An Executive’s Guide to CRM Planning

The Customer Centric Enterprise

A customer who orders a pair of shoes online, returns them for a smaller size and then orders a second pair of shoes from the same website is more than just a customer.

If the first shoes are high heels, the customer is most likely a woman who may want a purse in a similar style. If the second pair is children's sneakers, she may be a mother who will be in need children's shoes for years to come. This "customer" is actually a specific and measurable source of company growth whose buying patterns can be observed, customized and optimized over time, delivering lifetime value to the company. When business processes are reoriented in a customer-centric manner, the data that can be extracted based on customer activity provides the company with a means of increasing its profits over time.

Customer Relationship Management software is the technology that enables the measurement of all customer touchpoints and automation among all customer-facing departments from marketing to sales to service, thereby creating a unified customer profile that is accessible across the enterprise.

CRM software then uses analytical tools to correlate and synthesize customer data to drive improved product development, increase marketing conversions and grow sales results. The success of CRM requires that all customer touchpoints (call center, email, website self-service, chat/IM and social media) be integrated into a single profile of the customer. The elimination of information silos within a company is paramount to achieving ROI on a CRM investment.

It is the focus on the customer that distinguishes Customer Relationship Management applications from all other enterprise software. But the key to CRM is not technology. Technology alone will not transform an enterprise. CRM is a comprehensive, customer-centric approach to dealing with a company's customers, an approach that must be sponsored by the executive team and embraced throughout the organization.

The Value of each Customer Relationship

Understanding the value of each customer to the company is the basis for the shift in business priorities that gave rise to CRM. For many years business operated on the assumption that companies could control customer desires by pushing products on them with aggressive marketing campaigns. It is now generally accepted that customers drive the relationship, not the company.

This evolved from several principles. Beginning with a variant of Pareto's Principle of unequal distribution, somewhere around 20 percent of a company's customers often generate 80 percent of its profits. Therefore, all customers are not the same and do not have the same value to the company. From here it is a matter of identifying high-value customers, grouping them according to value and customizing products, services and marketing efforts to their specific needs. Retaining and optimizing those most valuable customers is much more cost effective than recruiting new customers. As new customers are acquired and tracked, they are similarly customized.

CRM Technology

Companies small and large rely on many different business software solutions to support their operations. How does CRM software fit in to the organizational technology picture?

One way to understand this is to separate the company's customer-facing programs such as sales, marketing and customer service from its non-customer facing departments such as finance and HR. Software applications that deal with customer-facing activities are grouped together as Front Office applications. Other technologies are Back Office applications. Software that integrates the front and back office is known as middleware.

Customer Relationship Management software is the core of the Front Office solution package.

CRM software systems offer two value propositions. The first is cost savings due to greater efficiency in business processes, known as Operational CRM. The second, generally called Analytical CRM, is the gathering of actionable customer data that is analyzed for improved decision making and predictive purposes.

Operational CRM
Operational CRM supports the front-end, customer-facing business processes and includes all the products, services and operational capabilities that enable the company to service its customers. Examples include contact centers, data aggregation tools, transactional/self-service web sites, customer-centric business processes and performance measures (cost, cycle time, satisfaction). For example, with operational CRM call center and self-help efficiency can be analyzed in great detail and improved upon quantitatively and qualitatively.

Analytical CRM
The value of CRM to the organization only begins with a more efficient and improved customer experience. The bigger CRM payoff comes as customer data is captured and analyzed to gain intelligence into both individual customers and the marketplace. When analyzed intelligently this data becomes the basis of future product development, targeted marketing campaigns and enhanced services. Ultimately, analytical CRM produces a more competitive enterprise that is able to predict and act on market trends rather than respond after the fact.

The analytical CRM umbrella encompasses customer analytics, business intelligence (BI) and data mining, customer grouping strategies, incentive or loyalty programs and tactical opportunities such as triggers for cross-selling and up-selling.

The 3 Tenants of CRM Software

CRM software has become quite broad as vendors expand their application portfolios. However, there are three primary application modules that most align with targeting, acquiring, supporting and retaining customers.

  1. Marketing Automation
  2. Sales Force Automation
  3. Customer Service

Marketing Automation
Marketing Automation serves to seek out and acquire new customers as well as grow existing customer share. Marketing campaign management lets you to design, distribute and track campaign performance across products, territories, sales people and other variables, so you know when to implement course corrections or where to increase marketing spend. Common marketing automation features include brand management, list management, real-time offer management, loyalty management and marketing budget ROI analysis.

Sales Force Automation (SFA)
Sales Force Automation software solutions seek to automate the entire sales cycle from planning and forecasting to negotiation and closure. Typical SFA functions include lead management, sale opportunity management, communication management, sales forecasting, product configuration, order processing, product information, quota management and sales analysis.

