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Searching For The V In CRM?
Consider VCM

By Xavier Van de Lanottle
VXTConsulting, Inc.


Customer relationship management (CRM) is grabbing the attention of business leaders who wish to instill customer-centric business models. Their concern, however, is how to determine what the value of CRM is both for their organizational effectiveness as well as for their customers. Value chain management (VCM), which focuses on value creation and process optimization, offers a new approach to leverage CRM investments and produce greater value output for both companies and customers.

Customer contact center solutions are increasingly taking center stage in terms of their contribution to value creation and process efficiency. Certainly, the new VoIP-based solutions offer significant technical and cost-savings advantages, but more importantly, their enhanced features suggest that we should rethink the objectives for CRM and how it fits in with the corporate organization and goals.

In this article, we’ll look at a traditional interpretation of CRM and suggest how VCM can reposition CRM to become an infinitely more valuable tool. We’ll list some of the new call center capabilities that enable companies to use CRM as a competitive differentiator and close with some immediate and long-term considerations on the value assessment of CRM.

Traditional Interpretation And Valuation Of CRM

Thirty years ago, we saw the emergence of call centers in the form of outbound telemarketing (telesales) centers, and inbound call service centers that handled customer orders and inquiries. Over the next two decades, these activities became increasingly more automated and sophisticated with, for example, the introduction of interactive voice response (IVR) systems in the 1980s and computer-telephony integration (CTI) systems in the 1990s. Little by little, CRM platforms emerged to more effectively manage customer interactions and to drive companies to become more customer-centric. The role of the call centers evolved into responding to customer needs while supporting customer satisfaction, customer retention and revenue objectives.

With the hefty price tag of building and staffing call centers, the expectation for a positive return on investment has caused the mission of call centers to predominantly shift towards “hybrid revenue channels.” CRM, in support of the ROI maximization objective, has evolved into elaborate database warehousing systems documenting customer profiles (including history, preferences, financials, profitability and customer lifetime value assessments). This trend has been accentuated with the increasing popularity of the Internet and its use in CRM platforms. Companies use the Internet to gather and mine more customer data, rely on it increasingly as a sales interface, and have gotten into the habit of referring their customers to their Web sites for self-help, support and assistance.

From that perspective, investments and upgrades of CRM systems become a tactical choice. Business leaders will choose to spend money on either salespeople, marketing, Internet applications or call centers, depending on which they believe has the greatest potential for growing profitable revenue streams. Their blending of these options without a careful strategy of what they intend to accomplish with each of the customerfacing channels is most likely why most of us still frequently experience sub-par satisfaction from our interactions with customer call centers. As long as companies cannot perceive the distinct value that CRM produces for them, it is unlikely that customers will get much value from dialing their call centers.

But this should not be the case. While parallels and similarities exist in the functions, missions and objectives across the sales, marketing and service organizations, companies cannot let those considerations become a blur. Instead, companies should cultivate the distinctive characteristics and capabilities of their respective customer-facing resources for the benefit of more valuable and diverse customer interactions. They should develop a plan to optimize their resource allocation in a way that will promote synergy and coordination.

Repositioning CRM With VCM

Value chain management enables companies to maximize customer value at the overall lowest cost. Resources are aligned to cost-efficiently service customer segments in a manner that boosts the overall value derived by customers from their relationships with their suppliers. Through strategic relationships and collaborative management, companies develop capabilities and engage resources within the value chain to meet their customer value creation and resource optimization objectives. Companies gain strategic advantages from higher customer satisfaction, integrated and cost-efficient processes, market access and growth opportunities, and greater insight and expertise of customer solutions.

