• CRM as a competitive strategy - a strategic view
• Customer satisfaction and loyalty
• Relationship: selection and retention
• Customer service and service marketing
• Sales Force Automation (SFA)
• Implementation of CRM

Key concepts of CRM are:

• Comprehensive strategy:

  CRM at one end links itself to SCM - supply chain management and on the other hand the customer service and customer care. This makes a comprehensive strategy.

• Acquiring:

  This is about prospecting. Using effective sales promotion methods, prospective buyer can be acquired. It is about developing new customer as well as converting competitor's customers.

• Selection:

  You can't please all people at all times. You may not be able to serve and satisfy all the customers at the same time. There may be customers who may not be willing to have long time relationships with you. As a consequence you need to have selectivity in the customers as well.

• Retaining:

  Once a right customer is selected, we need to provide the customer with a good product and a better service which exceeds the customer requirements. Only then can the customer be satisfied and retention of a customer can be possible.

• Partnering:

  Partnership is about constantly striving to create better value for each other i.e. the buyer and the seller.

• Interactive communication:

  A clearly planned and focused two way, interactive communication is a very essential ingredient of CRM. A meaningful communication will always be an Interactive Communication.

• Technology + people:

  CRM is all about people and relating people to technology. This is all automation of people is all about!

• Mutually beneficial longterm relationship:

  It is all about the long-term relationship of the buyer and the seller. This overall results in the mutual benefit of both resulting in a long-term relationship.

Customer delight needs to be created instead only satisfying the customer. Customer service is about giving facilities and services that the customer asks for, or delivering service that is expected in today's competitive world. Most products require additional or long-term support from the organization. These traditional services include delivery, installation, lessons-in-usage, instruction manuals, repairs and maintenance etc. Customer care (and also customer delight) is going beyond the "expectation check list". Customer care is being proactive in developing relationship with your customer. Always remember “Good customers are worth keeping for life”. Great services can create a great experience and customer delight.

Customer Retention:

The point to be remembered always is that a repeat customer is the best customer. 6:1 is the ratio which means - you need to spend 6 times the money you spend in retaining an existing customer. Another view point is 5% increase in retention of customer can add 25% to 125% increase in profit. Essentially, retention is the key. However, not all your customers are worth retaining. You should select the customer for retention. These customers should be the right ones with whom you wish to establish a long term benefit for mutual benefit.

There are a number of benefits for selection of the right customer for an organization:

• It reduces cost
• It increases profitability
• It helps create goodwill for your organization
• It gets you good word-of mouth publicity
• It improves the possibility of greater customer satisfaction and loyalty

Thus, it's needless to say - select the right customer, have the right understanding of their needs and evolve a right way to satisfy them.

The Service Marketing Triangle

The Service Marketing Triangle shows the relationship and linkage between three elements of service marketing - Company, Customers and Employees. Three types of marketing happen between these 3 elements.

• Company to customers: External Marketing
• Company to employees: Internal Marketing
• Employees to customers: Interactive Marketing

External Marketing:

Internal Marketing:

Interactive Marketing:

Sales Force Automation (SFA):

SFA is Sales Force Automation. Understanding SFA begins with the study of basic selling process and the importance of FAB (Features, Advantage and Benefits) approach to selling. It then moves to the technology of Automating Sales process.

SFA is a technological tool to help sales people acquire and retain customers, which helps in reducing administrative cost and provides good basis for account management. It increases better selling chances for the Salesperson and more business for the company. SFA helps in the following ways:

• It helps a company to get customer retention and hence increase profits
• Customers get better information, better products or services, faster responses to their queries and hence this results in Customer Satisfaction

The reasons why SFA is important to CRM are:

• Reduction in cost of selling
• Increased revenue
• Easy availability of customer information
• Increased sales force mobility
• Meeting increased customer expectations

CRM Implementation:

The most difficult part of CRM is implementing it. Implementing CRM - making it a reality is the real challenge and the purpose of any CRM initiative. When do you say that CRM has happened? When:

• Your customer is more than satisfied; he/she is delighted
• Your customer attrition rate is minimal. Thus, the selected customer is retained.
• The bottom line improves: the profits multiply

Implementation starts with questioning the basics of your business; defining business, redefining your strategy, setting up plans, implementing and evaluating the CRM. Implementing CRM is about creating a change and an urge in your organization to become customer centric. The first important factor taken into consideration while implementing CRM should be people; because CRM is nothing without people. Secondly, technology and the process play should be taken into consideration. A good product or service, sound process, technology and able people are some of the important baseline requirements to begin with the CRM initiative.

Unless you have the CRM merits in place, it is not possible to judge if you are going in the right direction. CRM evaluation has to be in place and predefined before you begin implementing CRM.

