CRM: A state of mind, not a technology

Customer relationship management (CRM) is not a technology. It is a way of structuring a business’s environment, attitudes, policies and procedures to enhance relationships with customers and maximize each customer’s contribution to overall profits.

One of the worst things a business can do is attempt to implement the technology without actually adopting the mindset. Many of the early spectacular CRM failures we’ve all read about were due to the mistaken idea that the technology was a panacea that would somehow cure the basic faults in the company’s methods of dealing with customers.

Here are 10 questions, the answers to which can give you an indication of your organization’s level of customer focus:

  1. What does your business do? Answers to this question that start with, “We make…”, “We sell …” or “We are …” tend to indicate an organization-centric business. Answers like “We provide our customers with …” or “We help our clients to …” indicate a more customer-centric organization. When the former type of answer is forthcoming at an organization, the running of the company tends to be geared towards lowest cost and convenience, rather than customer needs. The tariff agent who sets rates based on the ease of getting the product out of the plant, rather than to the customer, is a primary example of this sort of misconception.
  2. What are your employees’ attitudes about customers? While the correct attitude is especially important for those employees who interact with customers, many of them may be unable to distinguish the relative value of different customers. This can result in an inordinate amount of time or resources spent on customers who provide little or no value to the company.
  3. Does the left hand know what the right hand is doing? At any company bigger than the sole operator, it is likely that the customer has multiple contacts within the organization. Often those contacts may not be aware of each other’s activities. The salesman who attempts a major sale just after a customer has been put on C.O.D. will become quite unpopular. In other words, no matter what they need, ensure customers can be transferred directly to someone who can take care of those needs without playing telephone tag or caller volleyball.
  4. Are you accessible? How easy is it for your customers to interact with you? One of the most significant changes in customer behaviour in the last decade has been the rise in expectations. People expect instant gratification. Customers (and partners) expect to interact with you using whichever channel they find convenient. This could involve an in-store visit to make a purchase, a payment online using a credit card or a phone call for service. They must all be equally accessible and efficient.
  5. Do you know the profitability of your channels? Increasing your accessibility using multiple channels is not enough. It is important that each channel contribute to the bottom line. Each sales channel should be looked at independently from a perspective of value to the company. Thus management should know whether any particular channel is making money for the company or not.
  6. Do you know your customers’ value to your company? Most businesses segment their customer population by the nature or type of their business, their sales volumes or their size. However, these segments rarely give any indication of the value of the actual customer to your business. Not every customer is profitable; some may even have a negative value. In order to effectively measure customer value, the organization needs to know not only sales revenue and volumes, but margins on those sales, payment habits, purchasing habits, and the costs of selling and of servicing that customer.
  7. Are you taking advantage of cross-sell and up-sell opportunities? Increasing the value of the customer mix is extremely important in increasing business profitability, especially since gaining a new customer is six to seven times more expensive than retaining an existing one. Increasing volumes of current products may not be feasible or desirable, especially if those products are low-margin, or the cost of selling is high. Cross-selling and up-selling offers opportunities to increase the value of each customer to the business.
  8. Do you know your ideal prospect? Like your customers, your prospects should be segmented according to their potential value and the probability of fulfilling the sale. In order to optimize your customer mix, marketing and sales programs should identify and target high-value new business, not waste time and resources chasing low potential value customers that may be large or prestigious by appearance.
  9. What makes your customers satisfied — and are they? Many smaller businesses have no idea of their customers’ satisfaction levels. If they continue to purchase, they must be satisfied, and if they don’t, they are obviously not satisfied — that’s often the limit of their knowledge. Satisfaction comes not necessarily due to the lowest price, the fastest delivery or the best payment terms, although it may include elements of all three. One customer might be satisfied with lowest price, while for another, the quality of the product and ease of use might be the defining criteria for satisfaction. Records of the efforts made by the company and the customer reaction to them are probably the best indicators of true customer satisfaction.
  10. How much business are you really missing? Although it is easy to analyze the number of abandoned shopping carts on a Web page, missed tenders and sales opportunities and the number of stock-outs, this is not a complete or accurate assessment of missed business. Gaps in the product line, inconvenient business hours, lack of adaptation to changing market conditions and many other factors can affect customer behaviour, buying habits and thus, profitability. Truly understanding customer behaviour will go a long way to determining how much business your company is missing out on due to poor customer relationship management. Business should be on the constant lookout for changes in their customer mix, purchase behaviour and service requests that may indicate missed opportunities.

John Morgan is executive vice-president of Trioctal Consulting Corp., a Toronto-based consulting company specializing in CRM, as well as database and custom software development and maintenance for medium-sized businesses.

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