Enterprise Software

Despite doubt, CRM adds value to "old economy" enterprise

CRM can be labor and capital intensive. The results of CRM efforts may not be immediately measurable or even evident. But, according to one interactive marketer, it's an undertaking that can add significant value to any business with lots of customers.


If there’s one thing that firms should be gun-shy of, it’s a trend. During the past 18 months, many of us have wearily followed the demise of businesses founded on models that held fast to the “it” technologies out there but didn’t add value to products, customers, or even shareholders in the end.

Customer relationship management (CRM) is an initiative that some organizations are reluctant to undertake because of its strong association with bygone dot-com enterprises. What’s more, the hardware and software is expensive; the implementation complicated.
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But is CRM only guilty by association with the fall of so many e-commerce enterprises? From a marketer’s standpoint, the answer is yes. Despite the hype and ill regard that many have for CRM, its strategic ability to position a company close to its customers is redeeming and worth the investment. This article takes a look at how CRM has benefited even the most time-tested, “old economy” business—beverage alcohol—and why you, too, should embrace CRM.

A drastic change
When Charles Zug joined the beverage alcohol company Brown-Forman Corporation as Vice President for Interactive Marketing, he entered a business that differed vastly from his past experiences. With a key role in Southwest Airlines’ early adoption of CRM technology and electronic ticketing, a stint in the online travel industry, and time as a consultant, Zug had been well acclimated to the pace and dynamics of CRM processes and the technologies that drive them. All of that past experience was based in industries wherein CRM initiatives yielded point-of-sale metrics to gauge the effectiveness and returns on CRM investments.

But when Zug took the helm of Brown-Forman’s CRM initiatives, he inherited a complicated marketing channel that is heavily constrained by federal and state regulations. “Our ability to communicate directly to consumers is restricted,” said Zug. “Television is a broadcast medium that has not been available to us historically, and so we’ve been pretty much limited to one-dimensional communication: print [visual] or radio [audio].”

Regulations also bar wine and spirits producers from selling directly to consumers. Because products must migrate through a chain of producer, wholesaler, retailer, and finally consumer, producers have been heavily skeptical about undertaking costly efforts to communicate directly with customers.

“Unlike a dot-com retailer like Amazon.com,” said Zug, “I can’t pull up a consumer record and determine exactly how much of my product a certain person has bought…or how many dollars I have spent against them in acquisition or retention.”

The case for CRM
So if the valuable point-of-sale data isn’t an available metric for Zug and company, why is CRM even a consideration? For almost 40 years, the company had maintained written records in disparate files of its postal mailing campaigns to keep track of its communications with customers. There were numerous inefficiencies with the old system, but it was the only way the firm’s marketers could keep any kind of grasp on consumer touch points.

Zug’s first step: integrate all records into a standardized environment on Microsoft’s SQL Server. By consolidating all data and then utilizing campaign-management software, the cost savings that Brown-Forman enjoys is striking when compared to the amount of money they would spend on postage for similar campaigns.

Is cost savings enough?
While the point-of-sale data that allows retailers like Amazon to feature customized product recommendations is impossible for Brown-Forman, Zug believes that this is one aspect of CRM technology and processes that has been overemphasized. Even though they can’t sell directly to consumers, the CRM initiative is a platform from which the company can not only segment its “customer franchise” but also monitor purchasing habits over time through carefully managed communication with target market segments. In a sense, the company does get purchase data—albeit delayed over time.

It’s the delayed feedback and relationship building that leads Zug to advocate CRM so confidently. “I think that I can prove that the money worth spending on CRM will give us a sustainable competitive advantage over our competitors, long term, and enable us to show a direct correlation between the money we spend on infrastructure and the revenue we’re able to generate.”

The bigger picture
Clearly, CRM initiatives have found a place in Brown-Forman’s marketing operations, but can other businesses recognize similar benefits? According to Zug, CRM initiatives are worth the investment for any company who wants to develop an enterprise system that provides a vision of its customers.

However, considering the many available technologies and accompanying costs, it’s definitely not something to rush into. Although Zug and company were able to develop their infrastructure fairly quickly, “We’ve also been extraordinarily diligent in the way we evaluate each tool available to us, and we made sure that the tools aligned with our specific purpose,” he said.

With careful planning and a solid objective, CRM, in its many facets, may be the most efficient means of managing wide-scale customer relationships.

Has CRM been a benefit to your firm?
Can CRM add value to organizations or is it just a hype-filled trend? Are there ways to implement CRM technologies and save costs? Share your thoughts by posting a comment below.

 

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