Common causes of CRM failure:

• Treating CRM = Technology + Automation
• Large-scale systems with long-term promise are better
• Old organizational mindset
• Lack of CRM understanding
• Poor strategy and planning
• Lack of skills essential for CRM
• Inefficient or inappropriate software
• Lack of commitment

A famous saying in India states a customer to be God. It has all been from the Vedic ages but the fact being people have started noticing it as a specific field of management study for not more than five years, commonly known as Customer Relationship Management. You need to take care of your customer even for the slightest hiccup in his smooth ride on your product. All you need is to have a good professional relationship with your client.

You lose a customer when you don't meet their needs.

Business today is expanding in a manner water spreads being poured on an inverted cone. It has been expanding all over through verbal marketing, through advertisements on communication channels like TV and radio, through hoardings in public places, and the fastest mode of communication “The Internet”. The Internet is a perfect place for customer service. It provides an area for the customers to find the exact piece of information they need.

Customers today expect higher-quality goods, better service and quick delivery. This is where CRM comes in. It's all about understanding and following up with the customer needs, a good quality of product and service, and a fast delivery.

How does CRM improve your relationship with customers?

Some examples of its value to your business include:

• Expediting responses to customer inquiries,
• Increasing company knowledge of customers, and
• Identifying profitable business activities

Feedbacks should always be accepted from your customers in a positive manner. An appreciation from a client means working to get similar appreciation from the rest of your customers. But, most of the people do not accept the negative feedback from customers in a positive manner.

Instead of accepting it as a delta people generally retaliates against it. However, with the information gained from a CRM system which provides customer feedback, it should be used to improve products and services. This would also mean sharing information with your partners to ensure customer satisfaction.

What's the value of implementing a CRM?

Some of the values of implementing a CRM are:

• Your goods and services will improve based on your impact from customers. Valuable feedback from your customers will allow you to more directly meet their needs.
• You will increase the speed of your response to customer concerns. This will result in happy and loyal customers, which in turn will impact your company's bottom line.
• Your knowledge of your customers will grow. You will better understand your customer needs and will therefore be more able to meet those needs resulting in satisfied customers.

“There is only one boss: The Customer. And he can fire everybody in the company, from the chairman on down, simply by spending his money somewhere else.” - Sam Walton.

Customer Relationship Management puts the business focus back on the customer where it belongs. CRM combines business process and technology to create a better understanding of customers. Consequently, Customer Relationship Management is also known as Client Relationship Management. CRM helps to identify new customers and retain existing customers. To reach consumers who will truly benefit from your services, it's important that marketing campaigns define clear objectives and goals directed at an appropriate audience. The audience is defined through CRM.

The Marketing Team of a company uses CRM to identify commonalities among clients. With this information the company's marketing strategy becomes more focused and effective. Sales Team as a consequence notices the number of new customers and profits from existing customers' increases as the company improves its ability to meet client needs.

CRM allows you to customize relationships with individuals to provide a higher level of service. An effective CRM system will help you exceed your customers' expectations by offering them what they need - before they have to ask for it. CRM can create a personalized approach. It can also create a personal approach to customer service.

CRM can ease the exchange of information throughout every department in a company, personalize interactions with consumers to increase customer satisfaction, assist in pinpointing potential clients and monitoring relationship with the current clients. In a nutshell, CRM will assist you in identifying new customers and retaining existing customers. It will streamline information exchange, and it will customize relationships with individuals to provide a higher level of service.

CRM won't make you smarter; it will help you serve your customers by identifying their expectations.

CRM focuses on enhancing service to exceed your customers' expectations. How is this accomplished? By allowing all the departments access to the same information. The second goal of implementing a CRM system is using integrated information to create top-quality service. Customers' don't want to repeat the same information over and over to everyone they speak with. You'll save time and minimize customer frustration by sharing information internally.

Consider a simple example: Getting help from a new friend is tough as compared to getting help from an old friend. Similarly, research has shown that it costs 6 times more to sell to a new customer than an existing one, and your odds of selling to an existing customer are 50% better than selling to a new one.

What are the goals of implementing a CRM?

Some of the goals of implementing CRM are:

• To create a sense of loyalty with your customers
• To realize higher profits through better customer relationships

An effective CRM system takes the customers' view, not the products' or company's view.

There are three stages in CRM. None is more important than the others, but you will need to make one your primary focus - without abandoning the other two,

• Acquiring new customers
• Increasing the profitability of existing customers
• Retaining existing customers

The first stage of CRM is acquiring new customers. Through existing customer testimonials, product quality and availability convenience, and innovation; you can attract new customers to your company. The next stage of CRM is increasing the profitability of those existing customers. Apart from enhancing relationships with the customer through cross-selling and up-selling, it also offers the consumer great convenience at reasonable costs. If you have everything the customer currently needs, make sure he knows it.

