eCRM - delivering enhanced customer service?
The problem with ERP was that it focused on automating business processes rather than on seeing what information key decision-makers actually wanted. Most ERP solutions lacked any front office applications. Consequently, companies often lacked the information they most needed - information about their customers.
CRM is different because it provides a front-end to those automated back-office systems. It extracts value from ERP systems and allows businesses to collect and analyse data relating to its customer base.
CRM: What's it all about?
CRM definitions range from those that refer to CRM as a technology using data warehousing and data mining techniques, to others that consider it as a high-level initiative to develop relationships with a company's most valuable customers. The truth is that CRM refers to any strategy used to manage a company's relations with its customers.
The reasons for conducting CRM vary. There has been a particular focus on CRM in maturing industries where the market is close to saturation in terms of new customers, such as the banking and mobile phone industries. In these situations, companies use CRM to retain existing customers. Other reasons for using CRM are outlined in Figure 1.
CRM enables companies to gain a better understanding of their customers in order to serve them better, while also generating more revenue per customer through cross-selling and up-selling. One example is Scottish and Southern, the electricity and gas company, which knows so much about its customers that it has started offering them stakeholder pensions.
A brief history of CRM
CRM started off as a method for automating frontoffice functions. Sales reps' address books were replaced by contact management systems, customer service representatives gained valuable information through call systems and marketing departments were able to manage mass direct mail campaigns more effectively. To some degree the first generation of CRM solutions rode the same wave as ERP.
The current generation of CRM is more focused on the internet. While the internet provides yet another delivery platform for sales, marketing and customer service functions, it also increases the number of touch-points a customer has with a company (e.g. face-to-face, mail, phone, internet, email). This means that companies are finding it harder to track the interaction a single customer may have with that organisation.
So where does the 'e' fit into eCRM? The 'e' seems to be merely following a current trend among companies to put an 'e' in front of any of their offerings. In its simplest form, eCRM refers to CRM software that is 'internet enabled', meaning that it can be accessed via a web browser. In another context it refers to CRM software that fully incorporates the internet delivery platform in managing customer relationships. This includes inbound and outbound email, voice over IP and targeted web pages as part of the customer management process. In this sense, eCRM is a new way of doing business, separate from all other applications that are used to manage customer relationships.
Another implementation nightmare?
eCRM should not be the implementation nightmare that many companies experienced with ERP. Oracle even claims to have introduced an eCRM suite that can be up and running within 90 days. There are, however, a few key challenges that companies must overcome in introducing such systems.
More than just a cost cutting tool
Traditionally, many companies viewed the implementation of eCRM solutions as a method for reducing costs. While this is true, companies have started to realise that internet-based CRM provides businesses with a wealth of information about their customers. Companies can now identify which of their customers is most valuable and deserves the most attention, and according to an Ernst & Young survey, the 80/20 rule is clearly in force.
The top 20% of customers provide 80% of the profits. With the use of eCRM, companies can focus on forming closer relationships with the most desired customers while minimising effort on the unprofitable ones.
Integration is the key word
As mentioned above, the internet is increasing the number of touch-points that a customer has with a company. In many cases companies have many disparate 'treasure-troves' of information about a single customer - all derived from different CRM systems. As a result of this fragmentation, analysts estimate that potentially 36 different repositories of customer data exist within large companies. Companies need to obtain a unified view of their customers through seamlessly integrated eCRM systems, while customers need a consistent view of the company. An example of a company that may not quite have grasped this is British Telecom, where customers had to go through numerous communication channels (phone, mail, internet), often repeating their personal data (name, address, telephone number), before receiving any information on BT's ADSL service.
Not only one type of eCRM
eCRM is often seen as one system, one technology, one solution. In reality, many applications exist within the eCRM arena, most of which can be broadly placed into two categories: operational CRM and analytical CRM. Operational CRM includes applications such as Sales Force Automation and Automated Call Centres. Once integrated with other channels, operational CRM provides the 360 degree view of the customer. Analytical CRM analyses and aggregates all the data gathered to provide real-time answers to key business questions such as 'how profitable is a particular customer?' or 'which is the most effective channel to market to this customer?'.
Frequently, companies that have installed eCRM systems collect huge amounts of data about their customers but many don't actually know whether their eCRM efforts have increased or decreased profitability. The problem lies in a lack of strategic focus. Many have taken a tactical approach to eCRM and purchased vast data warehousing systems, where they have 'boiled the ocean' to collect mountains of data which result in little or no use. A customer relationship management initiative is necessary to support the overall strategic goals of the company with regard to its customer base, value propositions and market positioning.
As part of this initiative it is essential to have management who have a clear understanding of the requirements of customers and an appreciation of how eCRM can actually help to enhance the business relationships with these customers. If management has little involvement with the company's customer base then such an understanding is hard to achieve, frequently contributing to the failure of CRM systems to deliver the planned-for benefits.
Equally it is vital that the culture of the staff within the organisation has a strong customer focus. There is little point in providing staff with enhanced capabilities in terms of customer support and information if there is not the will and desire to aspire to providing excellent customer service levels.
Realistic marketing expectations
A recent survey by Gartner Research has identified a number of truths about the exploitation of CRM for marketing purposes. The results of the research indicate the need to have realistic expectations of exactly what CRM can and cannot provide to marketers, with the main conclusions being that:
You will never have perfect data - set clear expectations, since it is unlikely your data will ever be more than 90% clean - but remember, there are new legal liabilities and responsibilities that you need to comply with under the 1998 Data Protection Act, so beware.
You will never analyse all your customer data - if you are to identify your most valuable data, you must begin by categorising it. Once again remember, you are obliged to gain consent for the use of data for marketing purposes and, if you can't use it, don't keep it.
You will never have enough in-house marketing expertise - it's important for marketers to keep up to date with technology and refresh their skills at least every 18 months.
You will never be satisfied with your in-house IS function - it is of vital importance for marketing and IS departments to agree upon a common set of goals and strategies.
You will never achieve the vision of one-to-one marketing - since costs grow with increased segmentation you have to identify the point at which this vision no longer makes good economic sense.
You will never be immune from legislation and compliance - marketers, particularly those in global corporations, must keep up-to-date with both pending and new legislation to mitigate risk, and plan strategic investment.
Mobility enhances the customer interaction
eCRM's heavy reliance on technology often pushes companies towards listening to what the technology can deliver rather than to what customers really want. One way of delivering what customers want is to provide adequate channels through which customers can communicate, where they want, when they want. This means that businesses need to start thinking about how to incorporate 'mCRM' (Mobile Customer Relationship Management) into their strategy.
While traditional media have enabled companies to maintain a certain amount of interaction with customers, increased usage of mobile devices will allow companies to pursue more continuous relationships with their customers. Studies have shown that the more interaction a customer has with a company, the greater the average revenue that customer generates. In this light, mCRM not only allows businesses to have almost constant communication with their customers and field staff, but also increases average sales per customer, improves customer loyalty and leads to more efficient operations. Mobility has the potential to make a significant impact on the way companies manage their relationships with customers.
The way forward
Many companies have been slow to adopt eCRM solutions, while those that have are barely scratching the surface of ways they can use information technology to manage their customer relationships. Extensive use of the internet and e-commerce will make customers more sophisticated and demanding with regard to the levels of customer service they receive. Ultimately, businesses that do not adopt some form of eCRM strategy risk losing a key area of competitive advantage. The history of a good relationship with a customer is an area of sustainable differentiation that cannot be copied or built overnight.