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CRM Gets Serious
With customer loyalty an ever-more-fleeting commodity, businesses must deliver consistent -- and consistently high-quality -- service. In the five stages that define CRM maturity, is your company among the leaders? Not knowing means you're not there yet.
For the rest of the February 2008 issue of CRM magazine please click here
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Customers today are in control of your company -- whether you realize it or not. When visualizing an ideal business model, a well-oiled machine might come to mind: intricate parts running in harmony, tended to and maintained by a skilled chief executive. A modern company, however, is more akin to a speeding car, with the customer holding onto the steering wheel and pressing hard on the gas. With the level of information-sharing now available to consumers, what once might have been a minor business mistake can now be a devastating blunder. "Your errors are what define your service to the clients," says Rosalee Allen, senior vice president and chief operations officer of Pathology Associates Medical Laboratories (PAML). Six years ago, PAML, which facilitates medical-specimen sample testing, had made a few small mistakes: an error on a bill, a late supply shipment, a lost specimen sample. Because there was no infrastructure in place to track these mistakes, PAML had no idea the slip-ups had all involved the same customer. "We lost a million-dollar client," Allen says. "And we stood there flat-footed saying, 'What happened?'" (See sidebar, "PAML Pushes Forward.") Customer attrition has destabilized the old business model. Even for a company with reliable products, pricing, and service -- a company that hasn't committed any serious missteps -- a rock-steady customer base is no longer a given. Scott Nelson, vice president and distinguished analyst at industry research firm Gartner, explains that, in the past, companies could rely on loyalty out of sheer convenience. If you wanted a bank account, for example, you went to the branch closest to your home or office. Not anymore, Nelson says: "I can bank with somebody in Ohio if I'd rather, [instead of] with the bank across the street." Loyalty is now driven primarily by a company's interaction with its customers and how well it delivers on their wants and needs -- and customers have grown increasingly sensitive in recent times. Robert Wollan, global managing director of Accenture's Service Transformation Management consulting practice, says, "We see that expectations are rising not only in the past three or five years, but in the past year alone." To return to the banking example, Nelson explains, "It used to be you only had to be as good as your rival bank. Now you have to be as good as Amazon."
Multichannel is a Must-have A high level of service requires the integration of all business channels. The customer doesn't see the firm as a marketing department, a sales force, or a contact center; she sees it simply as one brand. One sour interaction with one channel reflects on the entire company. Additionally, as customers become more comfortable interacting across a multiplicity of media -- the phone, in person, over email, over chat, and even via social networking -- they become more liable to switch back and forth between these channels, even when asking one question or solving a single issue. Therefore, if a customer emails the sales department with an inquiry and follows up with a call to the customer service line, she expects this to be a continuation of one effort, not two separate ones. When answering the call, the company should know about the email. This is not possible unless channels are open and integrated. (See "Multiplicity Means More," for a look at the multichannel mandate.) A true multichannel company has a truly customer-centric vision, with aligned and balanced metrics and information-sharing seamlessly enabled not only within the company, but with all partners and service providers the company does business with. This ideal is more than merely difficult to realize -- according to Nelson, not a single company has yet achieved it. However, as businesses begin to understand how crucial customer centricity is to financial success, more and more of them wish to understand how to pursue and eventually fulfill this vision. With that in mind, Gartner created a model for CRM maturation dubbed the "Customer-Centric Generational Framework," which illustrates the five stages involved in becoming a full-fledged multichannel integrated business (see chart, below).
