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Drive Sustainable, Profitable Growth Through CRM: 8 Golden Rules to Turn Your Company into a Customer-Centric Enterprise

by Volker Hildebrand | SAPinsider

October 1, 2007

Customers’ expectations for service are changing. How can you design your CRM strategy and processes to make the most of your existing customer relationships, rather than just support the same old business processes? Learn the eight principles you should follow to improve your CRM processes, build a strategic framework around what your customers need and want, successfully reevaluate or redesign your CRM strategy, and ensure long-term success as a customer-centric enterprise.
 

 

Driving growth has become a business imperative, so companies are seeking new ways to exploit untapped market opportunities and make the most of their relationships with customers (see sidebar below). As a result, customer relationship management (CRM) initiatives top the agendas of many of today's business leaders.

But investments in CRM have produced varied outcomes. While some organizations have achieved dramatic increases in revenue and customer satisfaction along with significant cost savings, others have experienced limited returns and disappointing results. Focusing on bottom-line costs, tactical needs, and departmental goals limits the top-line potential of CRM investments. More companies would find greater benefits if they took CRM to the next level by designing their CRM strategy for broader aspirations instead of just implementing software to support existing processes.

 

All Roads to Grow Your Business Lead to CRM

In order to generate more revenue, companies must find ways to:

• Retain existing customers

• Deploy new channels and expand existing ones

• Increase wallet share

• Reach out to new customers

• Penetrate underserved segments

• Enter entirely new markets

• Introduce new products and services

• Engage partners

To gain competitive advantage and promote sustainable, profitable growth, companies need to achieve more than creative marketing campaigns or efficient call centers. They need to take a holistic approach to CRM, put the customer at the center of their business, and excel not only across, but beyond customer touch points.

In other words, companies must become customer-centric enterprises — enterprises in which entire business processes, such as order-to-cash or customer problem resolution, are streamlined, connected to other critical business functions (from finance to the supply chain), and designed to meet customer expectations for quality, speed, convenience, and reliability. Organizations need to break down their silos and redesign business processes from end to end, keeping them intertwined and coordinated across front and back offices for a common goal: to create and deliver value to the customer — and get value in return.

 

A customer-centric enterprise strives to continuously create superior customer value and consistently deliver an exceptional customer experience across all customer touch points.

Top-performing organizations have realized that they need to build their businesses around the customer to ensure long-term success. They design and continuously improve business processes across their entire ecosystem — which includes suppliers, resellers, and distributors — transforming their organization into a customer-centric enterprise (see Figure 1). Operational excellence across and beyond customer-facing operations, as well as competitive agility to quickly perceive and respond to customer needs and business dynamics, are key elements of success.

 

Figure 1
In a customer-centric enterprise, all vital activities and business processes — whether they face the customer or take place in the back office — focus on delivering value to the customer

8 Rules to Ensure Your CRM Strategy Centers on Your Customers

To make the most of customer relationships, organizations should consider a basic set of CRM principles that we at SAP have identified based on the successful strategies of best-run companies. These principles constitute a strategic framework for building a customer-centric enterprise (see Figure 2) and can help organizations distance themselves from their competition and secure long-term success.

 

Figure 2
SAP's recommended strategic framework for CRM identifies eight critical success factors of a customer-centric business strategy

 

To secure long-term success, organizations need to develop bold strategies to win, know, and keep their customers.

1. Balance Efficiency and Effectiveness

Many organizations tend to focus largely on efficiency and ignore effectiveness. To reduce operational costs, for example, they urge employees to keep customer calls short, sacrificing the extra time they need to build relationships with their top-spending customers or deflecting them to automated self-services. This may alienate customers and erode profits in the long run; improving efficiency won't matter if you're left with a high customer attrition rate. True, companies cannot neglect critical processes and areas for efficiency gains — in order to stay in business, you must operate efficiently, balancing cost and revenue. But effectiveness must take precedence over efficiency when it comes to gaining a competitive edge and improving customer loyalty.

