FRAMINGHAM (08/15/2000) - Life was much simpler back in the early to mid-1900s.
In those halcyon days, we shopped at the same department stores, went to the same corner drugstore to fill prescriptions or savor a milk shake, even used the same bank to deposit our tooth-fairy money and our pension checks. The owner of the downtown hardware store knew that come spring we'd be looking for cans of barn-red paint for our front steps, and he stocked his shop accordingly.
Then the age of strip malls and Internet shopping arrived, and we lost something. In exchange for convenience, we gave up some of the personal care and high-level customer service we had previously enjoyed. Loyalty to one brand or company became pass as we shopped around for the best deal.
Now, as we enter the 21st century, there's a new customer service tune in the air, and it has a familiar--and welcome--ring to it. It's called customer relationship management (CRM), and in some ways it's just a fancy name for something we used to take for granted. CRM is a business strategy that helps a company integrate itself and forge a tight connection with the customer. The promise is that by using technology and human resources strategically, businesses can transform themselves into the proverbial friendly general store--to provide the same levels of customer service that were typical in small-town America decades ago.
But the goal goes beyond simply satisfying customers. While providing customer service, clever companies are also gathering data on their customers' buying habits and needs, then storing and analyzing that data and using it to improve products or services as well as management policies. The enterprise that achieves CRM nirvana is an organic and evolving one, with the ultimate aim of turning consumers into customers for life.
For the 13th annual CIO-100, we've chosen 100 companies that have formed close alliances with their customers--or are well on their way to doing so. From their supply chains to their data warehousing strategies to the way they hire and retain their human resources, these companies have mastered the customer connection. In this special issue, we look at how our honorees achieve customer service excellence and highlight how they are going beyond transactions and products to focus squarely on the customer.
Setting a true CRM strategy is a daunting task. Because it aims to link all aspects of a company's business, it requires a top-to-bottom analysis of that business and of the way the enterprise sees its customers, employees and partners. This can be painful and can require a company to reorganize structures and systems while generating higher expectations. And no matter what the CRM technology vendors say, you can't just go out and buy CRM. Whether you build your own CRM strategy or customize an off-the-shelf solution, with all the integration challenges that entails, CRM can be a complicated and expensive exercise.
The promise can also sound too good to be true. CRM is just one in a long line of acronyms describing business and technology strategies with track records of varying success. Remember ERP? SFA? These, too, were meant to transform companies into more efficient and profitable enterprises, but the hype often outstripped the results.
However, it's hard to argue with the logic behind CRM. And so far, the evidence is promising. For instance, the American Management Association (AMA), a business education and management development group and CIO-100 honoree, reports that its updated contact center has increased efficiency so that average caller wait times are less than 10 seconds, and the AMA now makes 30 percent more in revenues on each call center representative's customer interaction. Hard to sneeze at.
Our honorees have found paths around the many obstacles and have built or are building systems that enable them to better understand their customers. The details of their efforts may vary, but behind them are almost always two key elements that are needed for success: a strategy and a culture built around the customer connection.
Too many companies mistakenly believe that all they need to provide better customer service is fancy, expensive CRM software. Some rush into a CRM implementation without conducting a proper analysis of their customer data.
Others move too slowly, allowing competitors to grab crucial market share while they agonize over how best to improve their customer service.
That lack of planning and strategic thinking is the biggest stumbling block on the route to true CRM. The smartest approach, according to Scott Nelson, an analyst at the Gartner Group Inc. in Stamford, Conn., is to "think strategically but act tactically" when installing CRM. "Invest in and get some CRM projects going, because in some cases you won't completely know what you need until [then]," Nelson says. "But most important, take a hard look at all of your processes. Otherwise, if you have a bad sales process, you'll just have a bad automated sales process" after installing your CRM technology.
Strategy setting doesn't have to be a discrete event. William Snyder, CIO of honoree Enterprise Rent-A-Car in St. Louis, says customer service "has been a core of our corporate culture" since the company was founded back in 1957. But a steering committee including Snyder along with the company's CEO, COO and CFO does meet on a regular basis to oversee strategy and operations. Snyder and the company's strategic business direction executive recently convinced the steering committee that the entire car-rental process needs to be redesigned to provide better interaction between the company's database and the rental agents. The redesign is still in the very early stages, but it is aimed at allowing Enterprise's rental agents to have much faster access to customer data via a variety of devices, including laptops and handhelds. "This will give us much more flexibility and will be a much faster, easier way to help customers," Snyder says. "Our customers will like it, and so will our employees. It's all part of our underlying strategy to keep using technology to raise customer satisfaction."
Scrutinizing a company's customer focus, operations, systems and culture are all part of setting a strategy. Yet CRM experts say many companies skip steps along the way, with negative consequences. Here are some of the steps they urge companies to complete:
-- Examine how the company currently understands its customers. Does it keep good data? How does it get that data? Which department "owns" the customer connection and how is that information shared (or not shared)?
