White Paper: the Case for CRM

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C t e l 3 M a r k e t i n g T e c h n o l o g i e s , L L C © 2 0 1 3

White Paper: the Case for CRM

Jack Wagnon

Principal Consultant

Ctel3 Marketing Technologies, LLC

May 5, 2013

investment in a relational database and CRM software would be warranted for the firm, and if so, how to approach implementing such an initiative. Currently, the company uses an indirect channel sales model where product is taken to market using face-to-face selling by contract representatives. Corporate marketing consists of traditional elements such as space ads, trade shows and selling brochures. There is a limited website presence that does have a basic response form to generate leads. The company database is little more than a list of names, addresses and other contact information stored on an Excel spreadsheet.

Environmental assessment

Today’s consumer has limited tolerance for marketing. They are technologically and socially empowered and clearly have an increased demand for marketing accountability (Hesse,

2009). Consumers expect a consistent experience with a company even as they go back and

forth across channels, with varying degrees of identification or anonymity, and with increasing levels of consumer-initiated contact.

Now more than ever, customer service must embrace real-time methods (Frankland,

2009). In addition to checking a company’s Web site and its brochures, many customers engage

in pre-purchase research on products and services from social networking sources such as blogs and online user ratings. With customers now requiring more real-time support, it’s essential to keep pace with their expectations and to respond to them in new ways.

Companies who adopt a commitment to customer orientation will find themselves considering investments in people, processes and technology to enable the transformation into a customer-centric organization. The following is an introduction into Customer Intelligence

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methodologies and supporting elements like Customer Relationship Management software, relational databases and direct marketing.

CRM defined

The fundamental business goal for effective and efficient customer engagement has not changed over time: Acquire new customers, build tighter bonds of loyalty, and reduce the costs of marketing, selling, and servicing (Band, 2010). CRM, or Customer Relationship

Management, is a core business strategy designed to reduce costs and increase profitability by solidifying customer satisfaction, loyalty, and advocacy.

Through the use of software, CRM aligns information from multiple data sources within an organization (and where appropriate, from outside the organization) to give a single, holistic view of each customer in real time. This allows sales, customer support, and marketing to make quick - yet informed - decisions on everything from cross-selling and upselling opportunities, to target marketing strategies and competitive positioning tactics (CRM.com, 2010).

It is important to understand that CRM is a business strategy more so than a technical strategy. CRM software simply provides the framework, management, delivery and automation to achieve CRM strategies. Furthermore, CRM technology is a tool set designed to fix

problems. You have to know what your problems are in order to implement and reap the benefits from a robust CRM technical environment.

The value of database marketing

Database marketing is a form of direct marketing using databases of consumers or potential consumers to generate personalized communications to promote a product or service (Stitch, 2010). Database marketing emphasizes the use of statistical techniques to develop

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models of customer behavior, which are then used to select consumers for communications. The value equation for database marketing can be expressed using this basic formula (Stitch, 2010):

Through the use of database-driven direct marketing, a company is able to create an ongoing, 1:1 relationship with a large, diverse population. Marketing campaigns become

personalized using the robust product history each customer has with the company. A relational database structure allows for highly targeted market segmentation which creates better

opportunities to personalize content and customize niche marketing campaigns (Stitch, 2010). Through personalization and increased segmentation, the marketer is able to disseminate one voice – a consistent message – across all channels and customer touch points.

Customer intelligence

With the advent of the semantic Web (3.0), intelligent Internet search and behavioral advertising, companies are now faced with the promise of exponential growth in the volume of customer data that can be collected. According to researcher Andreas Weigend, former chief scientist at Amazon.com, more data was generated in 2009 by individuals than in the entire history of humankind (Martinez, 2010). So the question becomes, “what to do with all this

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Enter the discipline of Customer Intelligence: “the Management and analysis of customer data from all sources used to drive marketing performance and business strategy (Frankland, 2009). “

By establishing new and useful ways to connect with the customer, a company can better understand their needs - and subsequently provide more value. Companies who approach

business with an intense customer focus will not only keep existing customers coming back, they will turn new customers into loyal fans.

“Know what it takes for a consumer to give you precious things like their attention, their engagement and their permission.”

