[January 11, 2001]

Go Vertical For The Right CRM Solution

BY LAURA REED

Today's competitive business environment has forced companies in all industries to differentiate themselves by how well they treat their customers. With winning and retaining customers in mind, U.S. firms spend $3.1 million a year on Customer Relationship Management (CRM), a market predicted to reach $11 billion by 2002.

In the early days, CRM was really "Customer Relationship Marketing," which focused on data mining and the warehousing of information about customers. From this limited viewpoint has evolved an enterprise-wide strategy for managing customer relationships by leveraging every customer contact experience. Gartner Group defines CRM as the transformation of the enterprise to become customer-centric while increasing revenue and profit.

CRM's growing popularity makes strong business sense. Insight Technology Group reports that CRM solutions can result in a 42 percent increase in sales, a 35 percent decrease in cost of sales, a 25 percent reduction in the sales cycle and a 20 percent improvement in customer satisfaction.

It's not surprising then to learn that most companies cite increased revenue as the main reason to invest in CRM. Harvard Business Review findings state that by retaining 5 percent of their customers, companies can boost profits by almost 100 percent. Other reasons to implement CRM strategies are to reduce churn, increase customer loyalty, provide personalized customer service, and learn more about customers. The bottom line is that CRM is critical in today's business environment, where companies are at war to keep their customers.

Measuring CRM Results
CRM is one of the few processes that can potentially increase revenue while decreasing operational costs. Yet, calculating the financial results of CRM strategy implementation can be challenging, because of long lead times and difficulty in directly linking changes in CRM practices to sales or costs.

According to a recent study by Andersen Consulting, the greatest return on investment from CRM is "easier customer contact through information technology." The study also measured return on sales, revealing significant differences between "high CRM-performing companies" and "average CRM companies."

Another recent review from Andersen Consulting determined that a 10 percent CRM enhancement could add 4 percent to the bottom line and that up to 50 percent of the difference between return on sales could be attributed to CRM processes and strategies.

eCRM
Technology has helped fuel the growth of CRM strategies. According to the Gartner Group, the evolution of CRM is moving in tandem with the e-business revolution. Data capture, storage, manipulation, and analysis capabilities have improved dramatically, as have the applications, user interface and data retrieval capabilities for Customer Service Representatives (CSRs). Essentially, eCRM involves giving customers Web access to customer, product, and company information, greatly reducing the number of calls handled by CSRs.

eCRM could be viewed as an oxymoron: It implies turning over to the customer the management, responsibility, data, and relationship. That approach in and of itself is not a CRM strategy, because the contacts with the customer become electronic and directed by the customer. Therefore, companies should limit the "e" to e-customer care or e-customer service. It must be geared for customers who prefer to communicate electronically -- and it should be just one component of an entire CRM strategy.

The Best Advice: Keep It Vertical
Since CRM encompasses everything from employee attitudes to state-of-the-art software solutions, there are no easy fixes to achieving this ongoing corporate-wide strategy. No one CRM solution or no single product to purchase, exists that will deliver truly complete CRM. When it comes to the customer care component of a CRM solution, however, market analysts have one overriding piece of advice: Find a solution specifically tailored for your industry.

Consider the variety of issues facing different industries. In the utilities and communications sectors, deregulation and churn management have spurred CRM strategies that reduce turnover by capturing customer data regarding service and preferences. The financial services industry, which used to differentiate based on product lines, is now retaining customers by improving customer-facing processes and services. Manufacturing companies have found their conventional supply chains giving way to networks of suppliers and partners, requiring CRM solutions that integrate supply chain management and CRM within the business-to-business arena.

Gartner Group suggests that because every industry has its own needs and constraints, vertical-specific CRM solutions are the most effective. The study concludes, "customers increasingly seek value propositions focused on challenges particular to their own arenas."

Giga Information Group also recommends that companies purchasing CRM software consider applications aimed at their specific vertical market, as these solutions are more likely to contain the functionality needed.

In today's competitive markets, it's not a matter of whether or not a company has a CRM strategy. It's how a company deploys their strategy and ultimately, meets their customers' needs on every level. In the war to win customers, CRM strategies reign paramount -- and the best weapon among the CRM arsenal is the one built for your market.

Laura Reed is the vice president of marketing at Jones Cyber Solutions. Jones Cyber Solutions Ltd. (JCS) provides customer management software to communications companies around the world. JCS is a subsidiary of Jones International Ltd -- the corporate parent of various companies involved in the Internet, e-commerce, software, education, entertainment, radio, and cable television programming industries.