Rev Up Your CRM Strategy

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Attendees of automotive expositions around the world are familiar with the "concept car" -- a vehicle designed to showcase the latest and greatest in technology. Yet despite the excitement and interest generated by their display, for one reason or another concept cars are not commercially viable.


Similarly, many organizations have built their customer relationship management strategy like a concept car, showcasing a lot of technology but still not fully equipped to perform in the real world.


CRM's lack of viability often results from stakeholders who are dazzled by the bells and whistles of the technology's functionality instead of focusing on what business processes the CRM strategy should affect and the goals it will achieve. Without developing a clear business strategy, no amount of technology will deliver the results that CRM is capable of generating.


Fortunately, there are four critical analytics-based CRM performance indicators, just like those on the dashboard of a car, that can help an organization align its CRM strategy with business objectives and the latest technology to reach its expected destination -- ROI.


The first metric on the CRM dashboard is customer retention. Just like the fuel gauge in a car, this indicator identifies the amount of resources a company has available to drive profits. Retained customers are the fuel that sustains revenue levels. Companies that retain customers can draw on their existing customer base "in the tank" to meet sales and revenue goals.


If customer retention is low and the tank is nearing empty, the company will have to spend money attracting new customers while missing out on potential profits during the time spent refilling the tank.


Though it's difficult to assign an exact dollar value, research shows that the cost of acquiring a new customer can be up to 10 times as much as retaining a current customer. And just like stopping to refuel a car delays the arrival at a destination, the time it takes to build a new relationship with a customer delays the achievement of revenue goals.


By collecting customer feedback and using analytics to interpret the results, companies can predict their customers' next moves and identify and proactively handle potential problem areas before the risk of losing the customer becomes a threat.


The next key indicator related to retention is lifetime value of a customer. This concept is similar to miles per gallon. It lets companies know the amount of profit they can expect from each customer acquired over the life of the relationship. Just like a fuel-efficient car, companies with high customer lifetime values can generate higher revenues with fewer customers.


In most organizations, a small subset of customers typically drives the highest percentage of profitability. Understanding which customers will drive future profitability can be challenging, but customer lifetime value is a metric that takes a forward-looking view of customers to help identify those with the highest profit potential. Once a company can identify its most valuable customers, it can prioritize its interactions with those customers to realize maximum profitability.


In the automotive industry, premium automotive dealers often offer free vehicle servicing during the first few years of car ownership. This practice can be considered both an acquisition cost to attract new customers and a retention cost that encourages existing customers to stay loyal and in time buy new vehicles.


Determining customer lifetime value not only helps automotive companies realize the potential benefit of providing services to customers, it also helps them determine what level of service to provide customers for maximum revenue-generating opportunities.


By examining the profitability level and revenue potential of customers, automotive companies can tailor their service programs per customer group to maximize lifetime value. It stands to reason that higher-profit customers should receive more services than lower-profit ones, and the customer lifetime value metric helps companies determine exactly the right level of costs to invest to attract and retain different types of customers.


Additional metrics related to performance are customer satisfaction and loyalty analysis. Customer loyalty, like a speedometer, indicates how quickly a company can accelerate revenue growth and profitability. Loyal customers not only are likely to be repeat buyers, but also tend to be cheerleaders, inspiring and encouraging others to become loyal customers of the company as well.


Customer satisfaction is like the revolutions per minute gauge, which identifies how hard the engine is working to achieve the vehicle's current speed and is the result of a number of internal processes working together. If the processes start to break down, the engine might be forced to work too hard or it might break down.


Customer satisfaction also results from a number of internal processes operating in sync within a company. Attributes such as product quality, packaging, delivery and service all play a part in satisfaction, and satisfaction tells a company how well its processes are working to keep customers happy. Similar to RPMs, when satisfaction becomes a problem, CRM breaks down and can require costly repairs in the form of credits, satisfaction campaigns and even potential legal issues.


For that reason, companies need to invest upfront and implement technology that can integrate processes to track product progress through the supply chain, ensure products are marketed and delivered in a consistent manner through various distribution channels with channel management, and answer customer inquiries through multichannel interaction centers. The investment in technology pays off because when customers are satisfied, companies can focus on achieving business goals rather than conducting damage control.


The gauges on a dashboard monitor a car's activities to provide an assessment of its performance. These gauges report how the car is functioning at the present time, and for optimum performance, the car should be designed and built correctly from the ground up in order for these metrics to perform in the expected ranges. In the same way, CRM analytics help companies automatically adapt to changing business conditions and lead to continued business process improvement.


A major German luxury automobile manufacturer recently followed the guidelines outlined above to craft a CRM strategy that helps it provide a superior customer experience that supports forming long-term customer relationships. Its CRM strategy emphasizes building satisfaction and retention through inbound company interactions while customer loyalty is built and fostered through outbound marketing campaigns.


With a selective marketing process that helps the company focus on which customers can provide the highest value, customer lifetime value and profitability both play a role in the overall CRM strategy. This luxury car manufacturer has kept these principles in mind while re-engineering all of its customer-facing processes. The goal is to provide a consistently high-quality customer experience in line with customer expectations based on the premium-quality products the company is known to provide.


Analytical applications proactively identify customer behaviors and values and automate decision making to improve corporate performance. The benefits of building a CRM system around customer lifetime value, retention, customer satisfaction and loyalty directly affect a company's bottom line in terms of improved customer profitability -- the ultimate corporate destination.


And above all, a complete CRM solution not only should address these metrics, but also include processes targeted to helping companies develop and refine customer strategies as part of a comprehensive roadmap to achieving ROI.


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