CRM technology can also increase average revenue per sale by helping sales representatives focus on the right deals-those that represent the highest revenue potential.
The CRM technology gives sales representatives a comprehensive view of all activities, opportunities, and service issues associated with any given account, enabling deeper selling of infrastructure management solutions into the account. For example, by allowing a sales representative to see that a company is currently managing a customer's computer network, the CRM software lets the representative engage in targeted cross-selling efforts, such as offering the customer a broader solution that encompasses the procurement of additional networking equipment.
Improved Customer Retention
Improvements in customer retention lead to increased revenue growth. Customer retention is a critical factor in determining a company's long-term financial performance. Consider the value of existing customers: they require no additional marketing or set-up costs, generally provide higher revenue per purchase, are less sensitive to price, and refer new customers. Consider everything together, and the financial return from retaining customers and extending their lifetime value can be enormous.
CRM lets an organization increase customer retention rates in a number of ways. First, CRM software provides powerful analytics that helps organizations understand the key drivers, timing, and predictors of turnover. Second, CRM marketing and campaign tools allow a company to develop models to target desirable customers at risk of defecting to another company with mailings, phone calls, and promotions. For example, one leading networking equipment manufacturer has used Siebel CRM technology in effectively tracking service contracts that are about to expire. “Since the system automatically alerts managers to approaching expiration dates,” says the company's director of customer service, “we're able to immediately go after those contracts and make sure they are renewed before the expiration date. This has increased our revenue from service contracts by 20 percent.”
Third, CRM technology can help a company improve customer retention by referring customers to alternative product and service offerings when a customer's primary choice is unavailable.
Additional Benefits of CRM
In addition to providing measurable benefits in the form of reduced costs and increased revenue, CRM technology provides many other benefits that are more difficult to measure. Some of these benefits include superior market intelligence, more customer-centric product development, improved forecasting and financial management, and greater brand equity.
Superior Market Intelligence
Because CRM databases are updated dynamically in real time, they provide an organization's sales, marketing, and customer service people with fine-grained and relevant information that can help inform strategic and tactical decisions. For example, at one leading energy company, CRM technology provides useful insights not only into broad market trends, but also into how individual customers make energy choice decisions. “Knowing why we win a deal, or why we lose one,” says a company executive; “provides a tremendous competitive advantage in a deregulated market.”
Product Development Tied to Customer Needs
By providing a comprehensive view of customer buying behavior, CRM technology can help companies tie product development efforts more closely to customer needs. At a leading software company, for example, Siebel CRM technology allows the rapid exchange of information between field sales personnel and product development groups. Because the system provides a field for Product Detail in the sales opportunities screen, product development personnel get highly specific information about potential deals and customer requirements. Says the company's directory of customer information services and that information leads to action.
For example, when a significant opportunity moves forward in the sales pipeline, the Siebel CRM system can send an automatic e-mail to the relevant product manager, and that manager can then ask the sales representative, "Is there anything we can do to help move this deal forward? Are there enhancements to consider? Should we send a technical support person on a call with you?" The exchange between the two functions is extremely rich. The CRM system is now really driving our product development.
Improved Forecasting and Financial Management
CRM technology can provide an organization with a more accurate picture of its sales pipeline, which leads to numerous benefits, including better inventory management, increased customer satisfaction, and stronger relations with the financial community.
Greater Brand Equity
While improving customer satisfaction and retention is clearly a revenue enhancement benefit, such improvements over time also lead to greater brand equity-a critical determinant of success in many industries.
Strong brand equity provides a competitive advantage not just by improving customer loyalty, but also by giving the brand owner greater license to introduce new products and services. When customers trust a brand, they are more willing to try new products and services offered under the brand's name. Organizations with strong brands thus enjoy an advantage when expanding into new markets.
Conclusion
In today's increasingly competitive marketplace, more and more organizations are turning to CRM as a means of driving corporate performance. Many of these organizations, however, wrongly assume that CRM is about technology. In reality, technology is merely an enabler of CRM. A complete CRM strategy must address each of the following areas:
- Effective customer segmentation. Companies must have a total customer view and divide their customer populations into discrete groups that share similar characteristics.
- Integrated multichannel strategy. Organizations need to synchronize their channels and balance the cost of each channel against other factors, including value to the customer, the customer's preferences, and each channel's profit potential.
- Well-defined business processes. Organizations must ensure that business processes are clearly defined and are based on customers' perspectives and needs.
- The right skill sets and mindset. Organizations must carefully manage change and provide the right training and incentives to bring about the desired behaviors.
- The right technology. Organizations require technology that provides a single view of customer information across all customer touch points, addresses specific industry requirements, works seamlessly with other technologies, supports multiple devices, scales easily, and provides support for global operations.
The key to creating business value with CRM is remembering that business strategy and technology strategy are inextricably linked. Companies that fall into the trap of thinking they can implement CRM capabilities based only on technology will fail. Those that take a more holistic approach will be able to achieve the greatest success in driving greater customer satisfaction, and ultimately, shareholder value.
