CRM – Why it works, or why it doesn’t

I’ve recently been wrestling with the the whole idea of CRM implementation and usefulness.  Fundamentally, I feel that the concept of a Customer Relationship Management process is sound.  It allows for co-ordination of data pools into a single centre which can be interrogated as required.  This seems a logical and sensible step for any business – a cleansed, centralised dataset of all customer touch points.   However, I feel that from this point in, the idea of CRM starts to become tarnished.

CRM doesn’t work because it ascribes a set of values to a customer.  It doesn’t work if it fails to work for customer.  Once data is mined, then the customer can be spammed with tenuously-linked offers, potentially placing their business at risk.  Even if automated buffers or triggers are in place, then the likelihood is that unnecessary contact is minimised.  At this point, businesses lose faith in CRM, and CRM doesn’t work.

CRM does work if it isn’t treated as “fire and forget”.  Automation doesn’t mean that the requirement to think is removed.  Too often, the implementation of a CRM system is seen to suggest that there is now less requirement to work with customer data.  The opposite is true.  Successful implementation of a useable, and (and this is incredibly crucial) regularly maintained and updated CRM system means that much more work is now required. 

The establishment of a centralised base should be planned not to simply amalgamate as much data together as possible, but built with a clear purpose in mind.  Data should be structured so that access to data is not compromised (a user should be able to “roll up” and “roll down”).   Most importantly, the base should be built so it lends itself to strategic thinking.  It isn’t enough to identify customers who spend the most; you need to know what their story is, and be able to tell this story with the data.  This is the central premise of the “R” in CRM.  Empathise with your customer, provide them with information; help them use their account history, for example – neatly implemented recently by Tesco (external link).  Irrespective of near-Orwellian approach to grocery shopping that the ClubCard has provided, the tying up of offline and online that Tesco constantly works towards would be impossible without a fully functioning centralised database and a huge amount of thought.

Ultimately, I believe that CRMs do work.  But they don’t work by themselves, and they certainly don’t work in just one direction.  They work for the business, but for the customer too.  They should be scalable, and built with the companies current and future aims in mind; as such simply lumping all data together and then using it as a contact / mailing list is a certain route to failure.  Use it to create discussion, generate true customer insight and improve planning and communications, and it will eventually become indispensible.

Decrease spending, increase efficiency

Happy New Year!  Marketing Week, (4 Jan 2010) has again given me a juicy topic for Momentum Analytics’ first blog post of 2010.  It argues that campaign targeting will take centre stage in 2010.  Throughout the majority of these posts, I’ve discussed approaching data as a ”business critical resource” in a relatively abstract manner.   A colleague of mine consistently hammered home the point that when it comes to data, analysis and genuine, revenue-driven insight; “Garbage in, Garbage out”. 

So.  How do you justify outlay on something relatively intangible?  Marketing Directors, media planners, Direct Mail marketeers can all justify thousands of pounds (even hundreds of thousands of pounds) on creative and copy, because it is possible to interact with it, to visualise it.  Investment in data and analysis is much more difficult to come by.  This can have knock on effects on campaign monitoring - how often is campaign activity

• quantified (either as stand alone performance, versus previous performance or versus a prediction)?
• tracked back to customer data?
• fed into the next piece of activity?

All this campaign activity is designed to increase revenue – often seen (correctly) as a measure of success.  Yet it should not be the only measure of success.  Indeed, if a campaign budget can be reduced by 20%, with a loss of 2% to the standard response rate (i.e. 2% response drops to a 1.96% response rate) then this should be deemed a success also.  And the most effective way to achieve wins at the beginning and end of a campaign?  Analysis.

Efficiencies of campaigns has always been a constant metric on which performance has been measured.  With a difficult, pressured and stressful 2009 still fresh in the memory, we should press for an increase in campaign efficiency by smashing down knowledge silos that build up in businesses of all sizes.  The emphasis should now be on joining up internal resources to best benefit the business.  You quite probably already hold information in your business that can save you thousands of pounds and make cost-per-response work in your favour.  Use what you already own to make make sure that your business only receives one form of successful CPR this year.

Why some people really are more important

When a client undertakes analysis of their customer data for the first time, it can be genuinely unnerving.  They are entering into an area of which they may have no previous experience.  As a result, they may find it difficult to pass responsibility onto the agency guiding them through the process.

This inability to trust is both good and bad.  Good as it shows the client genuinely cares about their customers, the processes and changes being implemented to help move their business forward.  Bad because it can give rise to a need to appear more knowledgeable than they may be about their customers – an attempt to retain ownership.

A consultant has to navigate these waters carefully.  The most effective way is to ensure that the client is a true stakeholder in the whole process – they bring ideas and approaches to the table that are critical for success.  However, because of their trepidation with the whole process, there is a real danger that a client will “chase the money”.

If it hasn’t been introduced prior to this point, then a discussion about the implementation of an RFM model should be undertaken.  With the intricacies explained, a client will see a marketing focus on high revenue clients placed in sharp relief with how often and how frequently they interact with their business.  This will lead to a more effective approach for customer contact prioritisation, and a more customer-driven communications experience.

Approaches such as RFM modelling or using Lifetime Value are the very bottom rung of analytical complexity.  But for a client that has little knowledge of how to best develop their data, they can be revolutionary.  Indeed, if the consultant can fully involve the client in the process, then these concepts can be the foundations for long-term growth of the client’s business and their own knowledge.