To truly see the benefits of the customer/seller relationship, you must sustain customer loyalty. The third stage of CRM is retaining existing customers. Not only do you have to offer products the market wants, but you must also offer what your customers want. Your goal is to retain your customers for life. Many companies focus in this aspect of CRM because the greatest percentage of sales comes from existing customers.

Focusing a company's goal on customer satisfaction is a major benefit of CRM. Another advantage of implementing CRM is that it redefines marketing strategy so that it is more effective. Transforming to a CRM system aligns your organizational structure with actual business operations.

A key advantage of implementing a CRM system is that it re-concentrates the single focus of product performance on to the customer. CRM is a bridge linking an organization to its valued customers. Implementing a CRM system dramatically affects everyone involved. It requires a political, cultural, and organizational change. CRM cuts a wide swath across the entire organizational body that it demands a more cohesive approach toward meeting goals.

Current incentive systems may work against CRM because they reward only a portion of the customer's relationships with the company. Therefore, your organization may lack an incentive program that supports a CRM system. The challenge of implementing a CRM involves the cultural resistance to the change it requires. You also need to embrace the international market and create an infrastructure to facilitate the new system.

To find out what your customer wants, you need to understand and identify the elements of the CRM loop. The CRM loop is the fundamental cycle of activity that drives CRM programs:

• Comprehension and Differentiation
• Development and Customization
• Interaction and Delivery
• Acquisition and Retention

The four stages of CRM loop are an interdependent and continuous cycle of activity. All your initiatives and objectives must be intrinsically connected to this core cycle of action to get the best results.

As you transition from one stage to another, you will become more adept at implementation processes and achieve deeper insights that will improve each successive effort.

So how does a CRM loop work? What are the purposes of the four stages and how they interrelate with each other? This underlying core of activity will be your primary method for gaining knowledge and understanding your customers. The CRM loop will also help you decide what subsequent actions to take. This helps you identify, connect, and hold on to your most valuable customers.

• Comprehension and Differentiation:

  As you learn, you will be able to zero in your valued customers quickly. And you will also attract new ones with similar learning's. Retention comes by listening vigilantly so you are prepared to modify your services when customers change their preferences.

• Development and Customization:

  Use analysis and research to comprehend what your customers' value. Then use your understanding to show customer that your organization is differentiating its services based on what they have told you and what you have learned independently.

• Interaction and Delivery:

  A basic principle of CRM is to develop products and services based on customers' needs and expectations. Although most companies can't afford to customize products for individual customers, they can customize the products for a proven customer sector.

• Acquisition and Retention:

  Besides marketing and sales channels, customers interact in many ways with your organization, including shipping and distribution and customer service. With new information, you can progressively enhance the value you deliver to your customer.

Value is the quality of product, the service, the convenience, the ease of use, the responsiveness, and the excellence of customer service. Value isn't just about the price of the product. A customer interacts with an organization in many ways, including shipping, distribution, and customer service.

The infrastructure provides the solid foundation, but the core competencies provide the heart and soul of a successful CRM system. It is here that the philosophy of CRM is expressed. The first vital core competency is the fine art of up-selling. Up-selling in a CRM environment means identifying your customer's needs and then matching their needs to complementary products and services. The result is a richer, more profitable customer relationship. One aspect of up-selling is event-driven marketing. By implementing up-selling software, you can track customer contacts and establish triggers to identify prospects for additional sales.

A second core competency of a successful CRM system is direct marketing. Direct marketing is the pre-sale interaction with potential customers. This involves the use of advertising techniques to influence and provide your customer with the information needed to make a purchase decision. As your business grows, you will be deluged with requests for information; be sure to manage the fulfillment end of this potentially overwhelming process.

The third core competency of a CRM system is customer service. The goal of an effective customer service program is to provide support and to assign, create, and manage service requests for the customer.

Walking hand in hand with the customer service is field operations, the fourth core competency. Field service is the hands-on extension of customer support. It comes into play when a problem cannot be solved over the phone.

In a nutshell core competencies of CRM are:

• Up-selling
• Direct Marketing
• Customer Service
• Field Operations

To involve the entire organization in CRM, you must be able to identify the benefits of such a system. What are these benefits? An effective CRM system will help you remain ahead in competition, tap into the world-wide market, instill loyalty in your customers, decrease cost, and increase profits.

Integrating a CRM system will help you decrease costs and increase profits, tap into the worldwide market, and remain ahead of the competition.

Effective sharing of client information throughout a company is the key ingredient for successful CRM.

