Tip: Apply the power of CRM to build customer loyalty

What you'll learn in this chapter:

• Customer relationship management (CRM) uses automation to align business processes with customer strategies in order to increase profits.
• CRM is a key initiative in building customer loyalty.
• Typical components of a CRM solution include databases and system integration technology.
• Successful CRM deployment requires a five-step process.
• CRM is no substitute for the human touch.

The five steps to successful CRM implementation are:

1: Develop a Customer Strategy First
Implementing CRM before you've identified your customer strategy is a case of "ready, fire, aim." You may get some interesting results, but chances of hitting the target are slim. The absolute first step in launching a successful CRM initiative is defining who your customers are. As we discussed earlier in the chapter, then, and only then, are you ready to develop the processes and the infrastructure to support your strategy. We can't emphasize this enough: CRM is a supportive technology. Use only as directed, and only after you know what you want to support.

More CRM tips: Find out the five ways to get the most from your CRM system Learn how to build a business case for CRM

As we have said repeatedly throughout this book, A-plus is a foundation for the most successful strategies for building customer loyalty. If your CRM system allows you to surprise your customer with service that goes beyond what is anticipated, you will be well on your way to building and maintaining loyal customers.

2: Align the Organization and Its Processes
Whether you have a terrific customer strategy or have invested liberally in technology, CRM will not transform a product-centric organization into a customer-focused organization. Before a CRM initiative will succeed in your organization, the culture and the practices need to be brought into line with the new strategy. As CRM consultants Rigby, Reichheld and Schefter of Bain & Company explain: "A CRM rollout will succeed only after the organization and its processes -- job descriptions, performance measures, compensation systems, training programs, and so on -- have been restructured in order to better meet the customers' needs."

This is a tall order. Yet research shows that the probability of a successful CRM deployment is highest for organizations that have revamped their internal structure and systems. Organizational readiness precedes the technology miracle.

3: Adopt Appropriate Technology
Two days after a new buyer closes on the purchase of a home, the real estate agent sends the buyer a small housewarming gift and a handwritten thankyou note. True or false: The gift and note are an integral part of an effective CRM solution?

If you answered false, you probably equate customer relationship management with high technology. You may mistakenly think that physical gifts and handwritten notes are too low-tech to qualify as components of a CRM strategy; you may believe that CRM means technology and lots of it.

If you answered true, you probably take a broader, and we believe a more useful, view. You see low-tech, middle-tech, and high-tech all as appropriate components in an effective strategy to acquire customers and build loyalty.

The right technology can be anywhere along the technology spectrum. Most CRM vendors would have you believe that CRM is synonymous with technology. It isn't. One of the biggest mistakes you can make in deploying CRM is to adopt technology that outstrips the capability of your organization or your customer. It is better to examine low-tech alternatives like handwritten notes and follow-up phone calls first. Look for suitable technologies that promote effectiveness over efficiency.

4: Measure Benefits
Like many information technology initiatives, CRM is often sold to top management as a "good investment" -- not only will the costs be recouped in the near term, but CRM will eventually contribute to company profits. Yet according to Giga Information Group, a leading information technology research firm, only 30 percent of companies involved in CRM deployment measure benefits. Without some way to track the return on your CRM investment, a project that is supposed to produce a cash surplus often mutates into a cash drain.

Successful CRM deployment requires monitoring. Successful monitoring requires measuring the right things. Watching the speedometer won't tell you how much gas you have left in your tank. Tracking the number of inbound service center calls won't tell you the level of customer satisfaction with your call handling. No matter how precise, automated measurements -- so-called metrics -- are no substitute for the right indicators.

Your customer strategy drives your choice of metric, be it financial, performance, or diagnostic. If your strategy is profit-segmented customer retention, an appropriate financial measure might be a trend analysis of the profit-per-segment adjusted for customer turnover (average profit multiplied by the customer retention rate). Over time, the turnover adjusted profit rate should increase for those segments you want to nurture. If your strategy is customer retention at all costs, an appropriate performance measure might be customer turnover (i.e., percent of customers lost for the period). Properly managed, this indicator should decrease or stabilize to some acceptable turnover rate. If your strategy is cost management of low-profit customers, an appropriate diagnostic measure might be percent of low-profit customer contacts using customer self-service technologies. (The less time the company needs to spend on such customers, the better.) Given time and the right CRM solution, the percentage of customers helping themselves -- using low-cost self-service -- should increase.

With monitoring, the right metrics, and a baseline measurement of where you started, you stand a better chance of converting a sizable CRM expense into an investment that maximizes your profits and yields an Aplus customer experience.

5: Build the Right Relationships the Right Way
A well-crafted CRM solution hooks into your strategy for acquiring, nurturing, and managing your customer relationships. A poorly crafted solution ignores the nature and quality of your customer relationships, offering automated interaction where none may be required or desired. Mechanistic CRM products blindly target profitable customers, alienating them with unwanted sales pitches or a blizzard of junk surface mail, junk e-mail, or annoying telephone solicitation.

To build the right relationships in the right way requires more than the comprehensive customer view available from a CRM package. First, you need to know what relationships are "right" for your company. As discussed earlier, this involves examining your customer strategy. "Right relationships" depend on such things as: