This report was created by Sistrum, The European Centre for CRM Excellence and a division of the Hewson Group, a U.K.-based organization specializing in management consulting and market analysis within the CRM arena. For more information, please visit www.sistrum.com
Improvements in Internet pre-sales service provide opportunities to leverage sales undreamed of by traditional direct marketers. And keen as I am on marketing analytics, this leverage blows a hole through most attempts to measure the effectiveness of the web as a sales channel. For most organisations, the micro-management of web marketing campaigns is equivalent to throwing water in the wind against a force eight gale of missed sales opportunities.
Over the past few months, as research director for Sistrum, the European Centre for CRM, I've been busy chairing, speaking and attending many conferences: some on CRM; others more e-business focused. All were preaching the mantra of customer management, the 360 degree view: that customer information should be available to all people in contact with the customer, regardless of channel, media or stage of the customer life cycle.
Now, given that the UK represents a considerable proportion, about 35%, (footnote 1) of the spending on CRM in Europe, you would think that we should be 'doing CRM' well. Not so. Far from excelling at managing relationships well at all touchpoints, in the UK we stumble at the one of the simplest challenges: how to handle e-mail leads from hot prospects.
Our third Sistrum survey (footnote 2) into online customer service survey found that, of over 180 major UK companies who actively promoted their website in their television and print advertising, 11 out of 12 are wasting hot sales leads. The much vaunted waste in traditional mass-market advertising, a mere 50%, is dwarfed by the on-line industry's 92%.
A swift and accurate response to enquiries is at the top of most Internet customers' requirements. A tiny 8% of companies provide an effective response to an urgent request from a potential buyer; 51% attempt to, providing a poor response at considerable cost; and a staggering 41% of companies make no effort to respond to an urgent request from a potential buyer!
It would be good to explain what we mean by an effective response to on-line sales enquiries. For the UK, we consider that if you can answer a potential customer's questions within two working days and send out any brochures or collateral within three, your prospect should be in the mood to buy. (However, as we will see later, there is evidence that a significantly faster response ramps up the chance of making a sale.) So effective response is a combination of good literature fulfilment and response to email queries. I have to tell you that, once again, the adult entertainment business provided the fastest and most appropriate responses. If you want to do some research on best practice you know where to go…
Now lets have a quick think about what you in The Netherlands might learn from our UK research. The first point, which is certainly not new, is that simply putting a website online clearly isn't enough. Online service requires both good web content and a back-end infrastructure that will ensure action.
As in the UK, getting the right infrastructure is hardest for the large brands working through local distributors. How do they square the circle of direct communications to customers with third party distribution whilst maintaining prices and service standards consistent with brand values? Add to this the challenge that most Internet users have higher than average service expectations (accurate response to enquiries is at the top of most Internet customers' requirement). The poor customer service offered through the vast majority of web sites devalues carefully and expensively constructed brand values. The risk to established brand leaders is greatest as they have more to lose.
The second point is that poor on-line service has economic implications. The economics of customer acquisition (marketing costs can be as high as £46 per £1 gross profit) mean that repeat and referral business is essential. Witness the recent study from Bain & Company and Mainspring, that in the clothing industry repeat customer's spend is 67% more in the third year of visiting a site than in the first 6 months. Unless it can provide the service needed to enable customers to build "trust" and buy again, a Website will be an economic black hole.
Our findings also call into doubt the ability of most companies to exploit repeat business on-line. The infrastructure and processes to deal with repeat business, assuming that the customer will give them a second try, are almost completely lacking!
Many UK companies are still unable to pass on web enquiries to their own field sales forces. In the automotive sector, 2 out of 3 local dealers failed to contact us to arrange a test drive. In some sectors, such as Personal Finance and Business Travel, we are seeing the emergence of an explicit strategy to point web users towards phoning for complex enquiries whilst making it impossible to enquire on-line. Whilst the jury is out on whether this approach is a compromise or outright winner, any strategy that manages web users service expectations must be better than the wall of silence that currently greets 41% of all web enquiries.
Finally, our survey shows that the biggest win for most UK companies is to succeed on-line much earlier in the customer life cycle. Improve pre-sales service to hot prospects and there is the opportunity to significantly uplift on-line generated sales.
Anecdotal evidence from Brightware (based on a sample of their US Financial Services clients) is that 98% of Financial Service Sales on the Internet generate an email and that responding within an hour increases propensity to buy by 75%. Improvements in Internet pre-sales service provide opportunities to leverage sales undreamed of by traditional direct marketers. And keen as I am on marketing analytics, this leverage blows a hole through most attempt to measure the effectiveness of the web as a sales channel. For most organisations, the micro-management of web marketing campaigns is equivalent to pissing in the wind against a Force 8 gale of missed sales opportunities.
The current state of play in the UK is so feeble that the 1 in 12 companies who manage on-line sales leads well have an opportunity to win business in a channel with little real competition. If they can keep costs down, increase sales and improve their brand then they will be in an overall winning position. For the rest, the choice is whether to reduce on-line sales and marketing spend or to tighten up their web site operations and score in a still open playing field.
Now at the same time as our survey came out I was reading Forrester's latest research which was very critical of eCommerce integrators and eCommerce strategies. They say "Today's websites ignore customer goals and fail to meet basic requirements…." This is a very telling phrase - about customer goals - and goes to the heart of the matter. Forrester advocate scenario centred design processes to help address the problem and I think this is right too. I hate to go on about the porn industry but they know what goes on in the minds of their customers. Our survey is probably the best in Europe at a qualitative analysis of e-business response. It doesn't really look at integration issues, which is an area where Forrester and others have criticisms. If we looked at multi-channel responses and customer knowledge issues I think we would get some really horrible results.
Now I know that it is very easy for speakers like me to say ‘everybody bad, world doomed' and clearly this is not the case or the world would stop. However, the sheer volume of indifferent performance in our survey does make a statement. At a time where real structural differences in the dynamics of US and European economies are being highlighted we need to think very carefully, not just about high flown 360 degree CRM philosophies but about the real world execution of customer management strategies.