The DNA of a CRM system

In thinking about a generic CRM technology product, I was recently asked what the common components are. Having recently been involved in a high profile government RFP and Vendor Evaluation, I have come up with the following list of common components. I believe these components represent the DNA of a CRM Technology solution.

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In thinking about a generic CRM technology product, I was recently asked what the common components are. Having recently been involved in a high profile government RFP and Vendor Evaluation, I have come up with the following list of common components. I believe these components represent the DNA of a CRM Technology solution.

Continue reading “The DNA of a CRM system”

What is CRM? My point of view…..

My view on the Million Dollar question. I argue that it is not one thing in particular. It is the whole of all of those things.

I am often asked and have often read about this question. I felt it about time to come up with my perspective.

CRM (Customer Relationship Management) is a term coined by the Software Industry in the mid-late 1990’s. Since then, there have been attempts to modify the term, usually to introduce a new variety of software. There has been eCRM, CIM, Citizen Relationship Management and CRM 2.0 (of course!) to name but a few. However, CRM has stuck and many of those now becoming aware of this previously unexplored part of the universe are guilty of equating CRM to a tool. I find that view very limiting and narrow. Usually it comes from one’s own perspective. For example, if you are a Salesperson and use CRM software to manage your sales opportunities, customers, leads and forecasts then CRM is a Sales tool in that context.

Let me first of all explain how I view organisational decision making. This applies to any organisation from the largest multinational to the “one man band”. Everyone has a slightly different take on this and there are other steps I have omitted e.g Values that are also important but have less impact upon CRM than some of the other steps.

GOAL – VISION – OBJECTIVE – STRATEGY – ACTIVITY – TASK

Everything starts with a motive. What is your reason for existing and doing what you do? For many private organisations, the goal could be to maximise shareholder wealth. For the one man band, it could be to not have to work for another person. Irrespective, it all starts with an overarching goal.

Therefore the next step is the vision. Where do you want to be to realise that goal? A corporate vision is a hugely important statement and is often confused with Mission Statements. To me, a Vision is inspirational, stretching, future. A Mission Statement should define what the organisation will be (note: not ‘do’) to deliver that vision.

From the Vision, we need corporate objectives. These objectives should be S.M.A.R.T.

Next, we need a Strategy. A strategy tells us what we need to do to reach these objectives.

The Strategy will then break down into a series of actions and sub-tasks that should enable realisation of the strategy.

So where does CRM fit in? To many people, CRM is a class of software that can help organisations better manage their customer relationships. This is correct. However, to me it is like saying that Space Exploration is all about Rockets. Sure, you need a rocket but what about Astronauts, Scientists, Engineers? What about the leveraging of knowledge? What about the planning? Is that not equally important?

My definition of CRM uses the space analogy to suggest that CRM is the entire universe containing many galaxies. I will start my explanation with a look at the decision making hierarchy many organisations use:

“CRM” should start at the vision stage. What importance does an organisation put upon the type, nature and interaction with its customers? To some organisations, it isn’t important. They focus on price competitiveness or other competitive differentiators that allow them to be successful even with mediocre customer satisfaction. Just look at your mobile phone provider for evidence of that. How many of those providers are truly customer focussed or offer outstanding customer service?

Assuming the Customer is central to an organisational vision e.g “Our Customers loyalty to our products and services will be the envy of all of our competitors”, then we now need to come up with a way of realising that. The objective will help define timeframes, measurements etc but will not tell us HOW. For that, a CRM Strategy is required. What do we need to do to achieve the objective to help realise our vision? It usually starts with a blunt appraisal of where you are today: (“How do you know where you are heading if you don’t know where you are?”)

The Strategy should define a series of initiatives that impact upon the entire organisation. It might affect the Corporate Culture, Organisational Design, R&D, Sales Strategies etc. Nevertheless, the CRM Strategy will be the focal point for all subsequent tasks and activities that are required to help realise the vision. It is likely the CRM Strategy will cut across functions which leads to another key question: Who is accountable for CRM. I will address that in a subsequent post.