Some examples of CRM information sources are:

• The Internet:

  Tracking visits to your website can give you a good idea of what customers are looking for some pages might get more hits than others indicating a demand for certain products. Using this information within a CRM framework will help you focus on customer needs.

• Customer Surveys:

  Surveys can be given online or through the mail. An effective CRM system can take this information and make it available to marketers, sales people, and customer service people. With a clear understanding of customer needs, each department is more likely to meet those needs.

• Customer Purchasing Habits:

  With data mining and other techniques, you can learn what your customers buy from you. What are your top selling items? Who's buying them? What isn't selling? Answers to these questions and more lie in customer purchasing habits.

• Customer Service Calls:

  Anytime a customer calls you is an opportunity to learn more about him. A CRM system designed for your company can help service representatives increase knowledge of your customers.

The second way to understand your customers is to integrate customer information into your company's system. This allows everyone access to customer information. Marketers can identify customer demographics. Sales people can generate new leads based on customer buying trends. Customer service based on the information gathered.

The Internet is driving a revolution of one-to-one marketing and mass communications.

Effective sharing of client information throughout a company is a key ingredient for successful CRM. The first key to successfully implementing CRM is Integrating Internal Business Processes. Creating a seamless flow of information throughout your company isn't always enough. You should include external business partners in your information stream. Sharing customer information is essential to meeting your customers' needs. Consider third party suppliers and vendors as an extension of your business, and use them to provide solutions for your customers. A CRM infrastructure using Web-based applications can eliminate communication hassles and cost overruns.

To successfully create your own CRM infrastructure, you must integrate computer systems. Theses systems are known as “enabling technologies” that work together to provide more fluid CRM system.

With more powerful applications in the future, this integration might not be necessary, but because methods of delivering information is so varied, you need a CRM solution that can handle information across all delivery channels.

• Legacy Systems:

  Many companies rely on 20 year old systems that cannot simply be replaced. Because of this fact, special software tools, such as “middle ware”, become part of the CRM solutions. This software helps integrate old legacy systems with new CRM applications.

• Computer Telephony Integration (CTI):

  CTI is used to manage incoming calls. It allows information about a caller to be entered into a CRM data repository. This information becomes a valuable part of the entire CRM process because it helps determine what solutions the caller requires.

• Data Warehousing:

  With all the information gained through CRM, data warehouses become invaluable tools. Not only do they store the enormous amount of information you have gathered, but they also supply you with the material needed for customer research. Data warehouses offer customer data for later analysis.

• Decision Support Technology:

  You need a way to analyze the information in your data warehouse. Decision support technology is a set of analytical tools that help you make decisions based on accumulated customer data. You won't get the most out of your CRM system without these tools.

A CRM system creates a new approach to customer service. To ease the transition, everyone in the organization must understand and contribute to the CRM process. The first step is involving the entire management team to establish the CRM strategy throughout the company. Adopt an approach that is consistent with your company's overall approach to its business. Involve leaders from marketing, sales, IT, and customer service. Discuss their future goals and explore ways that CRM can help them meet these goals.

The second step is involving the entire management team to define your CRM integration goals. Identify how you'll track your customers; what software is most appropriate, what vendors can help you, etc. Understand your customers and create a business plan to meet their needs.

Once you have defined your vision and established a strategy, its then time to measure company readiness. This is the third step for involving the entire management team.

The final step in involving the entire management team is to monitor progress through stages. Because of the complex nature of CRM, approaching is through stages. Because of the complex nature of CRM, approaching is through stages that will create a better chance of success. Create a time line for strategy evaluation. Set milestones you hope to reach and continually check your progress.

Through an effective e-CRM system, you can personalize interactions with your customers and expedite the closing of business transactions. e-CRM and data mining systems help personalize interactions with customers. It also creates interactions based on relevant customer information, and expedites business transactions.

e-CRM and data mining systems help personalize interactions with customers. It also creates interactions with customers. It also creates interactions based on relevant customer information, and expedites business transactions.

E-CRM makes it possible to recreate the customer service of the past. Companies can use technology to combine a personal touch with customized service and the illusion of the one-to-one shopping of the past. The four features of e-CRM are:

• Information Analysis
• Customer Personalization
• Direct Marketing
• Simplified Transactions

The first feature of e-CRM is information analysis. With e-CRM, your ability to collect and analyze information is more efficient. It will help you determine inventory sizing, product pricing, sales items, credit policies, and other business decisions. With the analysis of you will be able to effectively use the second feature of e-CRM: Customer Personalization. Individual relationships with customers can be created and maintained through e-CRM. An effective e-CRM system will gather customer preferences and ensure customer-made shopping experiences for each customer.

