Definition of Customer Relationship Management
Customer relationship management, or CRM, has become a catch-all phrase that has been applied to everything from strategy to software. But if properly executed, it can reap huge benefits for your company.
At its core, CRM is a proven approach that helps companies attract, retain and maximize the value of customers through the collection, assimilation and application of customer knowledge. Essentially it is a strategic approach that helps retailers and other companies manage the customer relationship (or manage the trendier “customer experience”).
Effective CRM encompasses four elements, which we’ll review in more detail below.
applications and infrastructure
procedures and business rules
business goals and objectives
organizational structure, skills and incentives
Components of CRM
Certainly, one of the major drivers of the meteoric growth in CRM is the financial return it can bring. Better customer experiences correlate to increased customer retention and loyalty, which translates into increased top-line revenue and company profitability. But to achieve success, CRM projects require a coordinated and disciplined approach. Without a strategic vision and supporting roadmap, CRM implementations can falter and all too easily become part of the 50 percent of failed implementations widely quoted by the research firm Gartner.
Customer relationship management is comprised of two fundamental components — philosophical and foundational — that need to be developed and executed harmoniously for your CRM initiatives to be successful.
The Philosophical Component of CRM
The philosophical component of CRM relates to making customer knowledge and insights the foundation for your organization. It covers areas such as:
- Culture, vision, positioning
- Loyalty program strategy and support
The Functional Component of CRM
The functional component refers to a host of marketing, operational, organizational and technological initiatives that make your CRM strategy run. The common thread is a 360-degree view of the customer via an integrated platform. The insights gleaned from the data impact and drive:
The Benefits of CRM
Once your company embraces customer relationship management, you’re on the path to becoming customer-centric — putting the customer first in both strategy and execution. Better yet, leveraging customer data and putting the customer at the center of your decision-making has been directly linked to significant growth and performance gains.
Other benefits that can be achieved through an effective CRM approach include:
- Gain internal efficiencies. By having a 360-degree view of the customer, the entire enterprise is using the same information to drive strategy and implement tactics. And reporting is consistent across business areas.
- Ability to react in real-time. Most of today’s CRM solutions offer access to vital customer information anytime, anywhere through mobile portals and at-a-glance dashboards.
- Improved proactivity. Having access to the full spectrum of customer data allows more efficient and quicker analysis of performance and business metrics, and allows much faster diagnosis of potential issues.
- Enhanced opportunities for targeting. By tapping broad purchase trend data and pairing it with personalized activity, predictive analytics can pinpoint and identify which customers have the most potential. And customer-based marketing can be more effectively targeted by analyzing and interpreting customer behavior.
- Better understanding of channel influence. Customers are interacting with retailers across myriad channels and devices, and are taking an increasingly longer time to consider their options before purchasing. Between reading website reviews, watching product videos, asking for recommendations on Facebook and reading blog articles to research their purchase, the number of potential paths a customer may take toward eventually purchasing your merchandise is multiplying. CRM software can now map out this purchase journey across channels to provide valuable information on what actually influences purchase decisions so you can focus on which channels drive the best return.
- Increase effectiveness of customer loyalty programs. Loyal customers are an asset, and increasing customer lifetime value (CLV) significantly impacts your bottom line. Tracking customer habits and purchase behavior can help you design more effective loyalty programs through more relevant benefits and targeted communications.
Despite the potential payback, CRM is not a panacea. Implementing a CRM initiative will not magically turn your company into a powerhouse that sells billions of widgets to millions of loyal customers who tell everyone how much they love your company and its widgets. It is a long-term commitment that evolves and matures over time.
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Elements of CRM Success
To be successful, your CRM initiative must have the following elements in place:
- Senior leadership commitment to change strategy.
- CRM will touch every aspect of the organization, requiring strategic accountability by the C-suite rather than ownership by a specific functional area. Having support at the top level helps reset enterprise-wide key performance indicators (KPIs), as well as address rewards, responsibilities and questions at all levels of the organization. In addition, having senior leadership lead the effort shifts the focus of the business and orients everyone to improving the customer experience.
- Focus on earning and growing customer lifetime value (CLV).
- Many retailers have abandoned the idea of earning customers’ loyalty, which has resulted in failing to identify, engage and reward high-value customers. Leading retailers are refining strategies and tactics in order to earn and grow customer lifetime value (CLV).