Customer Service
The customer service component of CRM software automates help desk, call center and field service management, providing automated, end-to-end incident or case management resolution. Customer service applications track and automate call routing, case management, response methods such as FAQs or knowledge-base lookups, incident escalations, and the capture of customer data for performance measurement, quality control and future product development.

CRM Delivery Models

In the early days of CRM (the term was originally coined in 1992 when customer service and sales force automation were first automated and paired) the only delivery model available was on-premise, licensed software. In this model the company purchased a software license and the hardware to operate it. These systems, which are still in use today, place the burden on IT staff to install complex hardware and software programs in-house and deal with ongoing technical and user issues.

In addition, companies would often choose "best of breed" software systems in which they would select different CRM vendors for sales, service or marketing and then have to integrate them to automate cross-departmental business processes and share information. The advantage of best-of-breed solutions was (and still is) that a business could take advantage of deep vendor expertise and product capabilities. The drawbacks were that the company had different software programs which required complex and costly integration, a tricky task that often had to be outsourced to an integration specialist. Client/server products such as Siebel Systems dominated the CRM industry throughout the 1990s and are still in use today.

The turn of the century ushered in a new delivery model. First called Software as a Service (SaaS), and later just referred to as the cloud, this model delivers CRM operation over the Internet as a service subscription, rather than the traditional purchase model.

It also shifts the acquisition of CRM software from a capital procurement transaction to a rental or pay-as-you-go subscription arrangement whereby the application software is remotely hosted and delivered to users on-demand via their Internet browsers. The SaaS pricing model is based on utilization instead of ownership.

Cloud CRM has taken root in the market because it lowers buyer risk, reduces technology complexity and delivers software on demand.

Organizing a CRM Selection Project

A CRM selection process is a significant project; one that should be handled no differently than any other major company initiative. It needs dedicated staff, budget, time line, research, deliverables and success metrics.

Start with a Steering Committee

A CRM project needs sponsorship and impetus not only from IT and all affected departments, but especially from C-level executives. When directives are formally handed down from the top of the organization as top company objectives, most staff will comply out of enthusiasm, respect of fear of repercussions. Executive sponsorship is one of the key success factors in a CRM implementation - and its absence is frequently cited among CRM project failures.

Be sure to set up a steering committee to dedicate the right resources and see the project through from software selection to implementation, adoption and ROI. The initial committee should consist of a C-suite executive sponsor, department leaders of sales, marketing and customer service and an IT executive. If outside consultants are to be involved, they may take a facilitation or leadership role on the committee. This executive team is responsible for communicating the vision, strategy and purpose to the entire company over the course of the project.

The committee will expand and morph as the project progresses. During the implementation and training stages it should include staff representatives from each of the functional departments who will help with employee adoption and the general cultural transformation into a customer-centric company. As the project timetable and deliverables are established, the committee is responsible for measuring incremental goals and delivering appropriate incentives as each step is accomplished.

Budget the Project

The amount of money at stake in purchasing and implementing a CRM solution is significant, and missteps at the selection or implementation stages can be costly, if not disastrous for the company and its customers. According to William Band of the Forrester Group, large enterprises generally spend $1 million or more on a CRM project, while smaller companies usually spend just less than $250,000.

When considering budget it's important to distinguish the cost of software, hardware and licenses from the cost of implementation and training. In most cases the cost of implementation will far exceed the actual cost of the software itself. Finally, with the historical failure rates of CRM implementations running high, starting with the CRM solution that is best suited to your company and industry is critical.

Get specific for the following CRM investments:

  • Software subscription - for cloud CRM
  • Licensing - for on-premise deployments, this is typically a one-time up-front purchase investment plus annual maintenance fees
  • Hardware - also for on-premise CRM, this includes servers and equipment acquisition with periodic upgrades and refresh cycles
  • Implementation services - consulting investment during the initial deployment and future new version upgrades
  • Alignment of business processes - often consulting costs associated with business process improvements
  • Software customization - a significant cost incurred during implementation, as well as additional costs with new version upgrades
  • Ongoing training and support - recurring costs for user support
  • System integration - a significant cost incurred at implementation, with additional costs during new version upgrades
  • Disaster recovery and business continuity

Establish your Goals and Metrics

An essential step in a CRM project is to establish the specific, measurable goals you aim to achieve with your CRM implementation. Sales, revenues, market share, customer acquisition and retention, campaign results—every meaningful result should be set up as a metric. Then business processes must be aligned with the metrics. This critical process will become the basis of establishing ROI in the post-implementation stage.

Hiring a Consultant versus Handling It In-House

Very early in a new CRM initiative the company will need to decide whether to hire a consultant to facilitate the selection process or to handle it in-house relying on IT resources and other expertise. This choice is generally dependent on the skills and availability of internal resources.

Larger enterprises looking at large implementations tend to hire consultants to guide them through the software selection process, thereby accelerating the process, reducing risk and increasing the likelihood of achieving a predictable success. Smaller companies often face budget constraints and are more likely to evaluate CRM software solutions on their own. Note, however, that even consultant-lead projects require sponsorship, ownership and considerable participation from the staff.