2. Capitalize on Customer Insight

Organizations must develop proprietary information about customers. They must then translate that insight about customer needs and preferences into frontline actions to identify and prioritize sales opportunities, better target marketing activities, and better serve their customers. They should also embed this knowledge into critical planning and decision- making processes across the organization. Consider how much more effective your sales planning, resource allocation, new product development, and supply chain management processes would be if customer insight and preferences were accessible throughout the organization.

3. Align Marketing, Sales, and Service with the Customer in Mind

Operational excellence and a consistent customer experience can't be reached when departments act in isolation to achieve their numbers. Organizations need to give up their internal, departmental views and revise their frontline business processes and information-sharing practices across marketing, sales, and service. They need to align their customer-facing operations, break the silos, link discrete systems, or — even better — create a single instance so they can frequently share valuable marketing, sales, or service information with the right people. By failing to pass leads, service cases, and purchase histories across departments, many companies miss out on sales opportunities and chances to improve customer satisfaction.

4. Manage Customer Experience Across Multiple Touch Points

Customers today expect multiple interaction channels where they can get information, purchase goods, pay their bills, request services, or get support based on their specific needs and preferences. They expect convenience, choice, reliability, and a consistent experience in every interaction with a vendor. Accordingly, companies must manage the complexity of customer interactions across multiple touch points while synchronizing offline and online channels and taking advantage of the efficiencies of automation. If customers call a customer service center to discuss an order, call center agents must be able to access their data quickly, no matter where the order originated.

 

Many organizations fail to reap the benefits of CRM because they've lost sight of their customers.

5. Guide Customers to the Right Channel

Many organizations fail to guide customers to the most appropriate channel to meet their needs. For example, a common strategy is to simply push as many customers as possible to low-cost, self-service channels — an online FAQ form, for instance. This can, in fact, increase costs and churn rates and eventually destroy market share. It's important to understand the economics, strengths, and weaknesses of each channel and carefully evaluate how you reach out to customers. To get the best results, you must optimize your entire channel mix, aligning your channel strategy with both customer segments (based on interaction needs and customer value) and business goals. This approach might mean giving high-spending customers who prefer phone communication ample time with your most competent sales rep, for example.

6. Connect the Front Office and the Back Office

To attract and retain customers, fulfill demand, and deliver on service promises, it's absolutely critical to synchronize front-office, back-office, and supply chain activities. Many organizations are losing revenue simply because they fail to do this. Without tight integration, online transactions fail, products aren't available when or where they're needed, orders can't be changed, service technicians don't have the right spare parts, returns aren't correctly passed to accounts payable, and customer issues can't be resolved immediately during the first call — so customer satisfaction declines and customer attrition rises.

7. Engage Your Partners and Create a Customer-Driven Value Network

As companies continue to focus on their core competencies, they will increasingly depend on an ecosystem of suppliers and partners to help meet customer demand and generate new growth. In fact, for many companies, channel partners drive the bulk of revenue. Accordingly, partners need to become an integral part of a value network, providing complementary capabilities to promote your company's brand, sell its products, and offer value-added services. It is critical to define the role of these partners, manage your relationships with them, and integrate them in a way that enables end-to-end business processes across the entire network.

 

IT can be more than just an enabler for CRM; it can be a catalyst for business transformation.

8. Adopt a Framework for Integration

To accommodate companies' needs for adaptability, collaboration, and speed, an open and flexible IT architecture is critical. This platform must seamlessly integrate processes and information from disparate applications, enable intra-enterprise and inter-enterprise collaboration, and quickly adapt business processes to changing customer and business needs. For example, enabling integrated, end-to-end order management across multiple departments (including channel partners in some cases) will yield measurable returns on a number of key indicators, including shorter order cycle times, increased order accuracy, faster response to change orders, reduced number of incomplete orders, fewer billing disputes, fewer order status calls, and lower inventory costs.