- Develop customer-level insight and understanding.
- Most retailers — even those who believe they are customer-centric —rely on obsolete, institutional knowledge, intuition and averages when discussing customers. Organizations must develop the commitment to set aside “what we think we know,” and replace it with a current, accurate and data-driven understanding of their customers. Successful retailers can identify high-value customers and understand what, when, where and how they are buying.
- Customer insight is embedded in core processes.
- Customers must be at the center of decision-making. Applying customer insight can’t be optional or left at the discretion of individual managers. Each major decision process must incorporate customer insights and use consistent customer metrics.
- Insight-led collaboration.
- Successful CRM efforts lead to working collaboratively, based on shared customer insights and understanding versus working separately. That results in improved customer value — one more reason it’s important to replace traditional store- and brand-centric thinking with a customer-centric approach.
- Relevant, targeted marketing.
- Traditionally, Marketing and Advertising have optimized marketing plans based on the lowest cost per thousand (CPM) for reaching a broadly defined audience with the desired frequency of contacts. But by using granular shopper data and behavior-based targeted marketing, ROI can be sharpened.
- Core CRM components.
- As mentioned previously, any implementation of CRM needs to consider these four core components: technology (applications and infrastructure), strategy (business goals and objectives), process (procedures and business rules) and people (organizational structure, skills, and incentives). Read on for more details.
Technology — encompassing applications and infrastructure — falls under the foundational component of CRM, but there is no doubt that successful customer management requires a 360-degree view of the customer. And to do that, it typically requires an investment in software. But all too often, technology overshadows the other areas of customer relationship marketing.
And no wonder – Gartner is estimating that the CRM software market reached $36.5 billion in 2017 and will continue double-digit growth to reach $40 billion in 2018. And that’s just the software solution portion of the equation. It doesn’t include the digital technologies needed to drive growth and improve the customer experience.
A CRM technology roadmap should have the following characteristics:
- Supports 360-degree view of the customer.
- Utilizes comprehensive end-to-end system integrations of all customer-related platforms with tight integration to enterprise CRM, MA and other legacy ERP systems.
- Ongoing updates are made as business evolves.
But before you invest in CRM software and its associated bolt-ons, you need to ensure that your strategy is in place and that the business fundamentals have been covered.
See how the right CRM technology helped these companies achieve their customer relationship goals.
Strategy includes business goals and objectives, and falls under the philosophical component of CRM. It directly relates to making customer knowledge and insights the foundation for your organization. As you build your strategy for managing different customer segments and becoming more customer-centric, you need to assure that it’s in line with, first, the company positioning, and then its culture and vision.
Once you have these elements in place, you can begin to determine how your CRM strategy will support them. For example, if you’re a value-based retailer, you will want to consider how you’re providing value to your customer at every stage of their journey. If you are a customer-service-based retailer, you’ll want to focus on how you’re interacting with customers at every point of their purchase journey.
As you can see, the ideal strategy includes a defined, integrated approach to ensure an optimal customer experience that stretches across the organization, as well as customer journeys that are tracked and measured based on the level of engagement and conversion.
Building a customer-centric strategy includes:
- Senior management viewing customer-centricity as the primary focus for the enterprise and aligning the organization around customer insights.
- Development of a detailed business plan based on customer understanding and insights.
- Collecting all available customer data and tracking customer behavior, providing the organization with a 360-degree view of the customer.
- Having the entire organization focused on creating a differentiated customer experience and operationalizing it throughout marketing, customer care, digital, ecomm touchpoints, and marketing/advertising campaigns.
- Coordinating touchpoints across functions to improve customer experience.
- Using customer metrics to measure performance across the retailers.
- Basing business decisions on data and insights derived from data.
- Using advanced modeling and algorithms to predict customer behavior and drive customer metrics.
- Delivering relevant, personalized communications to customers.
- Having an enterprise-wide dashboard with CSI, LTV, NPS and other customer-related metrics in place.
To be successful, customer management requires access to customer data, as well as cross-functional support of the business plan. Getting the data into the hands of the business users and ensuring that it’s incorporated into decision-making requires supporting business processes, including procedures and business rules.
To be successful, ensure that:
- Defined, integrated processes exist across the enterprise. Documentation of current state and future state is key.