Manage Your Risk

Successfully implementing a CRM application goes far beyond installing software and training staff. A new CRM initiative impacts the way each customer-facing employee does their job. Keep in mind that CRM is a business strategy that is enabled by technology.

Reports of high failure rates among CRM implementations are legendary. Analysts such as Gartner, AMR and Forrester Research have been studying the problem seriously for over a decade and each has issued alarming failure statistics at various times.

However, closer analysis shows a more complex situation. Many studies show that large enterprises deploying comprehensive CRM packages have greater failure rates than small and mid-sized companies implementing more modest systems.

Definitions of success vary as well. Strict ROI numbers may indicate failure whereas the software may be successful in other ways, such as growing top line sales or improving the customer experience. Another reason for high failure statistics is that, due to recent poor economic conditions, many C-level executives who participate in surveys are compelled to take a shorter view of success based on quarterly reports.

Still, by any definition, success rates are far from ideal, and no one enters a CRM implementation with failure in mind. Industry analysts and consultants have done many studies regarding implementation projects over the last two decades. The results can be summarized into CRM best practices.

CRM Implementation Best Practices

  • Establish a formal implementation project plan. This detailed plan should include resource assignments, task dependencies, critical paths, time lines, deliverables and measurable goals.
  • Get executive sponsorship from the beginning. Buy-in must occur at the highest levels of the company and filter down through the ranks. The message must be reinforced throughout the project.
  • Establish and communicate vision, strategy, purpose and goals. Let all staff know that CRM requires a new corporate culture and mindset, not just software training. Communicate specific goals and expectations.
  • Align business processes before implementation. Sales, customer service and marketing need to operate according to standardized practices so that processes can be automated and data can be shared across the company.
  • Integrate all customer touchpoints. Call center, email, website self-service, website query, chat/IM and social media.
  • Deploy your CRM software in modules or by department rather than all at once. Work out the bugs in one department before moving on to the next. Adjust processes as needed.
  • Establish processes for dealing with change management. Change is always stressful and tends to be met with resistance. Include employee representation and feedback channels at all stages of implementation.
  • Thoroughly train employees before deployment. Training can be offered in many ways including classroom, web-based lessons and live webinars for remote staff.
  • Set incremental goals, create incentives and mark achievements. Make your staff feel excited about and vested in the CRM project. Have celebrations as each department comes online followed by a company-wide event when the deployment is complete.
  • Establish a post–implementation project. Immediately begin calculating ROI according to the metrics you set up when the project began. Set future goals for optimizing your CRM solution and monitor customer feedback.
  • Integrate social CRM. Your customers are talking to other customers on an array of social networks, making recommendations or registering complaints about your products as well as the service they received. If your CRM software vendor does not offer a means of monitoring and using this information, do it yourself.

Common CRM Implementation Mistakes

Failure to follow through on any of the above best practices can be costly and may doom your project. In addition, the following list of implementation pitfalls should be proactively avoided.

  • Failure to get executive buy-in. This can't be overstated. Since CRM crosses departments, a leadership void at the top will result in lackluster participation and disappointing results.
  • Treating CRM as a technology rather than a business strategy. Even if the technology installation and integration is flawless, the implementation will fail if the company culture fails to orient itself to the customer's viewpoint.
  • Failure to eliminate information silos. This can include customer touchpoints that are not integrated, resistance to sharing information across departments, and sales people who won't enter data while on the road or otherwise. Practices like this reinforce information silos, which can undermine the analytical insights CRM is designed to deliver.
  • Deploying all modules at the same time. This big bang or watershed practice often leads to cross-functional chaos that can delay and even destroy ROI.
  • Failure to measure ongoing customer satisfaction. The point of a CRM project is to create a customer-centric enterprise that improves customer relationships. Don't fail to monitor this important metric.

CRM Optimization

CRM is a journey. Ongoing post-implementation optimization is necessary to get the most out of your investment. Optimization strategies include:

  • Rigorously monitoring RIO and reevaluating processes and metrics; Begin measuring ROI as soon as the CRM software deployment is complete according to the metrics put in place early in your project. Since ROI is achieved over time, tracking progress at regular intervals will help you monitor and address the successes and shortcomings of the new processes, make necessary revisions and achieve increasing results over time.
  • Monitoring usage of the CRM system by employees over time; user adoption dashboards can help
  • Integrating the front and back office business systems for enterprise-wide business process automation
  • Taking advantage of software upgrades and new capabilities; cloud vendors constantly add new innovation to their products, but it's up to you to take advantage of new capabilities; also periodically review your existing licensing agreement for features you may not be using
  • Staying up to date on software maintenance and support issues
  • Ongoing customization and optimization of the customer relationship

If there is a single over-arching point of CRM it is this: CRM is a journey. As the journey advances so will your customer relationships, business outcomes and technology ROI.