Technorati Tags: Recency,Frequency,Monetary,RFM,Prioritisation,LTV

Relevancy in contact strategies - from registration to loss

A recent article in Marketing Week touches on an important aspect of effective customer management; relevancy. The initial excitement with which marketers and businesses embraced email as a new channel for contact, gave way to disillusionment from both the consumer and the service provider. On the one hand, the customer faced an onslaught of unsolicited marketing materials. On the other hand, despite the volume of broadcasts, businesses were struggling to see any trickle-through to their business.

Over the past few years, as opt-ins and tailored mailing lists became the norm, the volume of “solicited spam” (unwanted emails, but from businesses where a customer currently has or has historically had a relationship, rather than boundless offers for Viagra) the industry has come to the realisation that the opportunity for direct contact needs to be tailored. The initial approach was to be frugal with broadcasts, but general with content. And there is some success with this approach.

However, true email-based customer service comes from timely, relevant and pre-emptive contact. By examining customer data, a consultant can help your business translate patterns that exist in your data, and ensure that email broadcasts are:

• targeted to portions of your base (rather than the whole base)

• contain relevant offers and information (know what your customer wants before they do)

• due to their specificity, can be fully quantifiable – true end-to-end ROI

• If used correctly, can assist in arresting churn

By knowing that that less really can be more, a move towards a data-driven customer service approach can help a business generate revenue for a relatively small level of investment.

Can 80/20 ever become 60/40?

A general rule of business is that 80% of your revenue comes from 20% of your customers. It's a naturally occuring rule, and even has a name (the Pareto Principle).

However, such a hard and fast rule may cause you to ask "Well, why should we waste time recruiting more business? We can afford to lose our smaller clients and coast on our bigger ones!". I'm sure you see the flaws in this logic. However, there are a couple of important points that not only address this misguided approach, but could actually give your business a shot in the arm.

100% of your clients have something in common. You. And although they may differ in a number of ways, you (as a service provider) are who they choose to fulfil their needs.

Also, because they have chosen you, they are comfortable to build a relationship with you, and you have their trust. However, the 20% that spend the most with you don't trust you more than the other 80% of your clients. They may simply have understood quickly that you can fulfill more of their needs.

The way to level up the Pareto Principle is to ensure that the further 80% are having all their needs met by your company, and also are aware that you can help them as service providers.

There are a number of ways to do this, and a consultant can help to implement a number of methods to address customer optimisation. However, by being intelligent with your up-sell and cross-sell offerings, whilst at the same time having effective retention strategies in place and (most importantly) learning from the data you own, you can begin to tip the balance in your favour.

CRM’s need not be complicated

The last 18 months has seen a radical shift in the priorities held by a business. Unfortunately, too many have been forced to devote the majority of their time and resources to simply staying afloat. And, really, this is totally understandable. The recession has been painful, relatively swift, and really quite violent.

For the last few months, investment in CRM has been championed by a number of sources – seen as the one dependable way to survive a recession and maybe even exit in a stronger position than a business entered. However, there’s a significant gap between large businesses who know they should tighten up their CRM practices, and those smaller businesses who don’t know where to start. And sadly, those smaller businesses are most at risk.

So what’s holding investment back? Two key factors. 

Firstly, fear; a perception that the implementation of a CRM system is incredibly expensive. Our suggestion would be that any steps taken to master your customer data are valuable. Even a little investment (maybe some data management, and some top line customer insight) can change the outlook of the business – knowledge leads to confidence.

Secondly, know-how ; a perception that implementation of a CRM system is incredibly complicated. Again, it needn’t be, and it can be done in-house. As you would expect, we’d recommend that (at least from the outset) external advice is sought on best-practice CRM creation. If this is professionally planned, then a consultant can create a system that can be handed over to the client, and to a certain extent maintained in-house. Admittedly, this isn’t best practice. However, if it allows a client to be more intelligent with their acquisition and retention planning, then it’s a positive step forwards, and a great platform to build on.

Why common sense isn’t always common sense

As a first post to this (hopefully regular!) marketing and consultancy blog, I’m hoping to start debate, or garner support…whilst hopefully avoiding outright hatred of my marketplace opinions!  But whatever happens, it’ll be great to hear all your thoughts!

So…

Marketers, data managers and consultants sometimes fail to grasp why the medium (which they’ve worked in diligently for a number of years) seems to be so difficult for other people to understand. 

However, it’s easy to sit on the sidelines and advise people to radically alter their business plans, even though they rely on the outcome for their livelihood.  With the increased pressure to squeeze a profit within an agency or consultancy environment,  I feel that an element of accountability is disappearing. 

It’s important to want to try something new, because it seems so obvious to marketers and the like to do such, if a client isn’t already.  But it’s necessary to work closely with the client to ensure relevancy and growth at the right pace.  Perhaps sometimes the risk of passing on knowledge and losing immediate profit by teaching a client a new approach is worthwhile, if it generates an atmosphere of trust.  The recession can instill a sense of need for immediacy of profit.  But those businesses that can afford to plan for the future, or at least sew the seeds of customer development, will reap the rewards in the long term.  We shouldn’t sacrifice service for the quick buck.