CRM Strategy: Is it Just Strategy or Does the Customer have something to do with

it?

Overview

A CRM strategy is a complex process, more complex than could be expected.

Because customer-facing processes (see the definition of the customer below) are the

dominant processes of any organization – sales, marketing, customer service, even human

resources and finances to some extent – the majority of the direction and thrust of a

company is toward those customers. A technology-enabled CRM strategy to meet

customer-focused objectives involves the vast majority of any organization’s activity.

A typical grand objective of a CRM strategy is to create a unified, 360 degree

view of a customer that is cross-departmental. To define how that will work, it is

essential to define what the customer is. I will do that.

This article will go through a high level view of a CRM strategy. By no means is

it the only CRM strategy possible. It will define the fundamental elements of putting

together the strategy but since there are space limitations it will only define the most

prevalent elements. For a more in-depth treatment of CRM strategy, see the second

edition of my book, CRM at the Speed of Light, which came out May 2002 from

McGraw-Hill.

#1 – the Customer

To begin planning a CRM strategy, there must be a definition of what constitutes

a customer. As trite a task as this may seem, the definition has changed so dramatically in

recent years that it is worthy of being called a sea change.

The classic customer was the individual or group that paid for goods and services.

That is no longer the case. The customer in the 21st century lexicon is the person or group

that exchanges value with another person or group. That means it could be an employee,

a client (the classic customer), a supplier or vendor, or a channel or alliance partner. For

example, an employee provides productive labor (value) in exchange for being provided

with compensation and benefits (value). A channel partner is provided with leads and

access; in return they provide revenue through sales of a product or services. I’ll leave the

other value exchange definitions to your thoughtful intelligence.

By adding these groups, numerous new layers of complexity are added to

determining what a CRM strategy will be. The implications are dramatic. Do not

underestimate the importance of knowing what, not just who, the customer is.

#2 –Rockies-level Strategy

Once the customer whats and whos are determined for the company, then comes

the “grand strategy” – what the major objectives and results should be from

implementing CRM successfully.

In short, they are:

1. The value proposition – what does the company want to get out of the

project?

2. Business case – What are the benchmarks and key performance

indicators (KPIs) that will be used to determine the success of that value

proposition? What will be the Return on Investment (ROI)?

Value Proposition

The value proposition is the results you want from your CRM implementation. Do

you want to increase the number of customers by x-fold or make sure that your customer

retention rate goes up x percent to x+1 percent? Do you want to reduce the time it takes

to solve customer problems? Do you want a reduction in administrative work time so that

the sales team can go out and sell more often? Do you want to automate the processes

that measure the effect of various marketing campaigns or be able to change those

campaigns actively in real time? Do you want to establish the capacity to measure the

lifetime value of the customer so that you can decide how to spend your carefully

managed available funds for sales and marketing? Do you want to establish a pipeline to

your channel partners so that their contributions to your revenue are increased to some

determined level? Do you want to increase customer satisfaction by some number that

also makes you happy? Ad infinitum.

All of the above represent possible objectives that CRM can affect. There are too

many others to mention in this limited space. They will vary from company to company.

But the value proposition must be established concretely before anything else is done.

This provides the ground upon which a foundation can be placed.

Business Case & Metrics/Benchmarks

The next step is the creation of the business case that will show how CRM will

support the successful execution of the goals and objectives. It is here that the formal

studies for ROI, the establishment of Key Performance Indicators (KPIs) – those

measurements that identify the tangible and intangible goals success factors – are done.

Sadly though, a lot of companies fail to focus on putting together formal criteria

and thus, almost guarantee CRM failure before they even select the package they are

going to fail with. These criteria are an essential part of your CRM strategic planning

because it is these measurements that will be used to determine the success or failure of

the CRM rollout. Thus, a formal business case is absolutely critical. In a recent study by

AMR Group through the CRM Project they found that 58% of the companies that were

spending countless U.S. dollars on CRM implementations hadn’t done a formal business

case. A deadly game to play when millions of dollars and countless labor-hours and even

corporate success or failure is on the line. Educated guesswork is not sufficient.

In “normal” economic periods, commonplace metrics for customer satisfaction

levels and retention rates and reduced costs of services and/or sales are used. In good

economies, customer acquisition and increased sales and revenue are often measured. In

recessionary times, head count reduction becomes a factor in CRM strategic planning.

