CRM Starts With Defining The Customer StrategyRecently I met with a group of Japanese businessmen visiting the United States to study customer relationship management.
In reading U.S. publications, they had concluded that CRM was purely about technology. Yet, their trip did not yield evidence that firms with significant spending on technology were further ahead in executing CRM. I explained that CRM requires changes in culture and processes as well as investment in systems. Most importantly, CRM requires a customer strategy - a systematic approach to customers to help their firms reach their goals.
While technology is critical, it is a small component of executing CRM, and many companies focus too much time and money on CRM's technical aspects. I encouraged these businessmen to step back and develop their firms' customer strategy before deploying new technologies.
A customer strategy defines the customers or groups of customers, identifies the business goal for those customers and sets the plan or approach to reach that goal. Defining a customer strategy forces an organization to make important choices, such as choosing to focus on selected customers or tactics and establishing plans based on information about customer needs.
A strategy is essential when a business faces one or more of the following issues:
• Strong competition for customers exists in the marketplace.
• There is a finite number of customers, or customers who have only a small amount of money to spend.
• Budget constraints demand efficient use of an organization's resources.
• The organization is in the process of developing a long-term value proposition for loyal customers.
The following are seven elements to implementing an effective customer strategy:
Align with business strategy. The first element of an effective customer strategy is its alignment with your business strategy. Unless you are able to succinctly define your business model and explain how your firm makes money, it is difficult to determine which path your customer strategy should follow.
Define your customer. Last year, I worked on an ill-fated attempt to define a customer strategy for an e-commerce start-up. The management did not agree on its business strategy. In one version of the strategy, employers were the customers while in the other, the customers were the employees. Unless your firm agrees upon who customers are, your strategy cannot be driven by customer needs. You cannot design a marketing plan or build a customer data warehouse unless you have identified your customers.
Clarify your customer value measurements. Financial metrics assign a business value to each customer. For many firms, it is difficult to calculate the current value of each customer to the business. While it may be relatively simple to match the revenue from sales to a customer to that customer's record, it is often difficult to identify the cost of maintaining a relationship with that customer. Firms can use simple or complex methods to assign business value to each customer as long as the results of the calculation are a useful tool for comparing customers and prioritizing customer segments.
Establish specific goals and identify interim steps to track your progress. A strategy requires both the goal and the means to achieve it. If your firm wants to be a low-cost provider, you have an approach but not a goal for your customers. Goals for your customers should be specific and measurable. What do you expect to achieve with your customers in terms of retention, acquisition or revenue growth? These goals cannot be achieved overnight, so interim mileposts should be designed. If you plan to reach a goal of decreasing customer attrition by 25 percent, how far do you expect to get this quarter? This year?
Establish resource requirements. No customer strategy is complete until it includes an estimate of the resources required to reach the goals. A complete view of resource requirements includes investments in people, processes and technology. As you list your resource requirements, consider both initial and ongoing costs for hardware, software and staff.
Propose methods for learning about customers. Your customer strategy is dynamic and will require fresh information about customers to grow and change. Your strategy should propose methods for learning more about your firm's customers. What do you need to know about your customers? What information should you seek from your customers? How should you capture this data? Should you ask customers questions directly on your Web site? Should you purchase third-party data? How often should you refresh this data? When should you retire old data? Taking the time upfront to answer these questions will set an annual learning agenda for your firm.
Create a starting point for customer information strategy. A well-articulated customer strategy will drive your information strategy. While most of my clients know what customer data they collect today and where it is stored, they have not yet determined what customer information they need to make decisions or how they consolidate, store and distribute this information. Building an understanding of your customers requires a commitment to a systematic information-gathering effort.
Your customer strategy articulates what actions your firm would like to take with your customers. Your strategy organizes those actions into a systematic approach to reach your business goals. At the end of the day, no matter how much your firm spends on CRM technology, you will need to stop and take the time to think about and deploy your customer strategy.