October 2004 - Do You Really Know Your Customers?

“Customer relationship management” is not just a name for multimillion-dollar database software. If you’re in it for the long haul, CRM is simply good business.

By Jack Gordon

Since ancient Mesopotamians began trading in goods, such as woven rugs and oil lamps, clever merchants have made it a point to gather information about their customers and to develop personal relationships with them. What kinds of people are most likely to buy a lamp? Which lamp buyers are also likely to buy a rug? Which ones have the means and the need to buy several rugs? Who was especially happy with the last item you sold him? Who was dissatisfied? Whose spouse or child has a birthday coming up? And so on.

Those who could write kept records. Those who couldn’t tried to keep the information in their heads. If you asked an ancient Mesopotamian-or a small-town American shopkeeper in 1950-what he called this intelligence-gathering process, he would have looked at you strangely and said something like “being a merchant.”

If you asked what purpose was served by knowing such things about his customers, you would not have heard words like cross-sell or upsell, but you would have heard the concepts described. The Mesopotamian could not have cited research showing that it is X or Y times cheaper to sell to an established customer than to acquire a new one, but he could have explained the principle.

You definitely wouldn’t have heard the term customer relationship management (CRM), but that’s what the Mesopotamian merchant was doing. CRM became a hot buzzword in the 1990s, but it has never gained great traction among direct response marketers. “Everybody in DR does some sort of relationship management, but [full-scale] ‘high-touch’ CRM is not nearly as prevalent as advocates predicted it would be,” says Bret Butterfield, director of market development for Convergys, an international call center based in Cincinnati.

CRM can be a costly proposition, Butterfield says, especially if you think in terms of buying and installing brand-name CRM software from suppliers such as Siebel Systems, SAP or Oracle. Big-ticket backend expenditures have little appeal in the DR marketing world, where “it’s always about ROI, and the typical mentality is, ‘lower my costs, lower my costs.’”

But CRM does not necessarily demand the purchase of million-dollar software systems, nor does it require a DR marketer to reorganize sales and business operations around the idiosyncrasies of that software-another beef against elaborate CRM systems.

Indeed, if you’re thinking about CRM, the first thing to remember is that there is nothing new about the basic concept or its purpose. All that’s new is the ever-improving technology that allows it to be done on a large scale-just as the printing press, then radio, then television, and now the Internet have allowed direct response marketers to reach consumers on a large scale.

The second thing to remember is that it’s a mistake to confuse the technology that enables CRM with the thing itself. CRM is not a database program that you buy or hire someone to maintain for you. CRM is what you do with the software and with your business operations. At its heart, CRM is simply about getting to know your customers so that you can target your marketing efforts more effectively, build customer loyalty, increase repeat business and generate more sales.

CRM Quick Facts
Non-integrated businesses using CRM methods increased customer satisfaction by 22 percent.

Integrated businesses utilizing CRM saw
customer satisfaction rise 28 percent.

Businesses that used a non-integrated CRM solution increased cross-selling and upselling revenue from 7 percent to 8 percent in overall sales revenue.

Integrated businesses witnessed revenue increase from 13 percent to 16 percent
in sales.

Non-integrated businesses reported that CRM decreased their average cost to resolve a customer inquiry by 4 percent.

Integrated businesses saw CRM decrease their average cost to resolve customer inquiry by 17 percent.

Overall, integrated businesses with CRM
experienced an average customer inquiry
resolution cost that was 17 percent less
than non-integrated businesses using CRM.

Source: IDC — A study of businesses worldwide that integrate sales, marketing, customer service and operations, and compared with firms that do not.

Norm Cosand is CEO of The Jackson Group of Indianapolis, a subsidiary of Total Response Inc. Along with its call center, ad agency, printing and fulfillment operations, The Jackson Group builds and hosts marketing databases for direct-response advertisers.

Cosand suggests that DR marketers who want to follow up in any way with their buyers will be forced to pay more attention to customer tracking if for no other reason than to comply with the proliferating and complex array of privacy laws and do-not-call regulations that vary from state to state. If you have to track customers anyway, why not incorporate CRM principles into the way you do it?

Aside from their expense, the rap against large, off-the-shelf CRM systems is that many are “designed by accountants, and they don’t flow the way a marketing organization thinks and behaves,” Cosand says. For instance, “With an accounting system, you need a buying record before you can set up a person as a customer. That means the system won’t allow me to deal with a prospect.”

An ideal system, Cosand says, would incorporate CRM principles into the whole buying cycle. It would allow you to identify both prospects and past customers with at least enough data to let you personalize communication with them (“There is no excuse today for ‘Dear Customer’ in a letter or an E-mail message”). It would help you allocate your marketing resources by identifying targets of higher value. The ideal system also would let you track the ROI of your ad campaigns to an individual level: “Not just, ‘I spent $1 million, how much did I sell?’ but, ‘I spent $10 against each of these two guys. What was my ROI for each?’” Finally, the system would let you identify and gather information about lost customers-people who have dropped your continuity plan, for instance. If you’re losing business as fast as you gain it, it would be nice to know why.