More and more companies are adopting the Balanced Scorecard approach to

measurement of Key Performance Indicators. This method, developed in 1996 by Dr.

Robert Kaplan, identifies and quantifies both tangible and intangible factors. Probably the

best example of the intangible would be metrics for measuring customer satisfaction.

“For example,” says Robb Eklund, Vice President of Product Marketing for

PeopleSoft’s CRM products, “KPIs for customer satisfaction might include how quickly

the customers pay their bills or how frequently they buy maintenance renewals. These

can be indicators of how happy the customer really is.”

A few of the vendors, notably PeopleSoft and SAP, build Balanced Scorecard

approaches into their CRM applications. However, vendor application functionality and

usability cannot be a factor at this stage of strategic planning. The vendors’ importance

only comes considerably later.

#3 – the Foothills – Elements of Strategy

After the objectives are set and the metrics for identifying the successful

execution of those objectives are completed, the elements of the strategic plan have to be

decided. CRM is a technology-enabled strategy that encompasses the breadth and depth

of an enterprise. Because it is a customer-focused strategy, it involves creating a unified

view of the customer that is accessible across multiple departments of a company through

multiple communications media. A good strategy is cognizant at all times not only of the

needs of senior management but of the users which could mean employees, partners, or

clients. Business processes may be changed, remain, be eliminated or added. Corporate

culture may be dramatically altered in unexpected ways. The CRM technology agreed

upon has implications far beyond what package or packages or even what approach to the

packages you select.

Stakeholding Committees

To make sure that the business processes are re-engineered (oh that word!!) with

the corporate vision and benchmarks/KPIs in mind, it is essential to form a team of

stakeholders that will drive the CRM implementation from the point of vision to the final

rollout of the applications. Here is the conundrum. Since CRM is ultimately an

enterprise-wide project, it needs to be driven by senior management. But, since the

primary reason for the high rate of CRM failure is the users simply don’t use it, the users

have to be as involved from the beginning of the project through to the end as senior

management. “User-as-stakeholder” involvement might be considered a bit of a

controversial position. It is not widely recommended yet, though it is gaining credence

among the integrators, vendors and analysts. It is not only valid but critical to the success

of any CRM project. Let’s look at it.

Who are the users? They are the employees who are going to access the CRM

applications chosen to effect the changes in the business processes. They are the

customers who are paying the company for products and services. They are the partners

who are working in tandem with the sales team of the company. If one of the stated

objectives of the CRM strategy is to improve customer satisfaction, then it makes

ordinary sense to involve those customers from the beginning in helping you architect the

program for their satisfaction. It becomes almost a self-perpetuating, self-contained CRM

strategy because the customers are happier when they are involved in planning a CRM

strategy and business approach that is aimed at their own satisfaction.

The same goes for the employees who will be using the applications and the new

system. The primary cause for the 55-75% CRM project failure rate that is espoused by

many analysts is that the system is not used by the users. Thus, for the CRM strategy to

be successful, it must include continuous input from key user representatives. The best

group to serve would be the appropriate “natural leaders,” those employees who are

respected in their departments, not due to their titles, but their deeds. These natural

leaders can be a powerful stakeholding voice because they know what their departments

need to make the system useful to their colleagues. They can be the evangelists back to

the department when the implementation is complete and the training for the system

about to begin. Why? Because they are providing input on functionality and usability

from their colleagues to the system in a way that their colleagues feel empowered from

the beginning of the planning. What is the likelihood of the departments using the system

effectively in this scenario as opposed to a senior management mandate dictating its use?

Senior management would thus play a different role than traditional senior

management stakeholders. The elements of their role would be to:

1. Make sure that there is a clear ROI defined for the project.

2. Make sure that the metrics and benchmarks are crystalline and sharp.

3. Make sure that the mission/vision remains corporate and doesn’t fall to the

level of any single interest group either departmental or external.

On the other hand, they would not be the people who are primarily concerned

with what functionality is usable and useful and what functionality isn’t. Let’s face it.

They are never going to use the system. They are the guardians of its ROI and normally

(unless there is a Chief Customer Officer at the company) not going to be dealing with

the customers directly in any way. Their interests are essential to the project, but

fundamentally different than the people who will use the system.

