CRM Is Needed Now More Than Ever

There was a time you could walk down Main Street and each local merchant knew your name, had a kind word for your family and knew something about the business you did with them. This knowledge gave you a sense of caring and trust.

Today, trust is a word that has become suspect amid corporate scandals and a shaky economy. Many people think companies are hiding something or are trying to take advantage of them. The companies affected most, aside from those involved in the scandals, are the ones that never established trust with their customers. Trust is the basis of the relationships that you have formed or will form with customers, and it is what will keep your customers bonded to your business through good times and bad.

Back to basics. Given corporate conglomerates and Wall Street-driven economic pressures, it is difficult to focus on the simple measures that make the difference, such as forming meaningful customer relationships. We’ve seen the consequences of neglecting basic, sound business practices for the sake of the next great technology solution, and we cannot allow that mistake again. Now is the time to resist the hype and return to basic, time-tested rules of business.

The first generation of customer relationship management was developed under the premise that technology would produce better customer relationships. That assumption couldn’t be further from the truth, and it is why 72 percent of CRM applications fail, according to data from Gartner, Meta Group. CRM is about understanding the needs, desires and behavior of your customers to communicate more effectively with them during each interaction. It’s time to return to this understanding of CRM and to the basics of forming lasting trust and bonded relationships.

Our customers are a bit like our children. We want to nurture them, we want them to grow with us, and we want to keep them close to us so that they don’t go away. Yet, better than 95 percent of businesses cannot tell you much about their customers. Where are they? Who are they? What are their habits? What motivates them?

If you don’t know someone, how can you build a relationship? Many companies don’t realize this until the economy takes a turn for the worse.

Traditionally, data is kept in systems that are part of business operations: financial, inventory, order processing, etc. These are not systems designed for CRM. Such data is not in a context or structure to answer the business questions required to build loyal relationships. Therefore, you would have difficulty adapting the data to answer your business queries and address your business needs, both of which should revolve around your customers.

A typical mistake by people who want to dive into CRM is blindly building a database, thinking that at least they can start collecting data. “Build it and they will come” does not work in CRM. Data is best maintained at the point of validation, and even then it’s tough to get the data completely clean. As it is, data has a 2.5 percent to 3.5 percent decay rate per month. When it is collected blindly and stored in the same systems used by accountants or purchasers, that statistic will rise.

When your data management system isn’t designed for CRM, several scenarios will create data decay. For instance, you may have hundreds of orders going to the same business, but they are filed under different names in various databases throughout your company based on what they are buying, location, billing procedure, etc. Or, each of your managers may have his own way to deal with the data in his silos. Nothing will be in sync.

This human factor will lead to another common data decay scenario: manual suppression. A good CRM system will have automatic suppression for redundant data. When manual suppression is used, there is no common procedure between departments and sometimes even within a department. In the end, the data will not correlate, and you will lose track of your customer.

People like to feel special. Customers bond with companies because they satisfy their needs, treat them with consideration and interact with them based on what they’ve learned about the relationship over time. It is difficult to treat all customers equally, usually because of the expense of serving them. You wouldn’t want to treat your customers equally anyway, for several reasons.

For one, people like to feel special. Most people now know that they are one of many filed away in a customer database, numbered and tracked. They recognize when they receive a letter that says “Dear Valued Customer” that they are merely a name and a number. They feel insignificant. They are not being spoken to. There’s no bond. But if a person can receive a specific, personalized message, there’s a greater chance to eliminate that feeling of insignificance, to connect with that person and to form a bond.

Second, focus on spending the money needed to optimize each customer relationship. Your most profitable customers may not be where you make your biggest investment. Keeping your loyal customers satisfied may not take a tremendous investment. Your investment should be placed on customer opportunity where future value is high, but share of wallet today may be relatively low.

Investment in customer relationships has many dimensions and requires many decisions to maximize returns. This exercise changes constantly, based upon the needs of the customer, changes in the marketplace, changes in competition, economic changes — anything that affects your customers’ relationships with you and the goods and services you provide to them.

Therefore, for the purpose of making your customers feel unique, and for making the appropriate investments to maximize ROI, customer treatment will be targeted and differentiated.

Win-win is the only way. Using your database and your CRM system to properly invest in your customer segments should result in a win-win scenario. The customer wins by feeling like he received a good deal or good value, or a good overall buying experience. The company wins by acquiring the customer, turning a profit and retaining the customer. If this scenario ever becomes lose-win or win-lose, that relationship will decay into lose-lose.

Long-distance carriers illustrate the win-lose scenario. To acquire and retain customers, many long-distance companies dropped their rates so low that they couldn’t turn profits. They attracted large volumes of customers, but lost money as a result. This resulted from a lack of segmentation in the customer database, and a lack of differentiation of the service and investment in each segment. To put it simply, if someone is willing to pay 10 cents a minute, don’t charge them 7 cents.

According to a 2000 study by the Advertising Research Foundation, 40 percent of advertising’s effectiveness is lost when the customer enters the business’ infrastructure. This is because most companies are not focused on the customer, but on the individual functional roles that each potential customer touch point plays within the organization.

If each of these touch points is not optimized to deliver consistent, customer-focused messages to the customers, the brand promise made by the advertising is compromised, jeopardizing the potential for building a bonded relationship.

Add to this the current media focus on the next big corporate scandal, the next accounting infraction, the next act of executive greed, and customers quickly become jaded with companies. They judge legitimate businesses guilty by association. Having the potential for wrongdoing becomes enough for customers to shun a company.

Mutual trust is the only thing that will ensure customer loyalty in situations like these. That is why, now more than ever, good CRM needs to be used to form and maintain bonded relationships built upon caring, reciprocity and mutual trust.

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