 

Is Your CRM Strategy Making Your Customers Suffer?
7 Questions to Determine if Your CRM Investments Are Meeting Customer Needs

  1. Do you really know your customers? Unless you have a true 360-degree view of your customers, your customer-facing staff may annoy them with unwanted solicitation or miss out on sales opportunities. Besides identifying who your most valuable customers are, it is critical to have full visibility into customer history. Before ever calling a customer, a sales rep should know about all of that customer's previous contacts and purchases, open service tickets, current back orders, impending contract renewals, or unpaid bills.

  2. Are your customer service representatives empowered? To effectively help customers, your call center agents must be able to see all relevant customer data, and also have easy access to critical transactions and enterprise knowledge. You don't want to make agents toggle between different systems when dealing with a difficult customer. Customer satisfaction is also at stake if agents have no clue what transpired on a different channel.

  3. Are you focusing too much on cutting costs? A common mistake is for a company to excessively fixate on efficiency improvements to curb expenses. Often not aligned with customer needs, such efficiency investments have backfired for many organizations. If customers get lost in an automated response system's maze of options, if orders or service requests are not processed accurately, or if call center agents cannot actually solve customer problems, the result is more customer complaints and higher churn rates — not lower costs.

  4. How quickly can you react to customer requests? As less emphasis is placed on an organization's products and services, the focus shifts to how quickly and effectively a business can deliver those products and services to customers. Agility and speed have become critical competitive differentiators — if you can't quickly meet your customers' needs, someone else will.

  5. Is your online store fully integrated with your offline operations? You might have a sharp-looking Web site with cool features that ensure a great online shopping experience for your customers. But if online transactions fail and you're not able to keep a delivery promise, sooner or later the once-positive customer experience will sour.

  6. Can you ensure that all lines of business are aware of your marketing activities? If a potential buyer saw a promotion on your Web site, but the marketing campaign didn't make it to your order management system and it refuses the promo code, you're going to have a frustrated customer — and another lost sales opportunity. The same will happen if you cannot guarantee that inventories are stocked when promotions launch, if new leads are not quickly passed on to the most appropriate sales rep for follow-up, or if call center agents aren't adequately briefed about newly advertised special offers.

  7. Do you have the right KPIs and incentives in place? If your agents are rewarded for keeping their call times to a minimum, for example, will the customer experience suffer at the expense of your agents' goals? Instead of rewarding agents for ending calls before they fix a customer problem, consider first-call resolution rates and customer satisfaction as additional KPIs for your call center agents.

Make Information Technology Your Catalyst for Strategic CRM

Many organizations look to information technology as an enabler for CRM, not just to help them understand their customers' needs, but also to determine how best to deliver on those needs. But IT can be more than just an enabler — it can serve as a catalyst for transforming a business into a customer-centric enterprise.

This transformation is about building a synergistic ecosystem with employees, customers, and partners that consistently creates and delivers customer value — an ecosystem where customer demand drives the supply chain, customer insight inspires innovation, and employees are empowered to best serve the customer.

Organizations that can build such an ecosystem, one that is also flexible enough to quickly respond to changing customer needs and business challenges, will have a sustainable competitive advantage and enjoy profitable growth for years to come.


Additional Resources

The CRM 2008 conference in Las Vegas, March 3-5, 2008, for strategic insights on planning, implementing, and managing your CRM solution environment with a focus on the customer (www.sapcrm2008.com)

mySAP CRM by Rudiger Buck-Emden and Peter Zencke (SAP PRESS,

http://store.sapinsider.wispubs.com)

"Make CRM an Integral Driver of Your Business Strategy," a Q&A with Bob Stutz and Adam Klaber (SAP Insider, April-June 2006, www.SAPinsideronline.com)

 

Volker Hildebrand (volker.hildebrand@sap.com) is Vice President of CRM Solution Management at SAP Labs, LLC. He has been with SAP for nine years, building momentum in CRM and e-commerce. Prior to joining SAP, he was an assistant professor of marketing and helped companies drive CRM initiatives as a business consultant. A thought leader in CRM for 15 years, he has written several books and over 100 articles. Volker holds degrees in business and technology and earned a Ph.D. in business economics.

 

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