When it comes to customer relationship management (CRM) systems, enterprises have unique issues to solve and obstacles to overcome. Over the past month or so, I’ve been working alongside CIOs and system architects at two different companies that have similar goals: increasing sales, decreasing delivery costs, and creating stronger relationships with customers.
Yet, while the two organizations have the same aspirations, and both CIOs have heard the message loud and clear from their respective CFOs—”Find ways to increase margins this year without significantly increasing costs”—the two entities have very distinct perspectives on both the problems and the tactical solutions.
In this column, we’ll take a look at how each company has decided to implement a CRM system and some surprising turns of events that took place during their experiences.
Company #1: Using CRM to boost sales efforts
The first company, which we’ll call “OneCo,” decided that the best way to improve customer relationships was to install a CRM system. It made this decision because, in the words of the CIO, “Our internal systems were broken.” What he meant is that the enterprise’s internal systems don’t “talk” to each other—they’re not connected.
For example, when the company’s marketing team generates a prospect, the data drops into the team’s internal database and then a printout of that sales lead is faxed or e-mailed to the appropriate salesperson.
The salesperson then takes the information and puts it into his or her desktop Act Contact file and follows through on the sales effort. Once a sale is closed, the customer and product information is provided to the support team. That unit enters the information into a database used by support professionals for postsale efforts.
A CRM application, on paper at least, promises to replace all of these functions with a single, integrated system that lets information flow freely between different groups. And while that sounds great in theory, the devil’s in the details when it comes to CRM.
As we began reviewing actual implementation time, the conversion (where possible) of existing prospects, campaigns, customer, and sales data, and the required training time for the personnel involved, grew the CRM effort from an expected three-month time frame to a yearlong project.
Not surprisingly, the costs expanded as well, as we considered the hidden costs of retraining systems, operations, and field people on how to properly maintain the new system.
And, possibly most important, is that OneCo’s CRM proposal doesn’t actually solve the fundamental problem facing the CIO to begin with. Rather than creating margin and decreasing costs, the CRM effort will more than likely increase costs and decrease customer margins, at least initially, as sales staff will need time to learn a new system. This learning time will obviously detract from sales initiatives. Yet OneCo plans to begin implementation this month and hopes to have the front-end portion (sales and marketing) operational by midyear and the complete system in place by the end of 2002.
Company #2: Using CRM to enable customer control
The second enterprise, which we’ll call “TwoCo,” is taking a radically different approach than the first company.
TwoCo’s CIO has the same mandate as his OneCo counterpart—to decrease costs and increase margins—but believes the best way to accomplish that goal is by making business simpler for customers rather than capturing and sharing customer data among employees.
The IT leader believes customers would rather do business with a company that stores and protects confidential customer information rather than one that is expanding accessibility to that proprietary data to boost sales efforts.
TwoCo is taking its existing marketing and support systems and tying them together with an XML messaging system. It’s adding the capability for customers to connect to the integrated system and get information about existing and future products as well as detailed product information on products already purchased. Customers can also schedule maintenance or support calls and even have supplies and consumables automatically delivered at predetermined dates at the guaranteed lowest prices. By allowing customers to preorder high-margin items and schedule service calls, TwoCo gets a steadier revenue stream and decreases personnel costs, as customers will handle some business functions.
Perhaps the most radical part of TwoCo’s plan is to create private, personalized Web sites for each customer. Site personalization is deep, as customers can specify which employees can browse, purchase, or request and/or schedule support for TwoCo’s products. By giving customers control over the sales process, the company’s sales force can concentrate on adding real value to their role by eliminating the order-taking element of a salesperson’s job.
A malleable technology
My initial reaction to these two project scenarios was to position them as a classic buy vs. build CRM decision. But it’s much more than that because the CRM decisions solved uniquely different business-strategy issues.
OneCo chose to consolidate operations by buying a CRM system, where TwoCo essentially built its own CRM system from existing components. TwoCo’s decision to move purchase and support decision-making from internal staff to customers makes perfect sense in these economic times. It’s able to decrease operating costs and get customer lock-in by providing services that the customers can’t create for themselves and that other companies aren’t willing to provide.
It’s important to point out that both companies’ decisions weren’t even possible just a year ago, and both show quick innovation and adoption capabilities. Many of the online services that TwoCo will provide customers are based on technologies that didn’t exist (Web services) or were prohibitively expensive (XML messaging systems) just a year or two ago.
While emerging technologies make CRM decisions more interesting than ever, it’s very likely they will also make CRM choices and approaches a bit more difficult in the months ahead.
What business strategy is fulfilled by your CRM effort?