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The Key to Unlocking a True Companywide CRM Program
Marketing, sales, and service departments' respective goals for customer relationships are often in direct opposition to each other; EPM strategy relies upon the premise that each part of the company will deliver on, and even exceed, its performance objectives.
Posted Mar 10, 2003
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It is easy to find hundreds of CRM implementations these days, but identifying the companies that have been able to use these implementations for greater business advantage with customer relationships is not so simple. There have been gains in departmental efficiencies, such as better managing a sales pipeline or ensuring more expedient call center handling, yet there are still few corporations that have developed company-wide strategies for managing customer relationships and implemented the technology to support them.

The reason for this is not a lack of interest or understanding, but rather that marketing, sales, and service departments answer to different marching orders and their respective goals for customer relationships are often in direct opposition to each other. As such, it is really no wonder that corporations are often disappointed in CRM investments. However, their disappointment often has little to do with the actual implementation or software, but rather pertains to the issues surrounding business process and departmental alignment.

Enterprise CRM objectives will only be reached with an EPM strategy in place
The overarching goal of enterprise performance management (EPM) is to pilot the business in a desired direction. This requires consolidating multiple enterprise business and supporting technology strategies, an effort that clearly involves a company's strategy regarding customers and revenue. It is a top-down approach that bridges corporate goals by understanding them in terms of their relative importance to one another, thus allowing a corporation to make intelligent tradeoff decisions about priorities and investments.

AMR Research believes that EPM represents the realization of CRM's initial promises by finally naming a cohesive owner of customer-facing objectives: the corporation itself. An EPM strategy identifies how CRM affects the broader corporate goals and requires input from every department on how to reach them. It also aids each department in striving for its own objectives unequivocally, since they are in alignment with the broader strategy.

An EPM strategy relies upon the premise that each part of the company will deliver on, and even exceed, its performance objectives. Performance measurements then must support that premise and allow management to monitor accomplishments toward goals, taking corrective action as necessary. As a result, CRM buyers' interest in EPM at this time is in addressing the weakest element of CRM projects to date: meaningful, actionable metrics.

CRM metrics can be company specific or industry standard
AMR Research often sees companies getting wrapped around the axle when trying to answer the simple question: What should we measure? The answer truly depends upon your company's broader CRM objective. If it is to deliver the best customer service in your industry, you need to generate standard metrics that can be benchmarked across competitors.

If your overriding objective concerns a company-specific issue, such as reducing the overall cost of customer service, you would elect to develop objectives that let you track and measure year-over-year--even month-over-month--performance, such as time to train call center agents or call deflection rates when implementing customer self-service products. Before deciding what to measure, make sure to do the following:

Determine whether the objective is to benchmark internally or externally, as this will impact what measurement tools are needed.

Don't benchmark everything. Develop a maximum of five metrics to keep a project focused on key priorities.

Develop a consistent process that can be used across projects. While the metrics themselves may differ, this process will simplify future investment decisions by making the comparisons more direct. This is best supported by the development of governance boards and/or steering committees.

The path to EPM should be paved with metrics that include cross-departmental business processes
Sales will always insist that marketing doesn't provide enough leads, while customer service will always accuse sales of promising customers the moon. Finance feels that the sales team's forecast is dictated to them, and lacking any other visibility they need to scramble to assess whether the firm's expense plan can be supported with ever-changing revenue predictions. EPM offers companies the opportunity for individual organizations to work together, since goals are intrinsically linked.

Until that strategy is put in place, there are EPM-based steps that companies can take now. As you identify the critical performance metrics, focus on some that will require agreement from another department, such as these two examples:

1. Incremental revenue per customer--involves sales initiatives, personalized marketing, and customer analytics

2. Improved customer satisfaction--involves manufacturing quality, service and call handling, and fulfillment and distribution

For the corporate cultures that struggle to achieve this cross-functional agreement, the most important tool that they can put into the hands of customer-facing employees is clarity regarding customer strategy. Employees handle customer requests daily, and until the real-time enterprise with real-time information at everyone's fingertips is a reality, the biggest danger companies face is letting each employee or each department make individual decisions about how to deal with the same customers. Over time EPM will surpass strategy disclosure and alignment with key performance indicators (KPIs) that are reinforced with incentives to encourage the desired performance.

Baseline metrics must be developed first to support legitimate business cases, ROI justifications, and investment decisions
Only about half of CRM projects are launched with a formal business case to justify the project. The justifications use a combination of tangible productivity improvement, resulting in a lower cost of sale or service, or are linked to revenue opportunities based on the creation of new channels, revenue retention, and aftermarket expansion. However, typically these are educated guesses, because there are few meaningful measures in place and the data to create them is difficult and time-consuming to collect.

For today's new evaluations, economic conditions demand more than a superficial evaluation and measurement of potential business impact. The diligence necessary to build a business case and obtain budget dollars requires that people have a solid understanding of where the business is failing and how technology can improve performance.

For example, attempting to improve customer satisfaction one call center manager assumed that low satisfaction levels were related to his agents' level of experience. So he replaced his call center staff of 25 with better-trained, more highly educated agents. However, in surveying customers following this expensive, two-year process, he learned that his customers place a higher value on the level of empathy agents showed over their ability to address every customer question on the spot.

A commitment to benchmarking must be the objective. Without a before snapshot it's impossible to get an after view, to know whether a technology investment has had the impact and return that you need. Additionally, individual project results will be misleading, because they are evaluated in a vacuum.

In addition to CRM applications, two components are needed to accomplish measurement initiatives
Existing CRM investments provide some measurement capability, yet most companies will need to incorporate new business processes, and in some cases new technology, to overcome their performance measurement challenges. Two components companies should use to complement their CRM programs are:

1. Benchmark process--This is required to support the development of baseline metrics. Companies can engage an outside consultancy, purchase benchmarking studies, or even use an online survey capability with employees and customers.

2. Incentive management--With the exception of sales organizations, there is typically a huge disconnect between how a company measures employee performance and how it determines compensation. CRM metrics, or any business metric for that matter, cannot be achieved without employee involvement and buy-in, and employees must see that a company takes linking metrics and compensation plans seriously.

Recommendations
To support the corporation's EPM strategy over the next few years, performance measurements must be in place to allow management to monitor goal achievement and take corrective action as necessary. EPM forces companies to make disciplined decisions about corporate priorities and related sacrifices, and the departments that can provide a historical view into performance will undoubtedly take priority over those that cannot. To support and defend customer-facing initiatives, companies should do the following:

Form CRM business cases by first developing baseline metrics to provide an accurate before and after view. Make this a consistent practice for all investment decisions.

1. Define whether to benchmark internally or externally based upon your broader CRM objective, and prioritize no more than five metrics.

2. Attempt to include three metrics that require cross-departmental agreement and cohesion.

About the Author
Kevin Scott is a senior research analyst, customer management service for AMR Research. Scott's research focuses on companies' utilization of e-business applications to enable marketing and other demand and revenue management strategies. He is also responsible for monitoring industry trends and developments within this market. His coverage includes marketing automation applications, analytics, revenue management, and customer data management.

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