Steps to Initiating CRM

A CRM initiative starts with top management taking a conscious decision towards customer orientation. Visualization of benefits should happen at this stage and should be articulated in the form of a value proposition. A discussion on CRM project’s value proposition is available here. The next step involves outlining business processes that will be impacted by CRM. As mentioned in an earlier post, the impact of CRM initiatives is not limited to the front end and customer facing processes only. While CRM applications have evolved and are industry focused and process oriented, the custom processes of the organization still need to be mapped to standard processes provided by CRM vendors. A process re-engineering team comprising of members from strategy, operations, IT and external CRM consultants should be formed at this stage to analyze custom business processes of the organization and provide clarity on the following:

1.      Time/Cost Estimates of the initiative

2.      Phasing approach (and identification of quick-win projects)

3.      Change management requirements

4.      Metrics to monitor progress/returns at every step

Subsequent to this, the CRM product vendor needs to be selected. Unlike purchasing a cell phone, where one learns after purchasing a feature rich phone first, subsequently realizes his unique needs and next time buys just the right one, CRM product selection is a one time activity unless the organization gets it completely wrong. Product vendors are aware of organizations’ penchant for features and would package numerous additional features highlighting discounts if bought as a bundle. Enterprise vendors would also bundle a few non CRM components for future opportunities. Organizations that fall into the trap may end up paying for features which they will never use. Results of the analysis phase should provide the framework within which the organization should commit its resources. A similar logic should be adopted while purchasing licenses. Organizations should however, ensure that product support and consulting from the vendor are included as part of the package as these are critical to the success of the initiative and will be costly if bought later.

The next step is to decide whether to develop the CRM application in-house or partner with a system integrator (SI). There are advantages and disadvantages of each approach which will be considered in a later post. Some key things should be considered while selecting the SI partner. Reputation and reliability are important because organizations will be exposing their customer strategy to the vendor, trust and mutual respect will play an important role in opening up and sharing knowledge. Good CRM SIs are costly because they employ technologists who in addition to understanding the unique business processes, are expected to understand the organizations customers. Being penny wise here will prove costly in the long run.

Once the organization has mapped out its business processes and selected the product and SI vendors, they are ready to create specific business requirements with help from product and SI vendor’s teams. 

CRM for Topline Growth or Cost Optimization

The profitability equation states, P = S x Q – C x Q, i.e. Total Costs (Unit Cost X Quantity) when deducted from Revenues (Unit Selling Price X Quantity) equals Profit. Organizations create value by either increasing revenues or reducing costs and sometimes by doing both. As per Gartner’s Run Grow Transform Model, every IT initiative should be accompanied with a value proposition which indicates clearly whether the initiative falls under the Run, Grow or Transform category. Run indicates Cost Optimizations, Grow indicates Revenue or Profit impact and Transform maps to new business undertakings. What should be the value proposition for taking up a CRM initiative?  

Implementing CRM can help reduce costs e.g. Customer Service Agents can resolve customer queries within shorter timelines thereby reducing AHT (Average Handling Time). While there are cost advantages to a CRM initiative, CRM itself is a costly undertaking. Apart from cost of software licenses; implementation and customization costs can be sizable. Additionally, budget needs to be set aside towards change management and training of users because without users championing the cause of CRM, the initiative cannot succeed. Thus, investments required to successfully implement CRM will normally outweigh the cost benefits of such an initiative.

CRM can impact revenues in a much greater way. Going back to the equation on top, revenue growth comes from selling more products and services per customer or through enhanced pricing of existing services. Data gathered through CRM can be used to segment customers based on demographics, psychographics etc. Lifetime Values (LTV) calculated for each segment indicates relative profitability and different treatments can then be designed for different segments. These treatments may include up-selling and cross-selling propositions through Email, SMS, Web or Phone. Responses to such campaigns can be tracked and tagged to customers instantaneously. While on a call with a CSR or while browsing the company’s site, CRM can be used to dynamically calculate the churn score based on customer’s actions and pop up relevant campaigns to the customer/CSR. This is done based on the collective history of interactions by customers belonging to the same segment. Thus, only relevant deals are proposed to the customer thereby increasing the probability of a sale in an efficient manner, saving time, money and enhancing satisfaction.

Revenue is also impacted by the ability to sell products at an enhanced price. When a customer has bought multiple products and services from the company, the costs associated with churn are high for both the company and the customer. Depending on the segment and willingness to pay, the company can charge a premium for services which loyal customers will be willing to pay.

Going back to the Gartner Model, the value proposition for a CRM initiative is overwhelmingly towards Grow. CRM helps grow revenues by targeting the right customers, enhancing their LTV by increasing the number of products and services per customer through targeted up-sell and cross-sell opportunities. It also reduces churn by creating a loyal customer base through timely and personalized customer service.