- Processes cross functional areas and are coordinated between Marketing, Advertising, Digital, Store Ops, Customer Service, IT/IS, Merchandising, Finance and ecomm.
- Processes are integrated into all strategic planning and future-state discussions, and maintain customers as the dominant focus.
- Data management and governance is in place. Business users must have confidence in data integrity.
Resources, or people, are a major part of the functional component of customer relationship management. This includes not only your actual team members and their skillsets, but also the related organizational structure and incentives.
When focused on customer management, organizations need to be aligned for maximum impact on customer engagement. Both CRM and digital have disrupted the traditional retail environment, and new roles and skillsets are required. Plus, teams and departments must be cross-functional to ensure a smooth customer journey.
Retailers must be able to adapt at scale to remain competitive. This makes recruiting and retaining the right talent vital. Other important factors include:
- A top-down commitment. Senior management needs to continue to oversee the efforts and ensure that the focus stays on the customer.
- An assigned owner for the CRM roadmap or business plan. This person ensures that the plan is continually updated and reflects current state.
- Using customer metrics to measure performance.
- Connecting budgets to customer satisfaction goals.
- Using analysts in functional areas to discover and analyze insights from consumer data.
Stumbling Blocks to CRM Success
Back when CRM was the buzz and everyone was jumping on the customer-centric bandwagon, getting the green light for a CRM investment was much easier. Many believed it was a plug-and-play solution that could be quickly installed and produce results within weeks. But as the CRM movement marched on, leaving hundreds of failed implementations in its wake, it left marketers and industry analysts scratching their heads. If customer loyalty is paramount, what went wrong?
CCG’s own research has uncovered these top obstacles to CRM success:
- Lack of C-level buy-in and support, depriving your initiative of a strong champion who can ensure your efforts are aligned with overall business strategies — and ensuring they have a seat at the power table.
- No corporate-wide CRM strategy; failure to develop a shared management perspective of CRM opportunity and lack of centralized ownership (and thus buck-stops-here accountability) of the CRM initiative.
- Lack of business objectives that are clearly defined and measurable.
- Seeking the “big bang” by attempting to develop skills and infrastructure too quickly.
- Little or no attention paid to employee skills and abilities; too great a focus on tools and hardware, not humanware.
- Change in the organization not managed well, leading to functional barriers as well as philosophical roadblocks; everyone must see and understand where they will benefit.
- Inappropriate sequencing plan for CRM investments (e.g., building technology before strategy or expectations).
- Failure to understand which business processes must be optimized to support the strategies.
- Program not in line with the brand position and customers’ expectations.
- Quality of data not properly addressed.
At the end of the day, it’s all about the customer. Wherever the customer goes, we follow. Whatever the customer wants, we give. Whatever the customer expects, we deliver.
In today’s world, more than two-thirds of consumers will research your product online before making a purchase, according to Retail Dive’s Consumer Survey. And Nielsen’s Digital Consumer Report shows that a whopping 87 percent will use their mobile device to shop. In general, you can also expect people to use several channels to interact with your brand.
All of this makes it imperative that your organization is able to engage all customers across multiple channels through multiple devices with excellent customer service. It is also crucial that companies harness all the data these channels can provide to enable a 360-degree perspective of each customer you connect with.
Finding the Right CRM Partner
Addressing both the philosophical and functional components of CRM is a significant undertaking for any enterprise. But for today’s retailers, it’s even more difficult because of strained resources, focus on short-term profits and an increasingly educated and fickle consumer. Let us show you how we can partner with you to help build your customer-centric strategy and corresponding roadmap — and transition to a business focused on the customer.
CCG is a full-service retail marketing agency with a multi-functional team of customer relationship marketing and loyalty strategists, analysts and creatives. As expert providers of retail marketing services and pioneers in the field of retail loyalty marketing, we have developed, launched and managed innovative CRM initiatives for retail clients across the country.
* “The Insights-Driven Business,” Forrester, July 27, 2016, https://www.forrester.com/report/The+InsightsDriven+Business/-/E-RES135823#figure4
** “Changing the Paradigm on Customer Centricity,” KPMG LLP, 2017, https://advisory.kpmg.us/content/dam/kpmg-advisory/management-consulting/pdfs/2017/omni-channel-study-2016-retail.pdf