Business Processes

Thorough examination of how the company does business is a pre-requisite that

needs to occur long before any vendor selection. There is a very strong tendency in the

world of senior management to let CRM sexiness get in the way of a clear view of

corporate business processes and methodology. CRM “coolness” can be incredibly hot to

a senior executive who looks at the politics of success. CRM vendors’ claims tease and

tantalize but often carry little relationship to what any company actually needs. While all

this good stuff is exciting and seems easy, on the other hand, a hard look at the business

methods and rules of a company often is agonizing because, to accomplish the objectives

set out in the value proposition, it becomes obvious that the existing system doesn’t really

work and the customers aren’t really happy. This means that an overhaul of how the

business does its business is a necessity. That can mean eliminating those processes,

practices and rules that don’t conform to the new mission or changing those that have

some merit but aren’t entirely appropriate. One such example of the latter can be

compensation incentives. For example, if a cross-selling or up-selling opportunity was

identified by the customer contact representative (CCR) and there was no means to

compensate that CCR if the opportunity succeeded, then the CCR would be less likely to

look for that opportunity. The entire compensation structure might have to be

reconfigured. This is just one of a multitude of possibilities. Imagine having doing this at

the level of the entire enterprise in all departments. It must be done.

Once the assessment of business processes is complete, then the next step is to be

aware of what functionality is going to be necessary to successfully execute the changes.

This has particular bearing later on the package selection process. Suffice to say, if the

analysis of the business has been thorough, then the functionality needs will be clear.

When these steps are done, risk factors have to be assessed.

Evaluating Risk

Risk evaluation is approached almost from the opposite standpoint of the creation

of stakeholders’ committees. Where the stakeholders’ committees are tasked in seeing

that the value proposition and stated goals and objectives are achieved in a corporate

sense, despite the interest of individuals, CRM risk evaluation viewed solely from an

enterprise level or as a single factor, is a horrible mistake. CRM risk factors need to be

segmented individually. When you are dealing with multiple modules or even a single

module, the risks engendered can involve the culture, processes, technology, goals and

objectives. Some elements of the above are immature, some mature. Some play a small

part in the CRM planning, some a large part. Some interact with others. All of this has to

be taken into account when evaluating risk. Some risk factors to consider are:

1. Lack of cross-functional planning – compartmentalizing things into

individual stovepipes.

2. No formal CRM business strategy – leading to arbitrary approaches and

“educated guesswork.”

3. Poor or no senior level support - leading to lack of corporate vision and

poor knowledge of financial factors.

4. Poor or no user support – leading to lack of use of the final product.

5. Blinding light of the vendor – leading to purchasing a vendor solution

with no understanding of corporate objectives, goals or vision for CRM

This list could go on extensively but suffice to say the risks are great and need to

be identified and controlled prior to any implementation or vendor selection.

Corporate Culture

This is the single most complex part of creating a corporate CRM strategy. Keep

in mind that most of the company is usually involved in customer-facing activities. But,

for example, perhaps historically, the company has been focused on demand-based or

company-based or product-based business activity. The entire way the company and its

employees think is embedded in its dusty past. Maybe your idea of customer service had

historically been that you will take care of customer complaints within 72 hours. A

change to make it a 24 hour response time will dramatically affects the corporate culture.

More people have to be in for longer hours or you’ll have to hire new and competent

people to handle the more rapid turnaround. If you have a contact center, how you

determine numbers of personnel during varying hours will be altered.

OR

A company that has used Excel spreadsheets for 7 years is going to be reluctant to

change its practices to something seemingly “harder” to use if the benefit isn’t obvious to

the individuals who have to make the change. If employees worked at their job for 15 or

20 years and have “ways of doing things,” and are going to retire soon enough, why

would they want to change the way they do their work for something even more difficult

to learn. They would simply prefer to let it be.

But in order to make sure that they are onboard, there have to be compensatory

incentives that show these loyal and productive folks that they can be more productive

and that there is something in it for them to make this change, since it is likely that their

company doesn’t want to lose them.

All in all, the corporate culture will be dramatically affected by the

implementation of CRM and those changes, both positive and negative, have to be

planned for.

