CRM: Ready or not?

One of the biggest myths about CRM is the idea that any company can embrace it and expect results. Well, that's like thinking anyone can run a marathon. Depending on your physical readiness (in terms of weight, training and endurance), you could be months or years away from even entering, let alone completing, the race. Similarly, a minimum "organizational readiness rating" (in terms of customer, process and systems maturity) must be in place for CRM to happen successfully.

Since CRM is about identifying, retaining and increasing the profitability of your best customers, something every business under the sun ultimately wants to do, it seems like the last question you'd want to ask is whether CRM is for you. Unfortunately, because you have only a one in five chance of success, and simply attempting the feat will cost $5 to $15,000 per user per year, you want to be very sure you can answer this question.

You should be looking at CRM only if you have a large number of customers (say, more than 5,000), the typical customer is worth a lot in terms of profits, and you have a large sales staff trying to sell complex, customized products in multiple channels. If not, then the costs and disruption that CRM entails won't be worth the benefits, and you should look to process improvements and simpler tools like contact managers or Web-based application services.

The key to CRM success is to analyze your company's maturity in four areas: customer focus, process, systems and people.

Customer Maturity

Most companies have a very good idea of what it costs to build and ship a product or create a service and the overall revenue generated. But a customer-focused company wants to know the following:

- Who is likely to buy a given product or service? The answer would enable us to target prospects with a similar profile and convert them to customers.

- Why do customers leave for the competition? The answers would enable us to fix the associated problems and to identify other customers facing similar issues and prevent them from possibly leaving as well.

- How do customers actually use a product or service, and what's the nature of their interactions with the company? The answers would enable us to identify opportunities for cross-selling and upselling.

Customer maturity is therefore a measure of how far a company has evolved from a product-based model (moving products out the door at minimum cost) to a customer-based model (who's buying our products, why do they like us, how can we measure satisfaction, why do they leave, and how can we sell them more?).

Companies with a high level of customer maturity try to identify the most profitable customers, quickly answer customer questions and even talk to ex-customers to figure out why they left. These are steppingstones to CRM and could result in IT systems such as a data warehouse, sales force automation, a marketing information system and a one-stop call center.

But each of those evolutionary steps can take six months to two years or more and cost millions of dollars in the process. So the higher the level of customer maturity, the lower the barriers on the road to CRM.

Process Maturity

The ease with which CRM tools and technology can be absorbed into the enterprise is directly dependent on how mature the processes are in the customer-facing functions of sales, marketing and customer service.

Consider the field of software engineering, where it became readily apparent that the ability of an IT organization to absorb computer-aided software engineering tools was directly dependent on the IT department's process maturity. This led to the famous process maturity levels defined by Watts Humphrey of the Software Engineering Institute:

- Level 1: Processes are "anything goes" and lack even rudimentary predictability of schedules and costs.

- Level 2: Processes are stable and repeatable. There's rigorous management of commitments, costs, schedules and changes.

- Level 3: The organization has defined the methodology and can consistently apply it with standard metrics. At this point, advanced technology can usefully be introduced.

- Level 4: The organization now has a foundation for continuing process improvement.

It doesn't take much imagination to see that those maturity levels could apply equally well to processes like sales, marketing and customer service. Customer service and order management departments are by definition process-oriented. Sales and marketing departments, however, are notorious for their lack of process. It's routine for marketing departments to have little or no idea of campaign effectiveness. As for sales reps, they're inherently individualistic and averse to rules -- what counts is closing the deal; the "how" is secondary. Between first contact with a prospect and the closing of a deal, black magic is alive and well! So this is an enormous opportunity to improve sales and marketing processes.

A maturing sales and marketing department is focused on metrics such as the sales lead-to-close ratio and the sales cycle duration. Such metrics are inextricably linked to CRM and could result in IT systems such as sales force automation, an order configurator and interfaces between systems to eliminate the rekeying of information.

Companies not yet at the repeatable process stage will find it extremely difficult, if not impossible, to implement CRM software, for the simple reason that there are no processes to automate! Instead of jumping into the deep end of CRM, they should instead concentrate on defining their basic processes and gradually automating those processes.

Systems Maturity

Systems maturity is a measure of how far a company's systems have evolved to reflect its level of customer and process maturity. The most important measurement of systems maturity is the evolution from islands of automation to integrated systems that share and pass information across functional boundaries.

A company with a low level of systems maturity would have completely disparate systems -- and no information-sharing -- for sales, orders, delivery, billing and customer service. An intermediate level of maturity would have interfaces between some of those systems, some information-sharing and a partial view of the customer's lifecycle activity.

At the highest level of maturity, there's full information-sharing and a full view of the customer and interfaces to back-office systems. Plus, decision support becomes part of the landscape, with transactional data consolidated to form a data warehouse (and possibly spin-off data marts).

The growth in systems maturity is a long-term process, with key interfaces and a data warehouse taking up to two years or more to accomplish. But these are the building blocks for CRM.

People Maturity

Last but not least, let's not forget about people, without whom no process or system is going to work anyway. People aren't going to spontaneously embrace CRM; they have to be motivated to do so.

Students of psychology and motivation know about Maslow's triangle, which explains how motivation is based on personal and environmental prerequisites, called the "hierarchy of needs." You can't ask people to embrace concepts like achievement and status (esteem) if they haven't got the basic prerequisites of food and shelter (physiological). Similarly, it would be a mistake to assume that people will be naturally motivated to embrace CRM just because it makes sense and is good for the customer and the company. Certain personal and environmental prerequisites will also therefore apply.

In the CRM hierarchy of needs, people will be more likely to be motivated to take up CRM if their job descriptions are relevant to it. This would then be made even easier if they're generally satisfied with their careers, benefit from a good working environment and don't have to worry about losing their jobs.

In practice, the biggest problems with CRM motivation are caused by bolting CRM responsibilities onto existing jobs without redefining performance and pay. Think of call center agents whose performance criteria are rarely linked to real customer satisfaction, but to throughput based on routine tasks with little intellectual challenge. A company will spend millions of dollars implementing a CRM system, then put it in front of call center agents earning minimum wage whose performance criteria is based on call quantity rather than quality. Another example is in sales, where it's difficult to get top-performing salespeople to buy into CRM when they associate it with de-skilling their jobs and helping their managers look over their shoulders and give away the best bits of their territories to others.

It's not sufficient for a company at the executive level to buy into CRM, then preach the gospel to the rest of the people and expect them to embrace it, too. People will only buy into CRM when they're motivated to do so and when they've been properly trained to feel comfortable with it.

While CRM can indeed be for everyone, there are many prerequisites that usually take a few years to achieve. So ensure that your company first learns to walk before it attempts to run.

Reprinted with permission from The CRM Project Management Handbook, by Michael Gentle (Kogan Page Ltd., 2002). Gentle is an international CRM consultant based in Paris.

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