- Brian Fetherstonhaugh, OgivyOne worldwide

The key to developing an intense customer focus is data—collecting it, analyzing it, and using it to create the ultimate customer experience (Frankland, 2009). The following chart

depicts the multitudes of information sources required to feed customer intelligence initiative (Stitch, 2010):

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Marketers today have a dizzying array of online and offline touch points at their disposal, but without a doubt all roads lead through the Web (Stanhope, 2010). For most organizations, websites, microsites, landing pages, communities, and other interactive properties are mission-critical for acquiring, retaining, and nurturing customers and other target audiences. By definition this reality makes the Web one of the most crucial sources of insight for Customer Intelligence professionals (Martinez, 2010). To put that insight into action, firms must leverage

Web analytics beyond isolated website marketing and operations to feed analysis, decision support, and execution for the entire marketing function (Stanhope, 2010).

Clearly, the role of analytics in marketing is being up-leveled in importance by the emerging customer intelligence field.

Technology adoption

Navigating the crowded CRM technology landscape is challenging, particularly in light of the rapid rise of social computing, the increasing adoption of software-as-a service (SaaS) solutions, and the need to provide mobile capabilities for front-line personnel (Band, 2009).

There has been a quick rise in adoption of the ‘software-as-a service’ (SaaS) delivery system versus the traditional on-premise installation. SaaS is referred to as cloud computing where the software and data are deployed from the vendor’s servers and distributed via a web-enabled interface.

According to research and analyst firm IDC, the SaaS market achieved worldwide revenues of $13.1 billion in 2009. IDC predicts the SaaS market to reach $40.5 billion by 2014, representing a compound annual growth rate of 25.3%. By 2014, approximately 34% of all new business software purchases will be procured via SaaS and SaaS delivery will constitute about 14.5% of worldwide software spending across all primary markets (CRM Landmark, 2010).

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Midsize organizations who are considering CRM will like the value a SaaS solution offers. SaaS is well documented to provide low upfront costs, usability, flexibility, and speed-to-value (Band, 2010).

In addition to marketing, sales, and service functionalities, CRM project sponsors should consider incorporating closely related capabilities like billing, order management, or contract management. Forrester Research calls this the “extended CRM application ecosystem” (Band, 08/2009).

Project sponsors should also consider integrating a knowledge management (KM) dataset

into the CRM software to put more information at the fingertips of customer service and the call

center. The typical KM tool is deployed via the company website and is a key part of the

customer support process, providing a comprehensive database of self-service customer Q&A.

In situations where KM is integrated with the CRM system, companies are able to deliver faster

incident resolution; this leads to shorter hold times, lower abandon rates, increased overall

productivity and happier customers (Brunelli, 2010).

There are a myriad of CRM vendor options to consider, each with their own strengths and weaknesses when compared to the extended CRM application ecosystem. Remember, each business is unique in terms of its CRM requirements. Functionality and features of a CRM suite should be based on pre-defined business needs that are unique to the business in question. The associated graph depicts the general market presence and perceived strengths of current dominate players in the CRM market:

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Expense and ROI

When first considering budget for software, an analogy is helpful to describe the approach in determining what to spend on CRM. First, don't buy a Winnebago when all you need is a Volkswagen for basic transportation, and conversely, don't ask your reps to ride in a go-cart when they need an Indy 500 race car to meet customer needs (Dickie, 2000). Invest some

up-front time to understand the level of support that company personnel require to sell more effectively, and then find the right class of software to meet those needs.

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When considering CRM return on investment (ROI), the project sponsors need to

understand that no two companies market to, sell to, or service customers exactly the same. The ROI calculation should be developed in support of the unique business objectives within each

organization.

In simple terms, there are two ways to justify an investment in CRM: Increase revenues

or reduce costs.

The reduction of cost is generally where most people focus their attention because it is

easier to quantify. However, the really large paybacks in CRM will occur from increasing

revenues of the organization. Increasing revenues and profits can best be derived from three

sources: Better customer management, targeted selling efforts and focused customer retention

(Humbarger, 2000). It is recommended to focus the CRM ROI assessment in this area.

Some basic examples of ROI attributed to CRM are: reduced order error rate, reduced

time to onboard fully productive sales people, increased number of leads generated per day

(Dickie, 2005).

Looking more broadly, measures used to evaluate marketing impact are changing.

Measurement and attribution are now key requirements for today’s marketers who must move

beyond measuring soft metrics (like gross rating points, click-through rates, or impressions) and

start measuring value metrics such as marketing’s impact on revenue, profitability, and customer

lifetime value (CLV). Nearly two-thirds

of CMOs think return on marketing

investment will be the primary measure

of their effectiveness by 2015 (Iwata,

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The following example illustrates the opportunity that CRM can afford a company.