It's worth noting that, according to Gartner, the majority of companies today are either in Stage Two or Three -- in other words, the bulk of CRM users are radically immature. Here is a look at this framework, with insight from Nelson, additional analysts, and companies that are struggling with these challenges today. STAGE ONE: Crawl from the Wreckage Early adopters that bought CRM technology also bought into the initial hype, and many never saw the expected benefits. This gave CRM a less-than-stellar reputation; a company suffering from that immediate disappointment, according to Gartner, occupied Stage One. A wave of companies has successfully passed through -- some might say "survived" -- this first stage, but it's hardly an historical artifact. "Certainly there were more [Stage One firms] in the past," Nelson explains, "but you still run into a lot of companies in a lot of areas that are still very early in the CRM game." Rob Bois, research director at AMR Research, notes that many B2B companies in particular remain in this preliminary stage as they have not yet felt the direct consumer pressure to deliver a better overall experience. A Stage One firm's vision is centered on product and profit, and customer experience is an afterthought. Often, CRM is installed to solve a single problem in one channel -- resulting in an inconsistent customer experience, and in some cases damaging other areas of business while one gets stronger. The full return on investment, therefore, may never be realized. STAGE TWO: First Steps Nelson calls Stage Two the "self-awareness stage." Firms realize why first-stage investments haven't yet yielded a return, and begin reorganizing processes and value systems. Technologically, little occurs in this stage -- or in any stage past the first. Systems have already been implemented; the next steps are to understand how to best utilize them. Although the vision becomes customer-focused, department-level initiatives remain discrete. Nelson says, "I often joke that [this] is the stage of CRM that happens after everybody who did the first generation is fired." Although Nelson's joke doesn't apply to Collette Vacations, the Rhode Island-based tour operator serves as a good example of the shift between Stages One and Two. Collette decided to install marketing software to increase return on investment when campaigns were moving too slowly and segmentation was elemental at best. As Diane Gorine, Collette's direct marketing manager, puts it, "We were using very kludge-y tools." Using Unica's Affinium Campaign and Affinium Model, campaigns that had taken two or three days took 20 minutes. Within months, Collette was segmenting customer groups and handling them accordingly. These Stage One steps -- implementations improving single problems in an individual unit -- have begun to bleed out to other siloes. "We can talk to people like we know who they are--that is something that has been noticed [in other areas of] the company," Gorine says. Although the original goal was simply for marketing to drive revenue, this illuminated the importance of customer centricity beyond marketing to other line-of-business areas. Gorine says further channel integration is planned; preparations for deploying Affinium Net Insight include integrating Collette's existing in-house contact database. STAGE THREE: Stand Tall Companies achieve Stage Three when they begin to think (and act) on an enterprisewide level. In the second stage, customer centricity was important, but was still pursued as a siloed effort: each unit trying to improve simultaneously, but separately. Nelson says, "In the second [stage], you have disparate projects going on. The third [stage] is an attempt to consolidate those much more." The firm begins to see that in order for channels to operate at the highest level, integration must occur at a higher level as well. As in Collette's case, a company often begins maturing toward Stage Three when one group within the company is clearly outperforming the others. A vision pursued by the outperforming group can spread to other groups, aligning customer-centric efforts. Implementing integration technology is crucial at this stage to share data and break down silos. However, this process can be quite difficult. Wollan calls this the sticking point for many of today's companies, the main reason the bulk of CRM users remain at this stage in the maturation process. "It's the interplay of the channels that's the real challenge," he says. As companies stagnate, frustration -- and costs -- can mount. Zachary McGeary, lead analyst at JupiterResearch, says, "We've seen integration cycles lasting as long as 12 to 18 months, with professional services costs piling up over this duration." To align marketing, sales, and customer service, internal processes may need to change. If different business groups are working toward different goals, incentive and bonus structures may need to be rebuilt to complement each other. Wollan says that it may be beneficial to give one person or one group full responsibility for the company's customer centricity. "Some [firms] are revising the concept of the chief customer officer," he says. "Some are actually taking it to an elevated C-level position and giving that person the mandate [over] customer experience." Other options include giving more scope to the position of chief marketing officer or linking channels and bringing them together as a "shared service" capability. STAGE FOUR: Walk Toward the Light In Stage Four -- the furthest any company has progressed to date -- CRM users begin to see light at the end of the tunnel: a focus on the customer at an enterprise level. Nelson explains that, in Stage Four, "CRM has to be a strategic direction for the organization and have key senior management support." The issues are no longer merely organizational. Maturation into the fourth stage hinges on vision, and no longer thinking of CRM as a