What is CRM (Customer Relationship Management)?

Defining a CRM Strategy

Customer Relationship Management (CRM) is a term that refers to the practices, technology, systems, and strategies associated with managing your customer through the customer lifecycle. The goal of CRM is to maximize customer lifetime value and relationships over time.

CRM is perhaps, in my mind, one of the most misunderstood terms in marketing today. As I think about it, it is a rare event when I pick up a marketing publication and I don’t see something about CRM. Frequently, articles reveal frustration on the parts of authors at organizations who have missed their objectives as it relates to CRM. Part of the disconnect is simply because CRM does mean so many different things to different people.

What follows is a lightly edited transcript of Episode 1 of the Inevitable Success Podcast with Damian Bergamaschi and special guest Gary Beck. (Listen Here)


How do you develop a CRM strategy?

Whenever I think about building a roadmap for CRM, it begins with defining clear business objectives and goals. The goals should be associated with both short-term and long-term objectives. In fact, frequently the driver of CRM is tied to creating the right customer experience over time. And certainly, if we have the right customer experience, our customers are going to be more satisfied and tell their friends about their successful relationship with our products or services. At the same time, they will buy more from us because they are satisfied. So, it makes sense to orchestrate the customer experience in a way that is best for our customers.

Frequently, CRM programs and techniques are used to collect the information necessary to understand the current customer experience. This understanding allows us to know where we are being successful, while identifying those areas that need to be improved.

There are typically four phases when we think about building a roadmap for CRM success. The first phase is a discovery phase. This includes identifying goals and objectives. It also typically includes some data exploration and understanding the assets that we currently have so that we can better create those goals and set meaningful metrics at this point in time.

During the discovery process, no matter how small or large the company, we frequently have stakeholder interviews. It’s important to discuss ideas and create consensus regarding where we want CRM, the customer experience, and the customer relationship to go.

Executing a CRM Strategy

The marketing department obviously has to take a leadership role, and they will need help across the organization. We need to have finance involved so that we understand the cost parameters associated with all of the activities that we’re thinking about in the future. We know of course we need our Information Technology organization because so much of what we’ll be talking about involves technology delivery to help guide these customer relationships over time.

We also need customer service and the sales organization. In fact, any place where we touch a customer with communications, any department that has that interaction needs to be involved in a CRM initiative. Finally, people from product need to be involved. So, both those who are managing current products and understand them inside out and those who are developing the next wave of products, because as we think about CRM, as we think about the future, we want to incorporate where the company is going as well as what we’re offering today.

It is imperative that top leadership within a company embrace any CRM initiative. And embrace the goals associated with those initiatives because there are so many different functions that need to work together. Without that leadership from the top, the CRM programs are doomed to fail.

Is CRM Effective For All Types of Organizations?

I think this talks to the whole point of CRM means different things to different people. So, if I’m a hammer the whole world looks like a nail in this particular case. If I’m a salesperson, I might be thinking of CRM as an application like Salesforce, where I can keep track of my outbound calls, my lists of prospects, my lists of customers, and any e-mail communications that I may have sent to them in the past. That is a CRM system, but to an organization, we may be missing a whole layer of other customer touch points that are important or to a retailer, e.g., interactions that the customer may have had online with our Website. We may be missing catalog purchases. We may be missing the retail store visits where the customer filed a complaint with customer service. So, in that, that’s a good example of where CRM can mean different things to different parts of an organization depending on what their particular focus is.

After we go through that discovery process where we talk to all of the stakeholders, the second phase of thinking through CRM is to provide an opportunity assessment of where CRM can make a difference in an organization. So again, it means lots of different things to different people.

We are going to want to lead any new initiatives around our customer experience in such a way that we have success early. One of the lessons that many CRM implementers have found is that without early wins in building out CRM capabilities, the path to success becomes much harder.

I have been involved in some CRM implementations and have discovered that early victories are important. There are so many moving parts and you can always add more to these types of initiatives. Perfect can really be the enemy of the good. Unquestionably, early wins are basically an axiom for career survival. I have read too many articles in the trades of colleagues leaving organizations due to failed CRM initiatives. CRM still has a negative connotation associated with it in some quarters. You will hear people say that CRM is “soft.” The skeptics will claim there are no hard benefits associated with it. What would they gravitate towards if they’re anti CRM? What is the alternative? Failure. Ultimately it is a failure.

What are the Benefits of CRM?

Anti-CRM executives frequently see the challenge of some of the lofty CRM goals and the challenge of making many parts of a large organization work together because it is challenging. Without high-level sponsorship within an organization, sometimes it’s very difficult to achieve some of these goals. For example, one of the challenges you’ll frequently hear in CRM planning stages is the goal of creating a 360-degree view of the customer. “I want to understand every touchpoint, I want to understand every e-mail exposure, every open, every click, and every conversion.

