers. Because each customer's needs are different, brokers must produce customized coverage estimates for each one. For example, some companies want preferred provider plans, and some want health maintenance plans. Each plan has different "riders," or options, attached, such as vision care or prescription coverage.

In the past, a broker would call Empire's broker relations department, pass along the customer's specs and then wait for Empire to calculate a price quote. The broker then relayed the quote back to the customer, who would either accept it or ask for modifications—in which case the broker had to contact Empire again and request a revised quote. When a quote was finally accepted, the broker filled out and filed one set of paperwork while the customer filled out a group application and sent it directly to Empire. Whenever Empire revised its plan structure, brokers found themselves with outdated enrollment forms.

The company then made 60 copies of the enrollment paperwork, filing it within 11 departments at Empire. Even then, fully 67 percent of the forms had to be returned or double-checked by phone with the brokers because of errors or omissions.

Since they couldn't generate quotes themselves or process the paperwork, the brokers were completely dependent on Empire's broker relations staff, who were around only during normal business hours. As a result, it took about 27 days to shepherd a new customer through the sales and enrollment process. Then employees had to wait another week to 10 days to get their ID cards.

The Quest to Streamline

In late 1998, Stephen Bell, vice president of e-business operations, and Kenneth O. Klepper, senior vice president of systems, technology and infrastructure, began developing a "print on demand" system to reduce the vast mountains of quickly outdated benefits brochures and contracts that sat in storage rooms.

First, Snow and his team took a hard look at the existing paper-based process. They took over a conference room and created a color-coded map of the sales process; no one had ever before tracked it from start to finish. "It was like a grapevine," Bell says of the process map. "It just got bigger and bigger. For the first time, we realized that there were 33 redundancy audit checks—where we go over information to make sure it's correct—built into the process. We had created this nightmare."

They began by eliminating all the loops and unnecessary steps, such as the need for brokers to keep calling the company for revised quotes. "Wherever there were repeats, we tried to eliminate them," Bell says. The team managed to cut the essential steps from 80 to 40. That was the easy part, he says; then came the daunting task of finding an application to make the streamlined map a reality.

Because Empire's sales channel was so complex, Bell decided that Empire couldn't go with an off-the-shelf application. And he quickly saw the value of moving the process to the Web. Bell and Klepper hired Firepond of Waltham, Mass., to customize its proposal configurator and develop a quote engine and group enrollment process for Empire. Because Empire lacked in-house experience and resources for handling an enterprisewide application, they kept the IT department close to the project so that staffers could learn from the experience. The department also had to integrate the application with Empire's legacy mainframes, a process that was tedious but critical, according to Bell.

Empowered Brokers

Empire's Broker Services Application, which includes the quote engine and proposal configurator and enables online group enrollment, went live in October 2000. The browser-based quote engine frees brokers from having to call Empire to crunch numbers every time they need a quote. Instead, they can now enter the relevant customer data themselves online, and an automated formula generates a quote in a matter of seconds.

If the client isn't satisfied with a particular quote, the broker can go back online and change the specifications. Upon making a sale, a broker no longer has to wade through piles and piles of paper, but can go online to enroll a new account. The password-protected system also lets agents maintain customer information online, where it's accessible around the clock.

By Oct. 31, 2001, all of Empire's 1,800 independent brokers had registered on the site, Bell says. When the site went live, Empire aimed for getting 15 percent of the brokers to use its self-service functionality. As of October, more than 45 percent were regularly generating their own quotes online.

Empire agents using the site now handle an average of 45 percent more quotes; brokers who used to process 20 quotes a day, now handle 50. Most important, the enrollment process that once dragged out over 27 days now takes just two to three days to complete online.

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