CRM - Satisfaction Guaranteed?

What does it take to keep customers sweet these days? Customer Relationship Management (CRM) is now proclaimed as the essential strategy for business survival. But what is CRM? What can it achieve for small to medium sized enterprises (SMEs), and how are CAD dealers and resellers taking to it?

CRM is so broad that finding a standard definition is the first challenge. The aim of CRM is to acquire and retain customers by providing them with optimal value in whatever way they deem important. This includes the way businesses communicate with them, how they buy, and the service they receive - in addition, of course, to getting the best through the more traditional channels of product, price, promotion and place of distribution. Michael Juer, Director of SalesPathways Ltd, a sales and service consulting business specialising in helping companies to adopt CRM strategies, offers a straightforward overview: 'Essentially CRM is a customer focused business strategy which brings together customer lifecycle management, business process and technology.'

Origins

So where has CRM come from? The trend for companies to shift from a product focused view of the world to a customer focused one has been developing for years,as products become increasingly hard to differentiate in fiercely competitive markets. It stands to reason that the better you understand your customers, the more successful you will be in meeting their needs. But adopting a truly customer focused approach can be a resource intensive business, and many managers have questioned how far the investment is worth it. The key to this problem, and a driving force behind the development of CRM, are the new technologies that can transform the technique of cultivating a loyal customer base. The retail sector have been at the forefront of using such technology. The information that Safeway holds on its 10 million loyalty card holders enables the company to track the purchasing patterns of individual consumers.

Action

So for a company that has achieved the transformation to a customer oriented outlook, what does 'doing' CRM actually involve? A central database of detailed and segmented customer intelligence is the cornerstone. CRM builds on the principles of database marketing, but takes it several stages further. There is no such thing as a standard CRM strategy, but examples of the sort of activities a business fully engaged with CRM include:

• gathering data at every touch-point with customers - whether it’s telephone, face to face, web site, email or snail mail;
• segmenting the data to enable the full scope of the customers’ relationships with a business to be fully understood. Acting on this information is a vital part of CRM, treating segments differently according to their needs/preferences, and, crucially, their profit making potential;
• integrating the knowledge gained from data segmentation with the information from customer touch-points, and feeding this all throughout the business to provide detailed histories and predictions of individual customer behaviour;
• automating sales and service functions where such options provide optimal value to customers and maximum scope for active customer management;  
• using all the optimised processes and functions that CRM provides in the acquisition of new customers.

CRM is also opening up new opportunities for businesses who are seeking to meet customers' needs through e-commerce and web-based support. 'The Internet is a great tool for interacting with customers,' says Matthew Burley, European Marketing Manager for the Pivotal Corporation, one of the leading developers of CRM solutions. 'The CAD market is like any other - if there is a demand for web sales and support, dealers must meet this demand or lose customers. That is what being customer-centric is all about.'

Expansion

The market for CRM solutions and services is expanding at a phenomenal rate; the European market alone is expected to grow from its current $1. 2 billion to around $7 billion in 2003. Many of the solutions in the marketplace are designed for SMEs. 'The key cost with any CRM solution is not the software itself,' says Matthew Burley, 'it's the costs of customising the solution to meet the needs of users. The applications for SMEs are designed to be flexible enough to meet the requirements and budget constraints of even the smallest companies. 'Leading producers of CRM solutions for SMEs include the Pivotal Corporation, Goldmine Software Corporation and the Interactive Commerce Corporation.

There is now a range of CRM solutions that aim to integrate sales, marketing and service elements. These come armed with a formidable array of automated features; here a just a few of the more basic examples:

Support for sales activities through:

• instant access to customer/prospect history
• an ‘encyclopaedia’ of product, pricing and competitive information
• triggering of mailings of literature/standard letters etc.

Support for marketing through:

• enhanced targeting, based on in-depth customer profiles
• tracking campaign effectiveness across market segments
• automated literature fulfilment.

Support for customer service through:

• tracking of product problems to enable proactive management
• service agreement and warranty management
• ‘problem and solution’ databases to facilitate the provision of consistent advice/information.

Support for e-business through:

• collecting leads and information requests from web sites
• lead qualification and automatic response generation
• linking of emails to customer records.

Focus On Strategy

There is a danger however that a focus on the ever expanding potential of technology will lead businesses to approach CRM from the wrong angle - on IT issues rather than on a business strategy for retaining customers. 'Organisations need to understand that CRM is all about strategy,' explains Matthew Burley: 'Lewis Carroll wrote, 'if you don't know where you are going, any road will take you there. 'CRM works on the same basis. The aim of CRM technology is to automate and provide a framework around the process of dealing with customers. If you automate the wrong processes, you'll be creating a useless system.'

So if you are convinced that CRM is right for your business, where do you start? Michael Juer recommends taking time to appreciate CRM's potential: 'Step one is to understand the art of the possible. CRM has moved way beyond simple contact management, or supporting functional items. The scope of what it can do is far more vast than you might imagine - there is scope to re-design the way you manage the customer lifecycle.'

