Although CRM software can deliver a wealth of benefits, many companies fail to appreciate that technology is just one component of a successful CRM initiative. With the addition of Siebel CRM, Oracle's experience with more than 5,000 CRM initiatives has shown that the most successful companies approach CRM as a complete business strategy, focused on improving the way a company markets to, sells to, and services a customers.
When implemented effectively, a CRM strategy results in greater employee, partner, and customer satisfaction and improved financial performance.
Oracle identifies the following components as central to any CRM initiative:
- Effective customer segmentation
- Integrated multichannel strategy
- Well-defined business processes
- The right skill sets and mindsets
- The right technology
Effective Customer Segmentation
Customer segmentation-the process of dividing a market into discrete customer groups that share similar characteristics-is a critical component of a CRM strategy. Customer segmentation allows an organization to understand which customers are most profitable and how to most effectively market to, sell to, and provide service to these customers. With this knowledge, a company can determine which investments will drive the greatest returns.
Segmentation begins with the development of the customer profile, which includes a rich description of the key characteristics of a specific customer, including both basic data (demographics, purchasing history, and so on) and information derived from analyzing the customer's life cycle process. The customer profile encodes, for example, observations about which offers appeal most to the customer, which channel(s) the customer prefers, which product attributes the customer values most, how much the customer has spent in the past and is likely to spend in the future, and other issues of strategic relevance.
By analyzing the customer life cycle process, organizations can pinpoint significant differences as well as significant similarities among customers. The job of segmentation is to sort out which differences and similarities are most important across all customers, and then to divide the customer base into groups based on the relevant distinctions. Effective segmentation is greatly aided by the power of CRM technology, which gives organizations the ability to capture and analyze large bodies of timely data and to discern significant correlations among customer attributes. In addition, CRM technology provides a single view of the customer across all company touch points. Having this holistic view is vital to segmentation efforts.
In the past, because organizations had no easy way to capture, consolidate, and analyze customer data, their segmentation strategies were limited and often based on criteria of little strategic value (such as geography). With CRM technology, on the other hand, organizations can segment customers according to far more complex and less obvious factors, such as channel preference, profitability, buying patterns, and other meaningful customer attributes.
Integrated Multichannel Strategy
For a CRM strategy to be successful, a company must offer its customers multiple ways of interacting with the organization. Companies today can no longer compete effectively with only one channel.
Not so long ago, most organizations had one primary distribution channel. For example, consumers could buy General Electric refrigerators any way they wanted-as long as it was through a GE retailer during store hours. Customers could order products from L.L. Bean any way they wanted-as long as it was over the phone to the call center. In this world of fixed, single-channel distribution, customer relationships were relatively straightforward.
Today, however, market forces and new technologies are dramatically changing traditional channel structures. Whether through the click of a mouse, a toll-free call, or a visit to a store down the street, today's customers can defect to a competitor with unprecedented ease. In this climate, a single channel simply cannot serve customers effectively. Complicating the marketplace even further, customers traverse channels in varied patterns-from the Web to the call center, back to the Web, and so on-while expecting to be recognized every step of the way in an ongoing dialogue with the organization.
As a result, organizations need a clearly stated, integrated, multichannel strategy that satisfies the following requirements:
- Aligns the right products to the right channels
- Balances customer needs and channel costs
- Enhances the customer experience
Aligning the Right Products to the Right Channels
Companies can use any number of channels to market to, sell to, and provide service to their customers. Options include field sales, retail outlets, call centers, resellers, the internet, and wireless platforms, to name just a few. In designing a channel system, a company must consider which channels are best equipped to support the company's products and services, meet the needs of specific customer segments, and support each stage of the buying cycle.
For example, one online pet store, no longer a going concern, learned quickly that selling 50-pound bags of dog food to an older demographic via the Web was not a sustainable strategy. The costs associated with shipping the 50-pound bags to consumers priced the product out of the market, and the low internet usage among the target audience further limited sales.