The Dutch bank ING was losing marketing effectiveness because many of its campaigns weren’t relevant to the bank’s customers. The bank’s organizational structure, processes, applications, and heavy reliance on direct mail were not meeting the needs of a multichannel bank with a strong Internet focus. By implementing a centralized campaign management program that created personalized offers in real time, ING increased average campaign response rates and reduce its direct marketing costs by 35% per year (Hesse, 2009)

Summary recommendations

There is a clear case to be made for the investment in a customer-centric operation. This investment includes the right kinds of personnel with advanced skills to implement and manage marketing technology. Successful, measurable business processes need to drive the new

technologies; and a fundamental shift in how customer success is measured should occur. The online channel is the foundation of any Customer Intelligence strategy. Invest in a

robust website that has the capability to provide ongoing information exchange with current and

prospective customers. All website assets should be optimized for mobile users and have

analytics feeding into the larger customer intelligence effort.

Invest in a mid-sized SaaS CRM environment that affords excellent scalability for

growth, and channel-oriented sales and marketing management. Consider how the CRM system

will warehouse key customer data from multiple marketing channels, and how marketing

automation software integrates data into the CRM backbone. Evaluate the data mining and

statistical analysis requirements for the new customer data and select the best tool for the job.

Most importantly, understand the organizational changes that are required to ensure

people-processes exist between sales, marketing, customer services and IT in order to take full

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References

Band, W. (2010, June 16, 2010). The Forrester Wave™: CRM suites for midsized organizations, Q2 2010. Forrester Research, Inc.

Band, W. (2009, August). Craft your CRM investment plans in light of technology adoption patterns. Forrester Research, Inc.

Band, W. (2009, July 9). TechRadar™ for BP&A professionals: The Extended CRM application ecosystem, Q3 2009. Forrester Research, Inc.

Braddock, R. (2009, December). FreshDirect’s secret ingredient: Customer focus. CRM magazine. Retrieved on November 5, 2012 from

http://www.destinationcrm.com/Articles/Editorial/Magazine-Features/FreshDirects-Secret-Ingredient-Customer-Focus-60489.aspx

Brunelli, M. (2010, Novemeber 10). Integration between KM tools and CRM leads to happier customers. SearchCRM.com. Retrieved on November 5, 2012 from

http://searchcrm.techtarget.com/news/2240025303/Integration-between-KM-tools-and-CRM-leads-to-happier-customers

CRM Landmark. (2010). Retrieved from http://www.crmlandmark.com/saasmarket.htm

Dickie, J. (2005, august). Demystifying the ROI of CRM. CRM Magazine. Retrieved on

November 5, 2012 from

http://www.destinationcrm.com/Articles/Columns-Departments/Reality-Check/Demystifying-the-ROI-of-CRM-43264.aspx

Dickie, J. (2000, December). CRM: How much will this stuff cost me? CRM Magazine.

Retrieved on November 5, 2012 from

http://www.destinationcrm.com/Articles/Older-Articles/CSO-Insights/CRM-How-Much-Will-This-Stuff-Cost-Me-46751.aspx

Frankland, D. (2009, October 16). The intelligent approach to customer intelligence. Forrester Research, Inc.

Hesse, A. (2009, October 27). Best practices in multichannel marketing, sales and service: Case Study – ING. Forrester Research, Inc.

Humbarger, T. (2000, September 1). Where is the ROI in CRM? The Humbarger Consulting

Group. Retrieved on November 5, 2012 from

http://www.information-management.com/infodirect/20000915/2705-1.html

Iwata, J. (2011, October). From stretched to strengthened: Insights from the Global Chief Marketing Officer study. IBM Institute for Business Value. IBM Corporation.

Martinez, J. (2010, May 5). Why Customer Intelligence is a bright idea. Forrester Marketing Forum 2010. Forrester Research, Inc.

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Stanhope, J. (2010, March 29). How Web analytics will emerge as a cornerstone of customer intelligence. Forrester Research, Inc.

Stich, M. (2011). Creating relationships: Recognizing the value of database marketing. Bridge Worldwide. Rocky Mountain Direct Marketing Association, Forum 2011.

White Paper: the Case for CRM