Technology allows mass-market efficiency with a personalized feel. You can recreate the shopping experience of a mom-and-pop store at minimal cost through the third feature of e-CRM: Direct Marketing. Customers can order goals online and give you permission to send them additional personalized messages about new products, sales item, and other services you want to offer. e-CRM allows you to simplify transactions, analyze information, and create effective direct marketing material.

Companies that focus on customer information and use that information to maintain relationships are most successful in the market place.

What is data mining? It is the process of analyzing enormous amounts of data to identify meaningful patterns. Data mining is used for:

• Research
• Process Improvement
• Marketing

Data mining is an important tool for lowering overhead costs. The first way data mining facilities business operations is as a research tool. Research and Development is a costly process that can be streamlined and automated through data mining. Data mining lowers costs from the beginning of the manufacturing cycle, during the research and development phase, by quickly shifting through vast amounts of information.

Manufacturing and inventory control is another area in which data mining can help your company cut costs. The second way data mining facilitates business operations is through process improvement. Data mining systems can monitor processes to ensure that variables can be monitored and connected through data mining. Although both research and process improvement; are valuable aspects of data mining, they are the least customer - oriented aspects of it.

The most successful use of data mining is in marketing. This is the third way data mining facilitates business operations. Data mining uncovers information that reveals buying behaviors of existing customers. All useful marketing information is available in your customer database. Data mining will help you sift (distinguish) through it all.

Data mining streamlines and automates research methods, improves business processes, and identifies valuable marketing information. Customer database are an unlimited source of information. They are important business tools, but they are technical aspects of data mining that require knowledge of algorithms, decision trees, and predictive models.

Some technical aspects of data mining are:

• Decision Support Technology
• Directed Classification and Prediction
• Undirected Association, Clustering, and Recognition

The first technical aspect of data mining is decision support technology. Decision support covers the entire information infrastructure system that companies use to make informed customer decisions. It's based on recognized data patterns. Data mining helps, identify those patterns.

• Data Warehousing:

  A data warehouse is a database that stores information from a variety of operational systems. It allows companies to view information as a single entity rather than as a collection of information bits.

• Online Analytical Processing:

  OLAP databases are often speedier and more clearly organized than data warehouses, OLAP databases organize information along specified variables and allow for more precise analysis of the information they contain.

• Integration of Decision Support:

  Facts churned out by databases and mainframe computers don't always create a vivid enough picture to create solutions. Decision support technology is a collection of software and hardware that allows you to visualize the information gained through data mining.

In data mining, you use data to build a model demonstrating how every record in your customer database can be categorized based on any combination of variables.

This method is the second technical aspect of data mining: classification is the method of categorizing record in a database by predefined criteria - for e.g. assigning customers to specific purchasing categories. Prediction is taking the mined customer information, analyzing it, and predicting how customers may react in the future.

Undirected data mining is an automated process in which similarities among all records in a database of customer records are found. The third technical aspect of data mining is undirected association, clustering, and recognition. Some technical aspects of determining are directed classification and prediction, undirected recognition and clustering, and data warehousing and OLAP.

In directed data mining, you use data to build a model demonstrating how every record in your customer database can be categorized, based on any combination of variables.

“Automated” salespeople had to rely on bulky, portable computers, barely legible visual displays, and capricious modem connections to use the software. In addition, software vendors of the time rarely consulted end users when developing applications. As a result, end user acceptance of the solutions was often poor. Many salespeople viewed SFA software as an “electronic leash” or, even worse, as a surveillance tool.

In this early period, IT solutions were sold as discrete, departmental packages, each one serving no more than 100 users. In a fragmented market, companies bought separate solutions for the field force and the call center, and the applications did not communicate with one another. SFA applications both exacerbated and were victimized by the notorious “silo effect”-different departments operating in isolation and maintaining separate information stores.

By the mid-1990s, leading CRM software vendors began to offer their customers integrated information systems. Applications for sales and service converged, the software became far more scalable, and applications for marketing were introduced. And as CRM software vendors sought more input from end users, the applications became far more user-friendly, leading to much higher rates of user acceptance.

Around 1998, CRM technologies took another quantum leap in response to the rise of global ecosystems-networks of customers, partners, suppliers, and employees all connected by the internet. To allow all of these players to participate in an organization's information flow, CRM developers added massive new levels of functionality to existing products while developing suites of new products to serve the emerging model of the internet-enabled organization.

CRM software vendors then developed software that would allow companies to provide their customers access to the organization across multiple channels. This development addressed an old technological challenge: How does one coordinate the information gathered in sequential customer interactions when some of it may come in over the Web, some into a call center, and yet more in a face-to-face conversation? The capability of CRM technology to solve this cross-channel synchronization problem propelled it into the next stage of market evolution.