CRM offers significant potential as a strategic tool to value chain management and plays a substantial role in establishing a company’s competitive positioning. Like any activity in the value chain, CRM and customer-facing resources must produce value for the customer. Failure to produce value for customers makes CRM unlikely to produce value for the company, either. Customers derive value from one or several of the following sources in their relationships with suppliers:

  • Intrinsic product and service attributes (including service and performance, relative to price) and platform characteristics;
  • Learning, knowledge and information transfer, and solution development;
  • Acquisition/purchasing and decision making processes;
  • Ease of implementation, management, maintenance and repair;
  • Supplier capability, consistency and dependability; and
  • Nature of the relationship/business model with the supplier or vendor.

With the VCM approach, companies seek to encapsulate and address the customer experience with reference to their products or services in the context of the global solution. They consider the customer experience from multiple levels (including end-users, decision makers, the accountant, the systems maintenance department, etc.) and focus their activities on making the experience at each level (moment of truth) hassle-free and economical, thereby creating more value for their customers. They do so most effectively by engaging other members of the value chain (e.g., suppliers, distributors, vendors of peripheral systems, etc.), the value chain representing the sum of all activities going into the global customer solution. Through value chain relationships, they share knowledge and objectives, and collaborate to optimize the end-to-end customer solutions.

Companies must consider how their customer-facing resources complement each other and how a CRM platform can most effectively and efficiently channel the desired value to customers. Instead of looking at call centers as overlay sales initiatives and/or cost centers, companies should consider call centers channels producing and delivering value. By using value chain management, organizations can effectively determine how value activities are best distributed and coordinated across organizations and the value chain in order to provide cost-effective service and support to their customers.

Customer call centers should be vested with a true operational mission and must be given appropriate customer value creation objectives. Their role and functions should be realigned within the organization of the corporation. Only then, can we assess their contributions in efficiency and productivity gains to the sales and operations functions; and it is only with that understanding that an ROI metric for CRM can begin to make sense. Below are some examples of how call centers controlled by an effective CRM platform can produce real value for the customers and cost savings for the company. Well run contact centers:

  • Complement traditional channels to perform selective functions addressing customer or segment specific needs;
  • Manage various processes and access various tools and information within the value chain to resolve customer problems;
  • Act as primary or alternate channel support systems;
  • Coordinate in real-time various activities across the value chain to support the customer requests;
  • Are an extension of the traditional sales channels for account management, promotional activities, renewal and cross-organizational sales;
  • Provide pre-sales information and take/assist with routine sales orders;
  • Perform service, post-sales support and account management services;
  • Document customer requests and value activities performed/required to satisfy those requests; and
  • Survey customer satisfaction, monitor trends in demand, maintain customer data repositories and generate leads.

In evaluating the potential returns of call centers, companies must consider the competitive advantages they can provide, and then compare their investments with the cost of alternative strategies to accomplish these same value objectives.

Catalyst Or Missing Link?

Today, new technological innovations are making these enriched missions and objectives of call centers and CRM possible, affordable and manageable. For those who think this is nothing but an illusion and believe that CRM and call centers are doomed because of their dubious reputation (i.e., pestering telemarketers, endless queuing, dropped calls, wrong agent, no help, etc.), think again! The truth is that building call centers and getting CRM right has been up until now quite challenging. Developing adequate call center capabilities has been impeded by the limitations of traditional voice telephony and its integration with other communication and productivity applications. Likewise, CRM has never lived up to its full potential (at least as theoretically conceived) because of the aforementioned limitations in technological capabilities.

VoIP technology is about to change that dramatically. It is the catalyst for providing more productive and efficient customer interaction systems. It is the missing link that brings together the totality of the customer-facing resources in a coherent manner required to unleash the potential of CRM. Following are some of the enhanced capabilities of call center solutions based on VoIP technology:

Routing and staffing. New routing algorithms allow companies to route customer calls to the best agent capable of addressing the customer’s issue anywhere: remote call centers located around the world, agents at home, or other company employees designated to handle calls at peak call volume times. Prioritization also allows companies to discriminate routing of high-value customers or FAQ (frequently asked questions) calls.