Applied to a call center, Cosand says, a CRM system should let an agent look up a caller to see if he or she is a repeat customer. It should enable the agent to add new customers to the database without creating duplicates and to edit information about existing customers without losing the caller’s interest. For repeat customers, the agent’s computer screen should present them with what Cosand calls the Four Ps: What products the caller is using; any problems he or she has had with them; practices that affect the way the caller uses the products (does he or she live in a small apartment or in a house with enough room that the agent could try to upsell the customer on a larger piece of exercise equipment?); and his preferences with regard to such things as payment options, whether and how he or she wants to receive future communications from you, etc.

Regardless of how the customer contacts your organization-via a live agent in a call center, an interactive voice response (IVR) system (i.e., an automated menu), or your Web site-integrating CRM at the point of interaction is a key challenge. Todd Strubbe, president of West Interactive and West Direct, both divisions of West Corporation, a call center based in Omaha, Neb., says this is the principle behind the company’s software system.

West’s SmartSell is a “real-time decision agent” that runs in the background during an interaction with a customer. Based on data it may already have about the customer, as well as information gathered as the call progresses, the company’s solution determines what script will pop up next on a live agent’s computer screen, or which choices will be offered to the customer on an IVR menu or a Web site. West doesn’t sell the software as a standalone package, but offers it as an optional service to clients.

For example, Strubbe says, suppose a live agent takes a customer call in response to a DRTV spot for a rotisserie grill. The software might determine that the customer is John Smith, he’s calling about a grill, he lives in Chicago, and he has responded to three other DRTV advertisements-about products X, Y and Z-in the past year. The solution doesn’t tell the call center agent about products X, Y and Z, as this may be proprietary information supplied by other DR marketers. The program simply analyzes the information and prompts the agent (or the IVR, or the Web site) to cross-sell, upsell, ask more questions, or whatever.

CRM Investment in 2004
CRM investment will grow to 10.8 billion in 2004, which is $1 billion more than in 2003.

Companies that have already made initial investments in data-collection tools are predicted to spend between $1 million to $2 million on analytic and predictive modeling tools that will help put more relevant data in their forecasts.

In 2003, 48 percent of firms said they were using CRM applications, while 25 percent said they were implementing CRM.

Source: AMR Research Inc.

“CRM boils down to treating customers with respect,” says Mike Conkle, partner and managing director of Sandcastle Interactive of Seattle, which develops e-commerce applications and software for the Web sites of products including OxiClean and Quick ‘n Brite. CRM presupposes that you want to build loyalty and repeat business, so if the sole point of your infomercial campaign is to “take the money and run,” the concept will have little appeal to you, he says.

Even on a short-term economic basis, however, customer-friendly business methods can pay dividends. For instance, if a buyer goes to your Web site, he or she can easily track his or her order, change the order, cancel the order, get the answers to frequently asked questions, and find contact information for live humans to speak with?

If not, Conkle says, then the 800 number you originally threw up on the TV screen is going to be the customer’s default option for contacting you about all of those things. And you’re going to pay the call center for every such call that comes in, not to mention tying up a sales agent.
Speaking of your Web site, are you overlooking opportunities to engage visitors on a more personal level there? Michael Ross, vice president of strategic partnerships for inQ Inc. of Sherman Oaks, Calif., doesn’t describe his company’s service as a CRM application, but it has a CRM feeling to it.

What inQ does, Ross says, is “take live chat to the revenue-generation level.” The company’s chat software sits on the order-confirmation page of a marketer’s Web site. After a site visitor has bought something and completed the transaction, inQ’s box pops up and the buyer is invited to opt-in to a chat. As Ross describes it, for example: “Hi, thanks for your order on Widget.com. Would you like to hear about (fill-in-the-blank?)”

If the buyer agrees, an agent engages him or her in a live cross-sell chat about Widget.com’s other products or about the offerings of inQ partners that might have discount buying and travel clubs or identity-theft programs. In the latter case, Widget.com gets a cut of the partners’ sales from its Web site. According to inQ, 50 percent of Web buyers opt into these chats, and 20 percent of those buy an additional item.

Is that CRM? Not if CRM is just a synonym for database software. Think of it as a matter of personalizing your relations with customers, however, you may find that new technologies can help you do that in some surprising ways.

Jack Gordon is editor at large for Electronic Retailer magazine. Please send your questions or comments to [email protected].


No Comments

No comments yet.

RSS feed for comments on this post. TrackBack URI

Leave a comment