How Latin business ecosystems affect CRM strategy
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With so may cultural differences and disparate business practices in South and Central America, creating a formula for CRM success can be daunting. Even within countries, there are differences between the dominant cities (e.g., Sao Paulo) and peripheral regions (e.g., the Brazilian Nordeste). But armed with knowledge of this business ecosystem, planning for ROI is in fact possible. Here, 12 insights into Latin American business practices that affect CRM strategy:
1 Personal loyalties checkmate value-based merit: Process circumvention to assist friends and family creates inefficiencies and grants superior service due to customer connections to individuals, not customer value to the firm. Solution: If you don't want to eliminate these ad hoc maneuvers, allow them but make them easy to measure and analyze.
2 Company-centric processes: Customer convenience is often ignored when designing processes. For example, application forms that ask consumers for redundant data elements, because the paperwork has been reverse engineered to facilitate back-office data entry. Solution: Embark on a path of customer-centric process mapping and reengineering. Also, adopt a "you'll never have to tell us the same thing twice" mantra.
3 Limited "management by walking around": Lack of contact between upper management and the masses leads to a disconnect between executives, company employees, and customers. Often midlevel managers have more contact with the country's president than with their company's. Some top managers do visit the field, but usually only locations near their headquarters. Solution: Experience the company as a customer: Visit outlets, phone the call center, surf the Web site.
4 A nonexistent "let a thousand complaints bloom" movement: Customer complaints are filed away at the local level, despite numerous studies that indicate they present opportunities to increase long-term customer loyalty. A sales executive in the Andes actually begged a colleague not to open a customer service hotline, because he was terrified of his CEO's reaction to problems in the field. Hear no evil, pay all performance bonuses? Solution: Eliminate the environment of fear. Work together to improve customer service and outline complaint tracking processes.
5 Blaming people rather than fixing the process: Guru Peter Scholtes would argue that systems, processes, and methods are to blame for 95 percent of an organization's problems. In Plowing the Sea, the book's coauthors document how they tried to understand why Colombian leather goods presented such a poor value proposition. They soon discovered that every link in the supply chain blamed the previous one, comically passing the culpability all the way back to the cows themselves. Solution: Ensure that your systems, processes, and methods (as well as those of your partners) are world class and that employees will rise to the same level.
6 Poor data hygiene: A Chilean bank once carried out a data audit and discovered 14 percent of all names were misspelled. Data hygiene issues are especially common here for three main reasons. First is a nonexistent direct mail culture. Databases use in direct mail campaigns tend to correct mistakes over time, because poor personalization carries a considerable financial penalty as reflected in lower response rates. Second, legacy systems have field widths that were set when storage costs were prohibitively high. Third, there is a lack of postal address--correction software and update tapes. Solution: Remember the old maxim "garbage in, garbage out," and scrub your database regularly.
7 Blind faith in technology: Technology cannot cure all evils--in part due to a tendency to ignore process. For example, one Lima bank had customers who come in for customer service swipe their ATM cards then sit until called. Gold cards generated the highest priority; other cardholders waited longer. Forgetting your card made you a third-class citizen. Every time a cardless customer is about to be beckoned, a new plastic-bearing individual would walk in, swipe his card and callously boot him down a rung. Solution: Don't become so enamored of technology that you ignore its side effects if blindly applied. Set business rules and track their consequences.
8 Wild West environment: There is uneven legal protection against database shoplifting (employees trafficking their company's data to competitors) and unauthorized "rentals" by third parties like couriers, because of parallel postal systems in many countries. For example, a general once offered to sell his country's entire voter registration database. Solution: Seed your database with unique names, monitor usage, sign contracts with service providers, and lobby for laws against data theft.
9 Inadequate support infrastructure: Postal service is unreliable, customs can be extremely bureaucratic, credit cards are not widely used, and payment mechanics (for example, telephone transactions) are restricted. Solution: Partner with efficient logistics firms, lobby with peers to loosen payment restrictions, and adapt to thinking differently (e.g., allow online orders to be picked up at your retail outlets).
10 High telecommunications costs: Low fixed-line penetration rates and cell phones doubling as primary devices change cost dynamics. Usage charges make surfing costly for your Net-savvy customers. Solution: Be sensitive to slower modems (only 5 percent of Latin users have DSL) and keep your Web site light on sizzle. Use live chat to eliminate the need to call in.
11 Belief that (campaign) size matters: A tendency to add mass to the target segment before mailing or emailing will lead to lower response rates and higher average costs. Yet this inclusionary nature is common among many Latin marketers. Solution: Remember that ROI, not campaign size, is the goal. Bigger lists are not better; higher profits are better.
12 Thrill of the chase: Short-term customer acquisition (seduction) goals are common, but few firms set retention targets. Solution: Analyze customer churn and implement programs that motivate an internal focus on retaining profitable customers.
CRM in Action: CRM Meets SCM
The Challenge: Minimize reductions and product returns by improving accuracy associated with product pricing.
The Solution: For consumer goods companies, like Dial Corp., maker of Dial, Purex, and Renuzit brands, the order is where CRM and supply chain management (SCM) meet. Managing orders can often be complicated, especially when dealing with a wide range of customers--from corner stores to Wal-Mart--each with a complex mix of pricing and promotion issues. Dial opted to integrate Siebel CRM and IMI Americas supply chain software to handle the order management melees. Dial uses IMI Consumer Goods software as its customer fulfillment engine, managing a high-volume business of almost $2 billion in customer orders annually. IMI Americas software provides Dial with a full range of collaborative order management capabilities such as order capture, pricing, promotions, and fulfillment. Dial integrated IMI Americas software with Siebel trade promotion software to enable Dial to more accurately manage promotions.
The Payoff: The integration of Siebel and IMI leads to "perfectly" priced orders: orders that meet customer service requirements without errors that result in costly deductions and product returns. Previously Dial had to manually load all promotions into its system. Using IMI software promotions are now applied automatically to line items on orders. --David Myron
CRM in Action: Financial Services
The Challenge: To reverse declining business and restore a competitive edge
The Solution: North Shore Credit Union (NSCU), a member-owned financial services organization base in North Vancouver, British Columbia, suffered declining business and flat growth throughout 1999. The primary performance indicators for credit unions--number of retail accounts, total assets under administration, member retention, and earnings--disappointed NSCU's management team. The executives subsequently hatched a handful of strategies to reverse the trend. One of those fixes, a custom $1.7 million CRM implementation from Pivotal Corp. managed by Sierra Systems, launched in October 2000. The core functionality of Pivotal's Value.Net solution for NSCU, which the CRM company now offers to other financial institutions, includes multichannel sales and service, targeted marketing capabilities, and a business intelligence component (that NSCU is currently launching). One of the credit union's main business objectives for its CRM solution at the time of launch was a $74 million increase in assets under administration within two years. It surpassed that gain six months later, and boosted assets under administration from $789 million at the end of 2000 to $1 billion today. NCSU also notched a 10 percent gain in its retail accounts within six months of implementation, the same time frame in which member retention jumped from 70 percent to 90 percent (a rate that holds steady today).
The Payoff: Pivotal's CRM project, along with NSCU's several new financial product offerings, helped the credit union reverse sagging membership retention, boost assets under administration, and increase new accounts through a solution that provides a consolidated view of customers and multiple channels of sales and service opportunities. --Eric Krell