Today's best CRM solutions have come to address specific vertical industry requirements while integrating unwritten business processes that historically have varied from division to division. The result is a higher degree of consistency, leading to improvements in efficiency as well as the integrity of customer-related information. Most recently, CRM vendors have extended the flexibility of their systems to allow organizations to deliver solutions via hosted or on-premise versions, or in any combination. In addition, they have integrated business intelligence to empower every member of an organization with relevant and up-to-the-moment customer and business data. Ultimately, these CRM solutions are critical enablers of the seamless, high-quality experience that customers now demand.

The Business Benefits of CRM

When executed appropriately, a CRM strategy can deliver significant quantitative and qualitative business benefits. The quantitative benefits are driven by two main factors: reduced costs and increased revenues. Looking at these two factors more closely, CRM solutions let organizations reduce the cost of acquiring, selling to, and serving customers, and they help organizations enhance revenue by increasing sales per representative, sales per customer, average order size, and other revenue-driving metrics.

Cost Reduction Benefits

By streamlining and integrating customer-facing processes and providing richer customer data to sales, marketing, and service personnel, CRM can produce significant cost reduction benefits in a few key areas: cost to acquire customers, cost of sales, and cost to retain and serve customers.

Decreased Customer Acquisition Costs

Effective CRM strategies help organizations better understand a customer's preferences, buying behavior, revenue, profitability, and purchasing frequency. Having this knowledge can reduce customer acquisition costs significantly. For example, within one high-tech company, the implementation of a Siebel CRM system helped the telemarketing group to dramatically lower the number of calls required to generate leads. The company's vice president of sales and marketing explains:

Under our old sales information system, our telemarketing people were deluged with irrelevant information-free-form, unstructured information that had been recorded by agents during previous calls. This random information often impeded their call productivity. With our account-focused CRM system, they see just the information they need to converse intelligently-service records, for example, or the fact that an account falls into a certain vertical market.

As a result, our telemarketing personnel can now make approximately 80 calls per day versus 60 before the CRM implementation, and the value of those calls has gone up. Our people's hit ratio-that is, the proportion of calls that translate into qualified leads-has gone from 1 lead for every 52 calls to 1 in 33. Most impressive of all, telemarketings success as a profit center-what we calculate as its "contribution margin" toward closing deals-has roughly doubled since we rolled out the CRM system.

Decreased Cost of Sales

CRM can reduce the cost of sales by increasing sales force productivity, enhancing partner-channel productivity, decreasing quotation-proposal generation time, and improving order-configuration accuracy. A communications company provides a detailed example of the way in which Siebel CRM technology can reduce the cost of sales.

Excess capacity in the telecommunications industry had driven prices down over the past few years, making it extremely difficult for communications providers to maintain profitability. The company sought to differentiate itself through a concerted effort to beat industry-standard intervals for service delivery. To accomplish this, the company had to significantly shorten its order intervals and focus on meeting the customer's requested due date. However, its existing legacy system had limited growth capabilities, poor integration with other systems, and inadequate data integrity. This led to increasing business costs due to the substantial effort and human resources required to meet its customers' dates.

To address these problems, the company replaced its legacy system with a Siebel CRM solution that significantly streamlined the order entry and validation process, allowing the company to meet customer-requested due dates faster and with fewer people. As a result of decreased order entry time, it reduced headcount in its dedicated order entry staff from 22 to 10 people, saving nearly US$500,000. Additionally, because the order entry process was much simpler, project managers could enter orders while talking to customers-increasing order accuracy and leading to higher customer satisfaction.

The company also cites the following improvements from its CRM solution:

• A reduction in average order entry time for direct access lines from 8 hours to 45 minutes .
• A 50 to 80 percent reduction in overall order entry time .
• Cost savings of US$10,000 each month through a reduction in time spent on account maintenance, security, and queries, and by eliminating paper files.

Decreased Cost to Retain and Serve Customers

CRM can lower the cost to retain and serve customers by deflecting simple customer service issues to the Web and streamlining the process of serving customers through other channels.

Revenue Enhancement Benefits

Because CRM strategies allow organizations to monitor, measure, and track every customer interaction, organizations can determine the precise results of those interactions and therefore calculate the return on every marketing, sales, and service effort. Indeed, with CRM capabilities, organizations can determine the profitability of each customer or account and thereby adjust their allocation of resources to each customer based on that customer's profitability. By extending this capability across all communication and distribution channels, an organization can optimize its business model. That is, it can reach the right customers and prospects through the right channels at the right time with the right product or service. These capabilities lead to improvements in key areas, including increased close rates, increased revenue per sale, and improved customer retention.