The list goes on… I want to understand every time somebody walks into my retail store. I want to understand every time customer service was called. I want to know if a product is tied to multiple returns or if this is just a single event for this person. Is this person a chronic returner?

It can seem daunting. It can seem unachievable which is why that notion of early wins is so important, and why that notion of phasing in capabilities in a meaningful way that moves the ball along for the organization is absolutely critical. All of these pieces need to be managed with the long-term goals of the company in mind.

All of that stuff is great, but I have to meet my numbers this quarter, right? Finding the benefits quickly associated with CRM initiatives is about better understanding who the customer is and how to talk to them better.

CRM starts with integrating all of the information that we have about our customer across systems that might not be talking to one another today. Benefits really are huge long-term and phasing them in a way that allows the initiative and the company to move forward is critical to the success.

We talked about discovery and assessing where we are in terms of our current state of capabilities. We may have goals to develop the ideal customer relationships and yet we may be constrained today by our current capabilities, so we take an honest look at what our technology,customer service, and sales capabilities are.

Next, we compare those capabilities against a set of goals, referred to as our future state. The future state may involve a new database that integrates all of the different databases that we might have in an organization. The new database might include information that we don’t have today, information that might come from new customer service processes. And our future state goals also take into account what the competition is doing.

After we create the future state, we compare it to the current state and of course we’ll see differences, we’ll see gaps. So, our fourth step of this process is to look at those gaps and figure out how to close them. We have business goals, we have objectives, and through this process, we now know what we need to achieve in the long term. We ask ourselves, which gaps can we fill in the short-term? What are those early wins that we think can contribute to the customer experience today?

What are the capabilities that we’re going to build on to gradually provide that future state capability that we’ve painted with the organization? With this information in hand, we put together a phased plan to be successful in delivering this thing we’re calling customer relationship management.

Is CRM a Continuous Strategy?

So, how do you know when you’re done? Well, first of all, you’re never really done.

The goal here really is to show wins in terms of better understanding the customer and to put infrastructure and capabilities in place that make the customer experience better. And that leads us to the ongoing process of improving customer relationships because you can never have customer relationships that are too strong.

You always want them to get stronger. And if you build this capability correctly you have an ongoing feed of new information that allows your company to evolve.

Are There Types of Organizations Where CRM is Not Effective?

All organizations can benefit from better customer relationship management.

Anything that helps us better serve customers is awesome. We want more of that. It improves the customer experience and we know when customers are more satisfied when they are more engaged with us.

What is an Example of Customer Database Marketing?
If you go back to the days when Amazon was only selling books, they provide us with an interesting example.

What did they do that was so smart? First, they created this amazing database of books that were available for sale. In fact, they became the go-to place if you were going to research what information was available on any given topic. Second, they focused on customer service. During the early days of web transactions, Amazon would tell you when a package was going to be delivered and when it arrived. By doing so, they established trust in the Amazon brand.

Customer Segmentation?

Another brilliant utilization was using their customer database, for a collaborative filtering algorithm. And what that algorithm did was it looked at the books that you purchased and then it made recommendations to you on other books that you might like to read. And that was a breakthrough at that point in time.

Today, if I buy a pair of sneakers, Amazon is going to offer me sweat socks to go with my sneakers. They’re just very smart about the market basket that they will put in front of you based on what you’ve purchased.

It’s remarkable that Amazon evolved the way they did, having the vision to offer retail goods. Their evolution continued as they went into the entertainment business. Now they’re producing original content and of course, the most recent acquisition by Amazon is the purchase of Whole Foods. In addition to supporting your literary interests, Amazon will support just about anything you wish to purchase in the retail goods world.

Amazon’s view of the customer is perhaps more comprehensive than any other organization that I can think of off the top of my head today.All of it stemmed from outstanding customer service through their initial collaborative filtering algorithms, understanding what customers wanted and by understanding how to market to customers as they made more and more new offerings over time. From a best practice perspective,knowing the customer and closing the loop with the customer, I have to take my hat off to Amazon, they have done it quite well.

They clearly continue to change the landscape and it will be exciting to see where they go in the future.

Can Smaller Organizations See Success with a CRM Strategy?

There are some things that Amazon does exceptionally well, but because of their size, there are some things that they can’t do that smaller retailers can.

Let’s look at the example of purchasing a pair of eyeglasses. Well, glasses are at least for me a personal purchase and I really don’t do it very often. I don’t really know what the fashion of today is. Maybe shame on me. But I don’t. The way that I like to purchase my eyeglasses is I like to go into my local optical store and I like to talk to the salesperson behind the desk. The one-to-one communication to me is important in that purchase. Customer service and local access provide differentiators for small retailers.

Amazon has cornered the market on online buying, but there’s still a segment that is looking to touch products and shop, and Amazon doesn’t quite cater to that.

That’s the opportunity to exploit. I do think that customer relationship management capabilities can help identify those opportunities to retailers, and much more!