It's déjà vu all over again. It's seems that at any given time there's one hot technology that's going to transform business (if not society) and bring about astounding profitability (if not world peace). Today's hot technology is CRM - Customer Relationship Management. The name is different, but the pattern is familiar.
Like its predecessors, especially Enterprise Resource Planning (ERP) and Sales Force Automation (SFA), CRM promises big results, nothing less than astounding improvements in profitability. Like them, the concept is simple. In the case of CRM, it's something like, "put all your information in one place so accessible to everyone in the organization at any time and use that to improve the customer experience." And, like ERP and SFA, CRM is one of those projects where the great ship of concept often smashes to pieces on the rocks of reality.
Let's take a look at a definition or two. After that we'll look at how we're doing at turning concept into reality and generate a couple of ideas for doing it better. First, the definitions.
One common definition of CRM is that it's software that helps you manage and improve your relationships with customers. Of course, this definition is favored by software vendors and ignores the human part of "relationship" pretty much all together.
A better definition is that CRM is everything you do to improve your relationships with customers and, thereby, your profitability. That works, but there's a more common folk definition running around.
In that definition, it's what you do to create that wonderful shopping experience of yesteryear. In warm, sepia-toned imagination, that experience was keyed to the shopkeeper who knew you, understood you and helped you make shopping memorable. It's not relevant that the experience we pine for never existed in more than a few places, or that it still exists in many small shops. What's important is the concept.
There's also the promise. The idea is that relationships with customers are important. Nothing new there. And keeping the customers you have and selling them more is a more profitable strategy than constantly bringing new customers in the front door as old customers surge out the back door. Nothing new there, either.
What's new is the idea that software can help you do that. And there's some evidence that it can. Consider the case of Wells Fargo Education Financial Services. This is the part of the giant banking company that makes student loans.
Like most of the things that work in business, Wells' success here doesn't begin with CRM software, instead it begins with two critical strategic decisions. The first is that it's possible to manage a student loan portfolio profitably without being heavy-handed. The second is that if you can do that, people who have a good experience with their student loan will remain with the bank and become excellent customers.
In other words, the Wells Education initiative is about a basic business decision supported by a relationship strategy that includes excellent uses of technology. The first issue is clarifying the business objective, then software becomes one of the ways to achieve it.
And achieve it, they have. In 1994 the bank that they could do better than the industry standard that took weeks to process loan applications and which often had files disappearing into some parallel universe, never to return. In Wells system approval now takes "minutes or hours," instead of weeks.
But that's simple efficiency and other folks can do that, too. Wells also decided to keep the loan servicing in-house. That's a departure from most banks' practice, but it offers the opportunity to offer great service and build a relationship. That's where the CRM comes in.
Wells' results are pretty impressive and go far beyond the processing and labor efficiencies. The percentage of students who've signed up for other bank services has doubled. Workers like the process because they can concentrate on processing applications and answering calls instead of tracking down documents.
The customers like it, too. In a survey taken in 2000, 75 percent of student loan borrowers said they would recommend Wells Fargo to a friend. And 90 percent of student loan officers said they had a high level of satisfaction with the bank's loan products and processes.
These are the kind of results the salespeople tout when they trot out the potential benefits of CRM. We're looking at long and short term improvements in both program profitability and institutional profitability. We're looking at high satisfaction levels inside and outside the organization. But we're also looking at the exception.
Most of the projects aren't doing nearly as well. In a review of 202 reported in Network World, two thirds no or minimal return on investment. In another survey, this one by Ernst and Young, a majority of respondents said they didn't know how much their CRM initiative had increased or decreased profitability. That's only the tip of the iceberg.
Most of the vendors of CRM software projects are the wonderful people who gave us ERP and SFA. These folks have become known for their super-large-fix-everything projects that tend to way over budget and way behind schedule if they ever get done at all.
Lots of projects are conceived with the idea that one huge database, or data warehouse, or data mine will be the repository for all company data, will be updated in real time and will share the right information with the right people instantly. Sounds good. So does a perpetual motion machine. You're probably about equally likely to see either one in your lifetime.
Then there are the problems of the systems and the data. Most companies have lots of separate systems that have been developed to serve separate purposes. It sounds like a simple idea to just connect them in some way, but that turns out not to be easy at all. Aside from the basic difficulties, many of these systems have been tweaked and changed for years without anyone actually documenting what was done to change the system.
And the data!!! Oh, my, my, my. The state of the data in most companies is simply awful. In one company I know there were seven or eight different part numbers in each of the two or three categories for inventory. In another we found accounts with as many as sixteen account numbers and almost as many names. This didn't matter when we did things by hand, but when you start liking files, the files had better be accurate.
What everyone is after is pretty much the same thing. We want to provide a consistent experience for our customers and prospects, regardless of how they contact us. To borrow Fidelity's phrase: "Call, click, or visit."
We want that experience to be high quality. It should be like the one delivered by the legendary shopkeeper who was knowledgeable, helpful and friendly.
And, because this is business we want the system to build profitability and long term competitive advantage. No one's doing the whole thing yet, but there are lots of small success stories.
Capital One has a phone tree system that does a nice job of learning customer preferences in activity and offering them among the first options.
Vanguard has cut application processing time from thirty to forty days down to nine and reduced the error rate on the forms from twenty percent to virtually zero.
Yellow Freight has developed a web-based system that handles half a million requests for specific information a month, drawing on the same database that call takers use.
Land's End has done a wonderful job with its personal shopper online.
Dell has pioneered the personal home page for special customers - 40,000 plus at last count.
What can we learn from all of this? The potential benefits of CRM are astounding, but how do you reap them without spending a sum equivalent to the US defense budget, having to call out the disaster management team, or requiring the services of a mental health professional?
Start by being reasonable. Don't try to boil the ocean. Most of the projects that succeed are built bit by bit over time. Set reasonable goals and a general long-term direction.
Build on what you know. You probably have a good idea of what your customers and prospects want to know. Customers, for example, really want to know about order status, and account history. Listen to what they ask you about and the problems they have. Then, work to get questions answered in ways that are better for both of you.
Work hard at getting the people perspective. Use vignettes to imagine how customers and others will experience you online, on the phone and in person. This kind of story-based planning helps you get lots of insight into a small and easily-remembered package.
Remember that culture trumps software. The best CRM implementation on the planet won't help much if you don't hire, train, supervise well. Software is not strategy and it's only part of implementing strategy.
Go for the optimum mix of human and technology. Nordstrom uses a Personal Shopper because there are things a human can do that software can't. Same for Land's End. But remember that sometimes software is the better choice, like when someone wants to search for information on treatment options for an alcoholic spouse.
Remember this. CRM is a powerful concept, but to make it work you need strategy, systems and software and the awesome power of people.
This feature appeared on 7 May 2001