Increased Close Rates

By deploying robust CRM systems and processes, customer-facing personnel have easy access to all relevant account, contact, lead, activity, and product information they need to serve customers. Moreover, CRM technology ensures that information is provided wherever and whenever it is needed, leading to meaningful improvements in close rates.

Financial consultants at a company, for example, use the company's Siebel CRM system to view information about investors, such as income and investment preferences, and then target their investment pitches accordingly. Explains the company's Assistant Vice President of Sales Force Automation:

We are able to be so much more personal in our interactions now, With essential customer information right in front of them, our representatives are able to develop customized investment strategies and deliver them-along with every appropriate piece of marketing collateral-directly to the customer, right from their desks. This system has enabled us to improve our lead conversion ratio-that is, the percentage of leads that become new accounts-from 40 percent to 60 percent.

Increased Revenue per Sale

CRM can help organizations increase average revenue per sale by facilitating cross-selling and up-selling. For example, a company has developed a program called Personal Planning Service, powered by Siebel CRM technology, which allows the company to create personalized vacation itineraries for guests at select resorts well in advance of arrival. When a customer makes a reservation for one of the company's select resorts, the company starts building an itinerary based on the customer's requests and stored preferences. When the customer arrives at the hotel three weeks later, tee times have already been scheduled, dinner reservations arranged, and recreation itineraries created. The company has found that guests who participate in the program show noticeably higher guest satisfaction scores and spend an average of US$100 more per day on services beyond the room rate. They are also more likely to generate repeat business because they had a satisfying experience.

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.

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.

Balancing Customer Needs and Channel Costs

Channel investment decisions are based on understanding two things: what value a channel offers to customers and at what cost. Channels must be evaluated in terms of their value proposition to customers and their costs to the company. Additionally, channel investments must be made with a strategic objective in mind, such as growing market share for a particular product or increasing overall revenue. Many managers have too quickly decided that a lower-cost channel must be more profitable and, therefore, all products are driven through that channel.

However, cost alone is a limited method of assessing channel strategy. A more thorough analysis should answer the following questions:

• Will the lower-cost channel effectively deliver value to customers?
• What type and proportion of customers will migrate to the lower-cost channel?
• Will the order or deal size be affected?
• How much will it cost to educate customers?
• Will the more expensive channel still be needed to serve some customers?

Enhancing the Customer Experience

Traditionally, companies operated under the assumption that building the best product was the key to gaining market leadership. However, with increasing product "commoditization" and increasing demands on customers' time, companies are realizing that how they market to, sell to, and provide service to customers is just as important as what they sell. Customers demand the ability to conduct business with an organization on their own terms, and they do not want to have their time wasted by inefficient company processes.

To meet customers' increasing demands, companies must take a couple of key steps toward enhanced customer satisfaction. First, they must provide customers with self-service options. Customers should be able to visit a company's Web site at any time to check the status of a service request, reorder a product, or resolve a billing inquiry. Providing this type of service not only increases customer satisfaction, but also lowers a company's customer support costs.

Second, companies need to ensure a seamless experience for customers across all channels. For instance, if a customer is trying to place an order online and encounters difficulties, the customer should be able to call a customer service representative and pick up the transaction where it was left off on the Web. A customer-centric organization will have this capability, while an organization that is not customer-centric might ask the customer to begin the transaction over again with the phone representative, wasting the customer's time and the company's money.

Well-Defined Business Processes

Automating an ill-defined or inefficient business process will only accelerate the pace at which an organization achieves poor results. A CRM strategy, therefore, must focus on redesigning customer-facing processes based on the perspectives and needs of the customer.

Each of these processes needs to be examined-not in isolation, but in terms of the way they are linked to other processes. Consider just three processes that are often poorly defined in the development of a CRM strategy: lead management, call routing, and service-ticket tracking.

Managing Leads

Lead management is the process of generating and or identifying a lead, qualifying that lead, and converting the lead into a sale. Within a multichannel system, leads may come into an organization from any number of sources: field sales, the call center, field service, a partner organization, or the Web. Given this complexity, organizations must clearly determine which person or department is ultimately responsible for closing leads, because this determines how leads should be routed. The organization also needs to determine how to define a qualified lead. Without a clear definition, leads of poor quality will be routed to the people responsible for closing them, resulting in frustration and lost sales productivity.

Call Routing

Many businesses-especially those organized by line of business-have not defined routing processes that can readily direct inbound callers to the most appropriate response person. The negative results include delays, frustrated customers, and abandoned calls. Therefore, before implementing CRM technology, organizations need to define optimal routing processes. Ultimately, a customer should be able to call into any point in the organization-from the front desk and the call center to the technical services department-and be routed to the appropriate person without being disconnected.

