Building a Compelling Case for CRM

As customer relationship management evolves from the latest business fad into a more mature initiative, it is increasingly being judged by the standards of most corporate initiatives: Why should you do it? What are the benefits and risks? What is the cost or investment required? What happens if you do not do it? What is the return on investment?

At one level, it is unfortunate that these questions have to be addressed. CRM should, in many cases, be fundamental to how a company is run. After all, making customers happy and profiting from that are the reasons most companies are in business.

However, there is a benefit in the rigor that accompanies the process of building a business case. Too many CRM initiatives have been undertaken because it is the trend or because a vendor has promised that its software will miraculously solve underlying business problems, such as sluggish revenue growth, declining customer loyalty or high levels of customer churn.

No set answer fits all situations. But here is a three-step process you can follow:

Context is critical. The first step should be to understand the context in which you are making the case. Some key questions to determine this are: What is the business problem you are trying to solve: customer acquisition, retention, profitability or revenue? How sophisticated are the organization’s current direct or interactive marketing processes? Who is the corporate sponsor – the CEO/chief operating officer, the head of a business division, the head of a staff department (information technology, marketing, etc.) or a committee?

Scope it right. The second major step is to understand the scope of the initiative. Answers to the foregoing questions help determine the scope. If customer acquisition is the issue, your business case should focus on building processes and systems (typically marketing or sales) that help do this effectively while reducing current costs.

If customer retention is the issue, then the service aspect of CRM may need to be emphasized. If the organization is already customer-focused and accustomed to understanding and responding to customer data, then sophisticated campaign management systems, data mining and reporting tools can make it much more effective. Such an organization can also benefit from improving and accelerating the learning process.

If, on the other hand, the company does seat-of-the-pants marketing and sales and relies on anecdotal information and corporate myths to run the business, software will just be a distraction. The best thing to do is to introduce simple systems and processes that include some learning, a great deal of training, evangelizing and generating early and visible victories that help convince the skeptics.

If your sponsor is the CEO, you can afford to tackle the issue on an enterprise level, but if it is the head of a division or channel, you may want to build the case for that limited area, then use the proven results to spread the idea across the enterprise. You need to crawl before you walk, and run before you sprint.

Build a comprehensive case. The final step is to quantify the benefits and costs of executing a CRM program. Package it the way these things are done within your company, typically a financial model (net present value, return on investment, payback-type cases).

While in the scoping exercise you may have focused on one area (retention, for example), do not forget to count the effect of other benefits (such as increased revenue because of cross-sell) in the business case. Also, be sure to include all the costs of execution, such as recruiting new skilled professionals and training existing staff, in addition to the usual costs of software, hardware, consulting and systems integration.

Acknowledge the risks of execution upfront (such as lack of strong sponsorship) so you are not blindsided by them. Include the opportunity costs of inaction or procrastination. The competition could lock up your customer base or, worse, unload their worst customers on you.

My company recently worked with a client that had a great handle on its customer base and the profit potential of individual households. When a new competitor came to town, this company cut off its “hard to collect from” customers and encouraged them to do business with the competition. The new company could not believe its success at signing up new subscribers, until it realized a few months later (after having spent millions of dollars) that most of them were deadbeats. Meanwhile, our client saw per-customer profitability and retention numbers rise to very healthy levels.

Early wins are an important element of most successful CRM executions. Most organizations lack the patience or attention span to undertake multiyear, multimillion-dollar affairs with no short-term impact. It helps greatly to have staged phases, each of which yields a visible and significant effect. For example, retention programs usually are most effective when they focus on the most valuable customers or those who are most likely to leave. That way you ensure that support continues, and it allows you to learn and fine-tune your approach along the way.

Regardless of who the executive sponsor is, make sure there is broad support for the business case among those who will be responsible for building the systems and the processes and for using them. Preselling key constituencies within the company before getting sponsor approval often can help grease the skids when you get going.

Once you obtain funding and the program is under way, the job is not over. Communicate constantly with the sponsors, other key supporters and those who are building or are potential users of the system. The case may need to be modified and defended to reflect shifting organizational sands. Keep the key players in the loop and in your corner.

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