'Step two is to redefine your business strategy to take advantage of these possibilities. CRM is about creating the best possible buying experience for your customers - and about making it very hard for them to leave you.'

CAD Angle

So how are CAD dealers responding to the CRM challenge? On the face of it the market seems to be ripe to reap the benefits of CRM. Intensely competitive, with limited opportunity to differentiate by product or long term price structure, but large scope for value added services. Clearly there are advantages and disadvantages for smaller businesses trying to adopt CRM. They may not face the internal problems faced by some blue-chip firms trying to persuade marketing, sales, service and IT departments to sing from the same hymn sheet. On the other hand, allocating resources to move away from reactive, day-to-day survival mode can feel impossible.

Anecdotal evidence suggests there are plenty of dealers around focusing on short term profit at the expense of long term customer relationships. But some dealers are realising the potential of CRM for their business. 'Of course we've always had a policy of looking after our customers,' explains Andrew McMahon, MD of The CAD Division, 'but we are now developing this into a CRM strategy. It's clear that the majority of customers do want a long term, supportive relationship.' However even loyal customers can be swayed by cheap prices. 'Dealers offering discounted prices do lure customers away - but these organisations are usually just after a quick buck and aren't interested in customer satisfaction,' says Andrew. "They don't usually stay around long, but do cause damage while they're around. In future, I think that dealers will have to implement a CRM policy to survive.' Cadtek are already employing a CRM strategy, and have seen it pay dividends; Vice Chairman, Allan Behrens explains: 'The system we use to manage our customer and prospect data allows us to propose best solutions, instruct our sales teams and manage our customers. CRM improves the performance of our business. We have recently regained some of our 'lost' customers back from dealers that sold product primarily on price, proving that quality and good service really does count.'

Cutting Edge Solutions Ltd is a small dealership which has been running for two years. While they don't have a formal CRM strategy yet, they are laying the foundations for future development. 'We have set up two database applications to track customer data,' reports MD, Allan Blackwell. 'We collate all our pre and post sales information, and log all our contacts with customers. This means that whenever a customer calls in, all staff have the complete picture in front of them. As the company grows and our customer base gets more complex, we'll use this data to greater effect.'

Setting up a new company provides the ideal opportunity to put CRM at the heart of the business strategy. Solid Applications Ltd did just this, as MD, Chris Hill explains: 'We had CRM in mind from the outset, and set ourselves up as a contrast to the typical VAR. Very few VARs here and in Europe properly understand the concept of service after a sale.' Chris feels that customers in their market were in particular need of more care and attention: 'We sell a lot of 3D modelling systems; this is a young market and not much is known about it. Many customers bought it from cheap VARs with no after sales service without realising the level of support they would need. We wanted to form a CRM strategy which enabled us to focus totally on our customers' needs, rather than our own.'

Solid Applications Ltd backed up their customer-centric philosophy with investment: 'We put a lot of money up front to developing our strategy and setting up our workflow improvement service that provides the tools to help customers get more from their software,' continues Chris. e-CRM plays a major role in the strategy: 'Every customer can use a password to gain access to their own personalised area of our web site that provides after sales support. Information is segmented according to customers' work practices and market sector. 'Helping people to help themselves has also proved popular: 'As engineers ideally like to solve problems themselves, we publish and update FAQs on the site.'

Barriers

Inevitably problems will arise when implementing a CRM strategy. 'People are the main barrier,' says Michael Juer of SalesPathways Ltd. 'CRM is about cross -functional working and the breaking down of departmental barriers. It can also make people more accountable. CRM changes the way we work and many people don't like this change.' SMEs embarking on CRM will find other issues need resolving. 'The average small dealer's business is usually very reactive,' says Allan Blackwell. Even if they are collecting data on customers, it's hard to make time to sit down and plan what to do with it.' Allan Behrens picks out a related issue:'There is a balance to be found between the investment in systems and services to create customer focus, and the bottom line of overall business benefit.'

The Future

What of the future? Can anyone afford to ignore CRM? 'Within about ten years CRM will be part of every business,' predicts Michael Juer. One thing is certain; CRM solutions will continue to develop at a staggering pace. Within a few years software will be available that looks after all of a company's front and back office information systems. 'But this sort of technology is just the tip of the iceberg,' suggests Michael. 'The emergence of BOTZ technology will have a big impact on CRM. These are software programmes that roam the Internet looking for the best deal; they are very powerful, with negotiating parameters to enable them to drive prices down. Websites will need to recognise these and deal with them.'

For Further Information:

Please contact David Eaton, Sales & Marketing Director, 
The Business Advantage Group Plc, 
PEL House, 35 Station Square, Petts Wood, Kent, BR5 1LZ
Tel: 01689 873636; Fax: 01689 878070;
E-mail: david.eaton@business-advantage.com

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