Debunking the CRM Myth

Published in October 2001

Customer Relationship Management. Sounds simple enough. But the three letters C-R-M are striking fear in the hearts of corporate leaders worldwide, especially in this emerging climate of
unprecedented customer churn and waning brand loyalty. Effective CRM practices can mean the difference between success and failure for businesses across all industries, particularly for mid-size
enterprises. Yet even as online and software-based business-to-business applications offer to revolutionize CRM, it seems that few companies have taken the most basic steps toward understanding and
properly analyzing their strategy.

In fact, an analyst for Meta Group, Liz Shahnam, estimates that nearly all of the CRM projects launched in the corporate world today lack key analysis and, even worse, those efforts fail to effect
significant change in customer relationships. But there are tangible ways to identify and retain key customers while boosting your company’s Return On Investment. Before wasting time or
technology, understand the differences between CRM and analytical CRM. Operational drives the top line and analytical drives the bottom line of your business.

Debunking the CRM Myth

Much like sightings of Big Foot, there are myths circulating the business world that CRM is simply the act of gauging customer satisfaction and selling more products to existing customers. Not
true. CRM is actually composed of three vital business analytics that can increase your profitability and impact your business model. In truth, organizations should apply assessment, acquisition
and customer management analytics.

  • Assessment is the collection of analytics that help you measure your customer’s value to your organization.
  • Customer Acquisition analytics deal with additional profiling, segmentation and ranking of customers based on propensity to buy, order frequency, and overall purchasing behavior.
  • Customer Management helps an organization determine the impact of order fulfillment, returns and call center activity on actual sales performance.

All of these elements formulate your strategy and help reach the four most important goals of CRM: increasing customer loyalty, retaining the right customers, acquiring quality customers and
managing those processes effectively.

With all these great sales leads, why is customer loyalty key?

Anyone in the sales field will tell you that identifying and retaining your top customers is the secret to success. No matter how much money you pour into sales, marketing and promotion, you will
miss the mark unless those efforts hit the right targets. Those targets should be customers who not only spend heavily on your products, but require the least maintenance and are viable candidates
for a cross-section of clients. Finding these clients can generate significant savings for your business. A study in the Harvard Business Review reveals that a five percent increase in customer
retention can cause explosive improvement in cash flow through a customer life cycle. This research is further backed by the age-old sales credo that 20% of a company’s customers make up 80%
of the sales. The key is to find that 20% and command your ROI.

Retain the right customers; Unite “islands” of information

In order to leverage relationships with your best customers, you must define “best.” Many CRM efforts botch the distinction because revenue data is stored separately from customer
support and client history data. The trick is to devise a database that pulls information from every department from sales to customer support and create a unified report. Currently, many
businesses place the burden of comparative analysis on their sales and marketing force. This arduous task involves wading through islands of data isolated in different departments and computers all
over the company.

Any business that is serious about CRM should seek out software systems that integrate data and draw up comparative charts that help drive sales and customer retention decisions. Housing data is a
moot point if you don’t leverage it to your competitive advantage.

For example, say Company X spends exorbitant amounts of money on your products, so it appears to your sales leadership that you have a top customer on your hands. Strong efforts are made to court
and continue the relationship with this “big spender.” However, what if Company X preoccupies your personnel and ties up customer support lines with constant complaints and special
orders on products? What if Company X requires special shipping options or demands that you buy back any residual stock of the product if their customers don’t purchase it? Place all of those
numbers and interaction patterns side by side and you may find Company X is not worth retaining after all. Such analysis is key to the health of your relationship with other customers and to your
organization itself. These analytics will guide you in the right direction when evaluating and acquiring new, quality customers.

Don’t just record, react in order to properly leverage analytics

As B2B portals rise in popularity, branding is fading in resonance and customers are focused on price rather than the name on the product. Plying these buyers with brochures, pamphlets or
ill-conceived rebates will do little to combat the dwindling resonance of brand loyalty. Instead, merging data to uncover purchasing, delivery and support needs will define relationships between
buyers and sellers. But don’t just record this data, leverage analytics to determine the next step. A proper analytics and CRM strategy should increase product value with action items, such
as offering increased warranties for the product, speedier delivery, or improved customer support.

According to the CRM crystal ball, the true players in the New Economy will not be the companies that are first-to-market or boast the biggest brand name. The players will be those equipped with
analytic processes that measure data, evaluate patterns, and recommend changes that will positively impact customer relationships.

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Mike Hennel

Mike Hennel

Mike Hennel is the President & CEO, Silvon Software. Mr. Hennel is responsible for driving the Company's vision and for managing day-to-day operations. He is also actively involved in the strategic planning and development of all Silvon products, including product acquisitions. Mr. Hennel has 20 years of sales, marketing, consulting and software development management experience in the computer industry. Prior to establishing Silvon in 1987, he spent six years at Pansophic Systems, Inc. (now a Computer Associates division trade named CA-interBiz). While at Pansophic, Mr. Hennel managed the firm's international application software customer and agent network, as well as the development of Pansophic's Enterprise Resource Planning (ERP) software products for manufacturing, distribution and financial systems.

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