The activities required to reach the objective can take many forms.

  • One of these activities might be to analyse and redesign the Customer experience.
  • Another may be to develop systems and tools to better capture, understand and monitor inbound and outbound customer facing initiatives. In other words, CRM Technology.
  • Another might be to train the workforce on customer communications and customer service.
  • Another might be to change the hiring strategy to evaluate potential recruits against a templated “customer focus” criteria.

There are many, many more things that could be done but nearly all activities will impact upon and/or involve People, Process and Technology.

Therefore CRM to me is the entire universe of customer orientation. This universe contains many galaxies of activities which contains many solar systems of tasks.

Customer Centricity is a journey through the universe without a real destination. Why? Because the goal (destination) keeps changing. Customers have different expectations and needs today than even a year ago. Even as recently as five years ago, how many organisations had a Digital Marketing or Social Media Strategy?

As the world evolves, so must our vision and enabling strategies to ensure that if customers are important to our overall vision, then we never lose sight of the need to evolve in alignment to the changing world.

Avoiding the Tipping Point

Everybody has a tipping point. That moment where an equilibrium is broken and the trend is reversed. Look at any election. What will cause a voter to “switch” from one particular choice to another? That ’cause’ is the tipping point.It is when the reasons to change become stronger than the reason to stay. The weight has shifted on the scales. The tipping point is reached and the scales sway in the other direction. It is the final nail in the coffin. The last straw. The moment of realisation.
With Customer Loyalty, the same is often true. Customers will follow a particular buying pattern or behaviour until they reach a tipping point. If loyalty to the brand or product is low, it does not take much. Buying fuel is, to me, a commodity. Out of habit, I tend to buy petrol at my cheapest local petrol station. However, if I’m running late, I may choose to go somewhere even closer but slightly more expensive. It’s not a big deal. I have no particular loyalty to a particular brand or petrol station. Being a bit cost conscious, I fill up habitually at the station offering the cheapest fuel around but the price differential is not that great. Therefore if I am time poor, I may shop closer to home and pay just a bit extra. Low tipping point. Low loyalty.
However, most Marketeers will tell you that creating a brand is everything. The brand has an intrinsic value that causes customers to perceive it differently and value it more. Brands attract loyalty, but that loyalty also has a tipping point at which that loyalty will be tested once too often or too far and the customer will subsequently defect to another product.
So the goal of most organisations dealing with customer loyalty is to do two things. Firstly, create brand loyalty. Secondly, ensure the tipping point is never reached. The Customer Experience has a major impact on both of these factors and partially explains why there is an increased focus on it. The latter is equally hard to do yet, in my opinion, gets less organisational attention.
Ironically, organisations cannot always wholly control the tipping point. Virgin Blue, the Australian airline, has a pretty good reputation for creating customer loyalty. Partly through its Velocity Frequent Flyer Programme but also by differentiating on attempting to improve all stages of the customer experience. Just over a week ago, Virgin Blue’s ticketing system crashed causing the cancellation of the majority of flights and leaving passengers stranded. It took several days to rectify and had a major negative impact on the brand from a reputational point of view. Ironically, the Virgin system at fault is not their own: It is (apparently) an outsourced solution. Not that this is any comfort to the thousands of irate passengers last week. My point, however, is that Virgin could not wholly control this “tipping point” although they could mitigate the risk. The dilemma facing Virgin Blue now is the longer term impact on its loyal customers. How many of them may regard the problems of last week as their personal tipping point? It will be a real test for the strength of the brand.
Organisations must always be on the look out for these tipping points. Years ago, people joined a bank and tended to stay with that bank for life. Nowadays, banks have made it easy and enticing to switch and, with customer expectations increasing over time, the tipping point is more easily reached than in yesteryear.
The same is true of many services, yet the tipping points are not always studied. How many organisations conduct ‘exit’ interviews on defecting customers? How many organisations attempt to identify weaknesses in their service offerings to proactively remove potential tipping points?
Consumer choice and awareness creates the potential for churn. Yet, often people buy for emotional reasons, whether it is habitual, a remembered good experience, what your parents did or even a familiar ‘name’ heard through mass media. With such a fragile recipe for loyalty, is it any wonder organisations should spend as much time protecting the brand from churn as they do in building the brand in the first place?

