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Cutting Through the CRM Hype

There has been a lot of talk about whether customer relationship management actually works. At the root of this is a general misunderstanding of what CRM really is.

In essence, CRM is your corner grocer knowing you by name, remembering what grade your child is in and suggesting that you pick up extra batteries for the big storm. It is the process of being aware of the lives and behavior of your customers, then having the discipline to follow through.

CRM is what you know about your customers, what you do with that information and how you manage the relationship based on that knowledge on an ongoing basis. CRM is driven by information, but it is not a technology, it is a process. The reason there is confusion about whether CRM works is usually based on the confusion between the process of CRM and the technology of CRM.

Why do relationships fail? Business relationships have many of the same characteristics and drivers as personal relationships. In many cases, relationships fail because someone did not bother to follow up. You do not treat your close friends with the same lack of personal interaction that you might have with a stranger on the street. That is what maintaining good customer relationships is all about.

In theory, it is that simple, but very difficult to execute. The corner grocer usually does not have thousands of customers. When you have thousands of customers, it is very difficult to make them feel satisfied and special, acknowledging them for what they mean to you and following up when they need you — and sometimes when they do not know that they need you.

The challenge is building the process so it can scale. This is where things have become muddled. Many vendors saw moneymaking opportunities in building the systems that automate the CRM process. Rather than staying focused on the philosophy of customer interaction, many companies have become caught up in the technology of a CRM program.

Do not misunderstand the need for technology in order to scale the CRM process. It is absolutely necessary to manage a large customer base. It is just that technology should be viewed as a tool to achieve the goal and not the solution itself.

E is dead, long live e? The recent information technology explosion has created a string of fads and misconceptions regarding CRM. One such misconception was thinking that by sticking an “e” in front of a common business function, you were changing it into a purely technological function.

Example: e-CRM. It is a misnomer. CRM is CRM, whether it is carried out face to face, over the phone, through the mail or electronically through computers and the Internet. When everyone was using the term e-CRM, it implied that in order to reach your customers, you had to do it through the Web, and the only way to accomplish that was with a big, complicated technology-driven process.

Again, do not confuse the Web’s ability to be a very cost-effective channel for serving your customers with it being unable to serve all customers’ needs all of the time. That is one of the reasons for everyone getting caught up in the technology side of CRM.

The same thing happened with e-business. Most of the companies that failed did so because they ignored basic, sound business practices and focused exclusively on technology. Everyone thought this was the “new way” to do business. It turned out that the technology was new, but its purpose was to serve as an enabler for business functions and strategies that were centuries old.

The same holds true for CRM. Developing a good CRM program means changing the culture of your overall business to place customers in the center of everything you do. Marketing, sales, service, support, operations, finance, human resources and IT all need to serve the customers. The technology will then fuel CRM.

Technological developments, the Internet, e-commerce and the hype surrounding all of this has confused us about what CRM is and has led to the high failure rate that makes people question whether it works. There is no question that CRM works. It has worked for centuries. The question is, how do we make it work on the large scale and in the changing nature of today’s business environment?

Defining CRM. CRM can be defined as “process discipline.” Personal relationships and business relationships require discipline to be maintained. People want to be remembered and treated well. They want to feel special. As a result, customer relationships must be understood in order to be personal.

This becomes easier as you realize there are a certain number of relationship types. Some customers are ambivalent; some are interested only in price; some need to feel cared for; some need to feel a degree of trust, etc. Knowing these types enables you to build processes that are scalable in serving these customers.

There is a process discipline in drawing customers closer to your company. You want to help them along the relationship path with you, making your value more important to them while developing loyalty and trust. This process discipline will build the loyalty that will create long-term, even lifelong customers. Process discipline must come from the top of your organization and flow throughout.

Optimizing individual silos does not necessarily optimize CRM. It is a philosophy that entails creating a companywide culture and putting a process into effect that will shape the entire organization to better handle the needs of the customers.

At its core, CRM is about maintaining relationships with the people who buy your products and services. CRM success depends on understanding this first before building databases, collecting data, buying software or designing elaborate systems.

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