-- Analyze the multiple channels through which the company interacts with customers. These need to be integrated so that the company has a 360-degree view of the customer while the customer picks which channel to use for purchases. Many companies make the mistake of creating Internet silos, for example, so customers have different experiences when they deal with the website versus the contact center; customer data is often not shared between the two.
-- Segment the customer base, including pinpointing demographics and understanding who the profitable customers are and where they are located.
-- Analyze human resources and make sure top managers are behind the effort.
"Do your people have the right training to execute strategy? Are all the executives on board? If not, you could be in trouble," warns Lynne Harvey, an analyst with the Patricia Seybold Group in Boston.
To focus successfully on the customer, the entire company needs to be aligned.
As part of setting a strategy, it's crucial to take an honest look at the company's "personality"--the way it views employees, especially those who face the customer.
"Cultural change means much more than sensitivity training," says Stephen Pratt, partner and coleader of Deloitte Touche Consulting's CRM practice in Chicago. "It's giving your people the tools, training and incentive to succeed at customer service. It has to be a conscious decision of setting your company personality--of saying, "Here is how we want our people to interact with customers, and here is the face we want to present to those customers.'" Historically, for example, companies have measured and rewarded contact center employees based on how fast they resolve problems and rush customers off the phone, the thinking being that shorter phone calls mean lower costs. Now the goals have changed. While speed is still important, the real test is customer satisfaction and repeat business. Contact center employees must have superior communication skills and be able to read between the lines in a conversation with a customer either on the phone or online. Such skills need to be developed and rewarded accordingly.
Marge Connolly, senior vice president of both credit card operations and IT for Capital One, a financial services company and CIO-100 honoree based in Glen Allen, Va., says that call center representatives at her company are now evaluated more on such soft skills and less on hard metrics such as speed of phone calls. "Since our philosophy is to use every contact to build a customer franchise, we want to handle calls quickly but not as a way to drive down costs," Connolly says. "The criteria have changed from a strict adherence to a set of rules for what should happen during a phone interaction to one that is more subjective." Capital One has also increased its use of customer surveys and has specially trained some of its website employees to be able to interact more effectively with Web surfers--all in an attempt to make sure that employee training matches customer needs.
The result? Connolly cites the example of a Capital One employee who saw on a weather report that a particular town had been hard hit by a tornado. He led an effort to conduct a database query on the town, which turned up several Capital One customers. A call to the postmaster general in the area then revealed that mail was being held up. So Capital One employees called the customers in that town to offer extended credit as well as to assure them that late bill paying would be forgiven. "That's the kind of proactive customer service we hope to keep getting from all employees," Connolly says.
At honoree Charles Schwab, based in San Francisco, the creation of an e-mail products and services program highlights the marriage of strategy and cultural awareness. Almost two years ago, at one of the company's yearly planning sessions attended by senior management from all the divisions, discussion turned to the fact that e-mail had become a strikingly ubiquitous form of communication among employees. Later research showed that the medium had grown so much among customers that e-mail users far outnumbered Web users. Schwab decided to set up a separate department for e-mail products and services.
Michael Raneri, vice president of the e-mail division of the company's electronic brokerage, says the program now has 650,000 e-mail subscribers and that e-mail is now the fourth most widely used customer contact channel, joining the Web, the phone and branch office interactions. Market alerts via e-mail are regularly sent to subscribers with complex, Web-like features using HTML applications. In short, Schwab was able to take a facet of its corporate culture and turn it into a revenue generator by aligning it with customer needs.
Our 100 honorees, taken from both the corporate and nonprofit worlds, all have stories like these. "The bar of customer service is being raised," Nelson says.
"Let's say I am a bank. It used to be that I competed with other banks. Now, if I have a customer who goes to Amazon.com and gets great service, he expects that same level of service from me."
The friendly general store may be closed forever. But with companies making renewed efforts to connect with their customers, service and satisfaction may be on their way back. It seems paradoxical, but modern-day technology and strategy may be what it takes to return us to the customer service and satisfaction of yesteryear.
Read on to learn how this year's CIO-100 honorees are making it happen.
Is your company making CRM happen? Tell CIO Special Projects Editor and resident CRM expert Mindy Blodgett at firstname.lastname@example.org.
METHODOLOGY This year's honorees were selected through a three-step process.
For the first time, we allowed companies to apply for the honor by filling out a detailed application form on our website (www.cio.com). Then, a panel of nine distinguished consultants and analysts with CRM industry expertise nominated companies they felt best fit our criteria for customer service excellence and customer relationship management.
CIO staffers conducted research on the 187 nominees and applicants. Finally, a team of CIO editors and writers voted on the 100 honorees.