Incentivizing referrals

An interesting question was posted on LinkedIn asking “do you have great ideas on how to reward customers for their referrals of your brand or products to others?”

I thought I would throw my perspective into the debate in the hope that it will stimulate further debate and sharing of ideas.

I guess a lot depends upon the marketplace you are operating in, the type of customers you target and the value of the referral. I have come across lots of different models but I should point out that I think “Brand Referral” and “Product Referral” are two very different things. “Brand referral” implies that the referrer is already a Brand advocate and a loyal customer. Surely this is the goal of all Marketeers? If you are lucky enough to have customers referring your brand, the best way to reward them is to ensure you continue to understand what they like about your brand and keep doing it. I am not sure reward is appropriate as the customer probably feels that the brand is already rewarding them, hence their loyalty. The brands I am passionate about do not need to reward me. I already refer them without the need to be motivated to do so because I believe in what that brand represents.

Product referral is somewhat different as you still have the opportunity to grow the spend with that customer through cross selling, upselling etc whilst further building loyalty. In other words, you are taking the customer on the journey towards brand loyalty.

A few examples of referral incentives I have come across:

Recruitment: Refer a Contractor to an agency and we will pay you a “Headhunters fee” if they get the job/contract. This also occurs as common practice in many organisations where certain skillsets are in short supply.

Hotels: Invite a friend to stay a week at a discounted rate and you can claim a voucher to come and stay for a weekend free of charge

Cars: Refer a friend for a test drive and receive a $$$ discount on your next service

Insurance: Various but best one I’ve seen is the offer of free charity donations (in lieu of % commission) for each referred Financial Healthcheck.

Legal: Refer 3 friends for a fixed price, discounted Will and get yours free!

Telcom: Free calls to your friends and family members who join our plan. They then contacted the friends directly with a phone call saying that you had referred them because you knew they wanted to save money on their home phone bills. I’ve since noticed cellphone companies using similar tactics.

I should also mention Multi-Level Marketing (MLM) which used referrals as the basis for its entire business model. To me, it was always a way of shipping a product which was in some way deficient (in either quality, cost or market) and using cash as a way of incentivizing agents to rope in friends and family as fellow agents or customers.

I guess the morale of the story is that you have to calculate the value of the referred business and set a value on the recompense to the referrer that is appropriate to the value of the referred business. You can then devise whatever incentives you like so long as it is moral, ethical and not to the detriment of your brand and/or product/service. Remember too that it is always easier and cheaper to retain customers than to find new ones. Therefore you need to ensure that your product/service is able to delight the (new) customer and outstanding customer service processes, people and technology exist in order to retain them. In those cases, you may find referral comes easier and without the need to offer reward.

I have had personal experience with Referral methods in the last few months. My wife and I run a small Australian Bush Lodge Retreat. It is holiday accomodation in SE Queensland for nature lovers wishing to chillout and explore. We ensure that our guest book comments are posted on our website: www.nunyara.com Additionally, we follow up all guests after they have left with a Thank You email offering them a discount on their next stay and a discount to any referred friends or family who make a booking in the next 12 months. We are doing this to establish ourselves in the market but we are already beginning to get referred business. The interesting thing to note is that no-one (yet) has asked or mentioned the referral discount. When we offer it, they say they knew nothing of it and are even more delighted!!!! This has led us to question the whole value of referrals when you have a brand/product/service that has already exceeded the customers expectations. In price sensitive markets, I guess it is likely to have a bigger impact than we have noticed but we are now starting to consider rewarding the referrer unannounced, as a retrospective “Thank You”. We feel this might be a way of exceeding expectations rather than our current approach which is to reward based on a set expectation.

I hope this has provided enough food for thought and I hope will stimulate a debate that might further our knowledge on the effectiveness and innovation within Referral Schemes.