Service-Ticket Tracking

It is imperative that companies have clear business rules for managing inbound service requests. These rules should define exactly how resources will be dispatched to fix a customer's problem and how status updates will be shared as the issue is being addressed. In many organizations, call center representatives are unable to track the progress of work being done by field technicians. This makes it impossible for them to keep customers apprised of a service-ticket's status. The processes for sharing service request information should be clearly defined before automating those processes with CRM technology.

The Right Skill Sets and Mindsets

Because a CRM strategy requires a company's various departments to work more closely together, it changes the dynamics of how people interact and how a company makes decisions. While CRM technology facilitates collaborative decision-making, this very virtue can create tension in fragmented organizations whose members take proprietary attitudes toward data ownership. Managing change is thus critical when implementing a CRM strategy.

The change management required by CRM entails the realigning of skill sets and mindsets. Teaching technical skills without changing attitudes will lead to poor user adoption-one of the recurrent hallmarks of failed implementations.

To support the culture change that CRM requires, many companies have found it necessary to realign their reward systems. This means, for example, that customer satisfaction scores and customer retention will carry more weight in the organization's compensation program than customer acquisition. In addition, the organization may have to reconfigure its commission scheme to support a multichannel strategy. At Cisco Systems, for example, salespeople receive commissions for repeat orders that come in over the Web or through the call center, because Cisco Systems wants its sales force to drive as much business as possible through these lower-cost channels.

The Right Technology

The right technology is the final linchpin in a CRM strategy because it enables an organization to track every customer interaction, regardless of where, when, or how the interaction occurs. The right technology will satisfy the criteria explained in the following sections.

Multichannel Support

A CRM solution must provide an integrated family of sales, marketing, and customer service software applications across all channels, including field sales and service, call centers, resellers, and the internet. This creates a closed-loop system for capturing, organizing, and leveraging detailed information about customers, prospects, and partners so that every customer-facing employee and process operates from the same comprehensive store of logically centralized data: The right hand always knows what the left hand is doing.

For example, a field sales representative can use a laptop to connect to the corporate customer database before making a customer call and find out that the customer had earlier that day logged onto the corporate Web site and spent 15 minutes viewing several recently posted pages detailing a new product offering. Armed with this information, the representative can review the latest positioning information about the new product and prepare a tailored presentation.

Additionally, a consolidated customer data source lets an organization determine the preferences and economics of customer segments. Supported by this knowledge, an organization can determine which marketing campaigns and offers to target to which specific customers, how to design new products and services to meet customers' additional or changing needs, how to best provide service and support, and how to reward and express appreciation to the organization's best customers.

Industry-Specific Functionality

Regardless of the amount of pre-built functionality a CRM application offers, enterprises typically develop supplemental functionality so that their CRM solution fits their unique business processes and needs. The degree to which they must do so, however, depends largely on the number of unique requirements they have and the amount of pre-built functionality an application offers. Accordingly, organizations should select applications that offer extensive pre-built functionality to support the business processes for their particular industry. By scrutinizing the pre-built functionality available in a vendor's offering, organizations can avoid needless costs associated with reinventing the wheel.

Scalability and Global Support

Many employees throughout an organization, including personnel in sales, marketing, customer service, and back-office functions, use CRM applications. In addition, increasingly large numbers of customers interact with these applications through online self-service channels. And, in the case of employee relationship management applications, the user base might include every member of the workforce. CRM applications, therefore, must be highly scalable and flexible enough to be delivered any way users prefer-in both hosted and on-premise versions, or in any combination.

In addition to scalability, CRM applications must also provide multilingual, multi-currency support as well as support for multiple time zones. With this support, global organizations can implement the applications in multiple languages while maintaining a single, unified repository of customer data across the different languages. This allows organizations, for example, to consolidate sales forecasting information across different global regions and to analyze data regardless of the language of the underlying customer interactions.

Flexible Deployment Options

Companies of all sizes utilize CRM technology to better meet the needs of their customers. As CRM initiatives expand across regions, functions, channels and markets, CRM vendors have introduced a variety of deployment options including web hosted, private hosted, on premise and combinations thereof. The selection of the correct deployment option is critical to the success of CRM within an organization. The table below provides some key insights to consider when selecting a deployment option including functionality, deployment time frame, available IT resources, budget and attitudes toward outsourcing.

Support for All Devices

Today's organizations take advantage of a broad range of information and communications devices, including desktop PCs, laptops, hand-held devices, and cell phones. A state-of-the-art CRM system must support all of these devices, whatever the underlying hardware and operating systems, and must work seamlessly across devices. For example, users of mobile devices (such as laptops and hand-held computers must be able to easily and effectively synchronize information stored locally on their device with the system's centralized database. Without this capability, mobile personnel will be out of sync with the rest of the organization, a situation that can significantly undermine sales effectiveness.