Integration with databases and browser-based applications. Calls automatically trigger customer data to appear on the agent’s computer display through screen-pop capability. Calls are shorter and less frustrating for the customer. Agents can access records of databases across various departments such as billing, shipping, technical, scheduling, sales, etc., to immediately address the customer’s concern.

Convergence of CRM technologies. Phone, computer, video, Internet, productivity tools, databases, e-mail, voice mail and fax systems are using the same basic digitized technology. This facilitates the recording, storing, retrieving and communicating of the customer interaction sessions. Agents are supported by a multimedia platform and its broader set of tools to effectively communicate with customers.

Call handling, supervision and support. Call transfer and conferencing are easily performed without losing the call. Agents can place the customers in touch with other agents, specialists or supervisors wherever these individuals might be located. Improved recording capabilities add flexibility and quality of monitoring, training and documenting of call center activities.

Management and contingency. Management and reporting can be done from a central location. Agents can be set up anywhere on a moment’s notice to expand the call center resources, handle call overflow or deal with disaster recovery. Network and power outages can be dealt with by immediately rerouting calls to other resources.

Cost advantages. The following cost advantages can be attained:

  • Network costs: use of Internet and IP VPN to route calls on a global basis;
  • Management costs: centralized, easy to set up and maintain;
  • Agent resource costs: lower-cost agents, part-time, at home, or use of other down-time employees;
  • Real estate costs: remote and virtual staffing of agents;
  • Licensing costs: systems allow tracking of software usage and sharing of licenses; and
  • Investment protection: scalable and capable of migration or upgrade to any IP-based solution.

Value chain management stands to greatly benefit from the progress in effective management of customer interactions and relations as these become more meaningful and more apt at channeling value for both company and customer. Effective CRM capabilities and getting call center functionality right are a tremendous competitive differentiator and a credible positioning strategy.

Customer relationship management, whether formalized or not, is something that we all do each time we communicate with our customers and provide them with our products and services. From there, it is essentially a question of scale, which drives companies to more or less automate that process to costeffectively achieve their objectives and their position in the marketplace. To determine the value of CRM, a company has two options:

  • Consider CRM purely for centralizing customer documentation processes and spearheading telemarketing campaigns according to needs. In this case, a straight comparison between the return on a CRM investment and the return of alternative means to attain the objectives may be sufficient to determine whether CRM is the better option.
  • Consider using CRM as a strategic tool to deliver incremental value to customers and drive greater efficiency and productivity across the corporation and the value chain as suggested by VCM. An “apples to apples” comparison is not possible here.

Calculating the ROI on the CRM investment would require accounting for various productivity and efficiency gains as well as various contributions to revenue growth, margin retention and other competitive advantages. As VCM and CRM suggest organizational and business model changes, it’s recommended that companies assess their value based on gauging the organization’s overall performance in terms of growth, profitability, customer loyalty and its ability to sustain competitive advantages.

According to the Gartner, contact centers will all eventually migrate to IP architecture. This technology will create more effective communication platforms, which will in turn progressively bring down the walls of the organizational silos. In a seamless environment, companies will need to rely on effective management tools such as CRM to control, coordinate and administer the interaction with their customers. Roles, objectives, processes and linkages will have to evolve, and organizations must embrace these new technologies and capabilities to achieve ever higher customer value objectives and cost efficiency.

Finally, the needs and behaviors of the markets move in sync. Some lag is attributed to technological lifecycles and the time it takes to implement new applications. However, customers are demanding more value from their relationships with their suppliers. If you are not focused on creating that value, are not linked with the value chain or have not acquired the means to manage the relationship and understand the need, what do you believe will be the resulting behavior when time runs out on you?

Xavier Van de Lanotte is the president of VXTConsulting, Inc. Xavier advises firms in the telecommunication and IT industries on competitive strategy, value chain management, customer value, alliance management, and distribution. For more information on value chain management, please visit http://www.vxtconsulting.com (news - alert) or [email protected].

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