Technology

This is an equally important parameter of CRM strategic planning. What

technological infrastructure and architecture already exists in the company? Most likely,

there has been a major investment in what are now legacy systems and, also potentially,

third party applications. A technology survey is necessary to assess what platforms,

applications, and hardware exist. Do you already have an Enterprise Resource Planning

(ERP) system in place? How easily can the CRM applications that you are thinking of

implementing integrate with your existing technology infrastructure? For example, if you

have an SAP Financial system in place, it might be easier or more cost effective to

implement an SAP CRM solution simply because of the obvious integration points

between them and the ability to utilize common data from the data store that your system

uses. A complete technology survey and plan is paramount for any sort of CRM strategy.

Package Selection

Okay, you’ve decided on the value proposition, built the business case, assessed

the business processes, identified the technologies, determined the risks and looked at the

cultural change that is likely to occur. This is being done by stakeholder teams that are set

up from senior management and users among others. Now its vendor time! Time to pick

the package. Keep in mind this is only 24% of the cost of the implementation, but the

wrong pick and despite all your other careful planning, your project is ruined.

Prior to picking the package, the package strategy which overlaps with the

implementation strategy, has to be decided. Simply put, are you going to implement an

enterprise-wide solution or a modular one with one or a few of the modules at a time?

Are you going to implement a single package or best of breed in the areas that you

identify as mission-critical for CRM? All of these questions are vital and are directly

affected by all the factors that have already gone into the strategy AND the economy.

For example, in a recessionary economy, since the value proposition tends toward

customer retention and cost reduction, the approach that is often taken is modular. Find

out where the bleeding is occurring in your processes and fix that with the

implementation of particular modules of a CRM application. If your obvious weak points

are in the production of your sales team, then Sales Force Automation (SFA) might be the

domain you want to look at. Within that context you can find modules for any facet of

sales management that you want. However, if your weakness is elsewhere, e.g. bad

communication with your business partners, perhaps Partner Relationship Management

(PRM) is the way to go.

Once the strategy for package selection is decided, then a vendor review starts.

That is a fairly obvious thing because by the time that you get to the vendor selection, if

you’ve correctly developed your CRM strategy, you will know what you need pretty

clearly. There are a few salient points to be made nonetheless.

1. “When you buy the application, you buy the vendor.” – This means that

the application isn’t the only thing that must be evaluated. How good is

the vendor at customer service? Does the company have a good

relationship with their account manager? How financially stable is the

vendor? How well do they understand the business model that the

enterprise works with? What experience do they have in the particular

industry?

2. Most of the applications have similar functionality. The question at this

stage is how usable is that functionality? How well the application

executes the functionality is essential. Additionally, how easy is it to

use for your users?

3. Another consideration is how well the architecture integrates with your

existing systems.

There are many other things to consider but these things are crucial and

sometimes the first two are especially overlooked.

For your information, the largest and best of the multi-functional CRM enterprise-

level packages are: Siebel Systems, PeopleSoft, Oracle and SAP for the largest

enterprises; E.piphany, Kana, Onyx and Pivotal for the second tier and Interact

Commerce Corporation’s SalesLogix for the mid-market.

Implementation Strategy

Once the package selection is complete, the next step and final for the purposes of

this article is the implementation strategy. Keep in mind that implementation services

ordinarily cost about 3 times what the software licenses cost, so this is a critical phase.

The initial questions to be asked (and these apply to all enterprise level packages, not just

CRM) are who is going to do it and how are they going to do it?

Some options are:

1. Internal – The least viable. Very rarely is there an internal group of

employees who have the experience and/or the time to actually

implement a very CRM complex system by themselves.

2. Vendor professional services – this can be a good alternative and

provides the customer with an experienced team with access to the

latest information from the vendor. This can be expensive.

3. Integrators – either large or boutique this is often the best option for

price and commitment. Look for a certified partner of the vendor that

you are using for the software.

Implementation methodology is beyond the scope of this article and is something

to be decided between the customer and the project team. I would highly recommend

though, that there is a clear statement of work and a well-established change management

process agreed upon between parties before the implementation starts.

Summary

I’ve just touched upon the major elements of a CRM strategy. There could be a

book written about it. It seems like a daunting task to put it together and is quite time-

consuming, but taking the care to identify all the objectives, processes, cultural changes,

technology biases, etc. will lead to a likelihood of success in the use of this new CRM

system. That can lead to happy employees, happy customers, increased revenues, better

use of those valuable dollars and a successful company. That’s what it’s all about, isn’t

it?

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