win/lose proposition. In previous stages, success was a measure of return on investment, separate from customer satisfaction; in this stage, these two measures become synonymous. "In the fourth generation, you switch over to the idea that 'If the customer wins, we win as an organization. We can spend more money to take care of the customer and we'll make more money for doing that,'" Nelson says. In Stage Four, all systems and channels are integrated internally -- requiring a level of work, time, and investment that makes this maturation level very rare. McGeary cites a JupiterResearch survey showing "only 3 percent of companies have achieved what we would call a 'multichannel' service offering." (The lucky few tend to be more consumer-driven: telephony, retail, banking, technology, and healthcare.) The barriers are both process- and technology-based: Nelson says that while CRM vendors are improving functionality, "the technology isn't really there yet," lacking a higher level of integration and ease of connectability. Anthony Uliano, president and chief technology officer of multichannel integration solution provider AMC Technology, cites an additional issue: "It sounds like common sense not to purchase something unless you know how to use it, but there's just not a lot of best practices out there for multichannel-interaction vendors." STAGE FIVE: Full Speed Ahead The fifth and final level requires that the idea of enterprisewide customer-centric alignment become more than just a short-term initiative, or one person's pet project -- fully mature CRM must reside at the very core of the corporate culture. Companies may get as far as the fourth stage and still fail: If, for example, a core vision is held by only one individual; when that person leaves, the vision may depart as well. "It takes years of consistently doing this, even as new management starts coming into various parts of the organization," Nelson says. Another differentiator of this stage is that company channels must be aligned not just internally, but externally as well. This means that every partner, distributor, and joint venture -- any firm that represents you in any way -- must become part of the customer-centric multichannel framework. The obstacles here are manifold, including issues of technological integration as well as intercorporate complexities of data-sharing, security, brand control, and confidentiality. Although no firm has fully reached this stage yet, Nelson says Microsoft is one of the frontrunners -- and a good example of just how complex this level of integration can be: Microsoft must be able to see and control the interactions among any of its resellers and hardware vendors, because, as Nelson explains, "at the end of the day, one disgruntled employee at a Best Buy can make Microsoft look bad." (See "Fine-Tuning the Channel," January 2008, for more about channel partners.) To gain complete control of your customer interactions, "you have to start in a place that pulls the entire ecosystem together," Nelson says. Only the most advanced firms, he notes, are feeling the consumer pressure to make bold moves to reach Stage Five. Until one vanguard company establishes a template for success, a widespread move to Stage Five may be a ways off: "Because we haven't seen anyone completely pull it off yet, it's hard to know what to know," Nelson says. Predictions for how long it may take can seem dire: "A decade may be very realistic," he says. Looking Forward Today, this five-stage model stands as more of an ideal than a realized business practice. However, analysts agree that the Stage Five endpoint is where companies are headed -- and where their customers are pushing them to be. Even though no company has yet reached the Promised Land, Nelson says that "customers are expecting this more and more." And where customers go, companies must follow. Bois says that staying competitive means realizing that customer satisfaction is the ultimate differentiator. Investments of time and money and other internal resources will pay off, he says, and firms that fail to make these investments will be left behind. "This isn't something that companies can outsource or do on a shoestring," Bois says. "The common thread is that the customer has the power now." SIDEBAR: PAML Pushes Forward Six years ago, when Pathology Associates Medical Laboratories (PAML) lost a million-dollar client due to misaligned business practices, the company knew that its corporate culture needed a significant makeover. The hefty blow forced PAML to realize just how crucial customer satisfaction was to overall success. Rosalee Allen, PAML's senior vice president and chief operations officer, says, "We didn't have any way to interact with the client at all -- or even act like we knew them if they called 10 minutes ago." To better serve customers, PAML implemented Microsoft CRM. Although the process was not easy -- the implementation took two years -- the benefits were invaluable. The company has been able to reduce response rates from three days to under 24 hours, and can now treat each customer as an individual with an understanding of inquiry history and client profile. And, as any company with eyes on Stage Five must do, PAML continues to push forward, making its CRM database available via mobile devices and even deploying its CRM system in the local hospitals that participate in its medical testing. Implementing Microsoft has not only improved customer satisfaction, but has also allowed the company to expand its client base. Allen cites CRM capabilities as a high selling point in meetings with potential clients. And PAML has discovered that perpetually asking more of CRM is the only way to derive additional benefits. "We continue to look through the application and see what it can do and apply this to business practices," she says. Contact the editors at editor@destinationCRM.com.
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