What's the fuss about... CRM?

CRM is now widely accepted by UK Plc, but less than one in ten projects are assessed for real effectiveness, according to recent research. Clive Longbottom tells us the fundamentals to keep in mind always.

Customer relationship management - Holy Grail or unholy mess? For many companies, it's a bit of both. Given the attention on CRM over the past couple of years, you could be forgiven for thinking you are well behind the curve. In fact, Quocirca has found the reality is almost always different.

With CRM, many companies (and the majority of CRM vendors) get very focused on the 'C', rather than the 'M'. Although the customer is a key part of the equation, they are not king. It is true that without customers you cannot survive but the secret is in having the right sort of customers.

Many companies get caught up in the numbers game ("We have more customers than you"), neglecting the one word that needs to be in the sentence - "profitable".

Many other companies offer fantastic levels of customer service - forgetting the goods they sell are low margin or viewed by the customer as a commodity.

The key to successful customer services is to use the right amount of management for the right type of customer, to make each customer as profitable as possible. This requires a degree of initial skill in identifying and profiling an existing customer base.

The first imperative is to find out which of your customers are actually important to you - and this may raise some interesting issues. In many cases, there will be only a small percentage of your customers who make any appreciable profit for you and there may be a higher percentage on which you make a loss every time they deal with you.

This has been shown to be the case in banking, with mobile phone companies and many others, where 20 per cent of a customer base makes 120 per cent of a company's profits. The bottom 40 per cent makes fairly significant losses. Therefore, you may have three types of importance for customers:

- Your high-value customers, needing a high degree of management and customer focus to keep them sweet and stop them from defecting
- Your marginal customers, on whom you will apply a different style of management to move them in to being high value customers
- Your loss-making customers, whom you will either manage up the value chain or actively manage away from you, so they cease to be customers.

From this information, you should also be able to create prospect profiles. By understanding your prospects, you will be able to rapidly position them within one of the three main categories above, and so apply the right sort of management to them.

Next up, policies and procedures on how to deal with prospects and customers must be put in place. The use of least cost routing (including basic IVR, web FAQs) is only suitable for those prospects and customers where you do not have any realistic expectation of an ongoing, profitable relationship.

For the middle sector of marginal prospects/customers, Quocirca recommends a policy of management by exception. By this, we mean basic predictable processes should be automated wherever possible, as this allows the customer to gain rapid response and resolution of their issues. However, the customer should be allowed to move up to higher levels of assistance as their needs move away from the predictable.

For the high-value customers, we recommend a policy of flexible management be applied. Here, it is necessary to fully understand you customer and their needs at any time. For example, if the customer is at home or at work, it is possible that they will want dealing with either over the phone or via the web. This may not be the case when they are on the road, however, where interactions may currently be predominantly phone-based but may change as new mobile devices and technologies are adopted.

This then brings in other issues - how do you ensure the information required by the customer is available in the format they want it in, in a means which is compatible with their device and the bandwidth to that device? Will you want to manage multiple forms of the same data to cover all eventualities or will you look to solutions that automatically repurpose this information based on device look-up tables?

Quocirca advises caution here - manual processes get out of hand too rapidly, creating a chaos of different information which rapidly becomes out of sync with itself. Yet many companies end up putting too much reliance on automated solutions, neglecting to check whether what the customer sees actually does meet their needs. The very requirement of needing to check the efficacy of automated tools can often make them as time consuming as a purely automated solution.

The key to managing the customer and prospect bases is to know their needs and so to map them to your needs. You are in business to make money - which is profit-related not necessarily revenue-related.

You have to be able to identify who is making you money and provide the requisite management to keep these high-value customers.

You also have to identify who is losing you money. Manage them so as to move them to be profit generators or actively dissuade them from dealing with you, so that they can become a problem for one of your competitors.

**Quocirca is a leading, user-facing analyst house known for its focus on the 'big picture'. For a full summary of its activities see www.quocirca.com, or reach the company's founding directors by emailing quocirca@silicon.com.

Also in this series:
What's the fuss about... UnitedLinux?
http://www.silicon.com/a55136