CRM Checklist for Success

February 1, 2002
Jim Kalustian

,
Web Fletcher

,
Bart Lombardi

Bart Lombardi is a founder and managing director of Clarion, a Life Sciences Consultancy.

Pharmaceutical Executive

Pharmaceutical Executive, Pharmaceutical Executive-02-01-2002,

Customer relationship management (CRM) has become a pharma buzzword, but few companies actually practice it. That is about to change.

Customer relationship management (CRM) has become a pharma buzzword, but few companies actually practice it. That is about to change. A new study by Braun Consulting, based on its work with Fortune 500 clients, identifies 11 trends that will affect the industry in 2002:

Successful companies will invest more in customers, not less. Within the past 18 months, the economy has taken a nose dive from exuberance to retrenchment, forcing companies to closely examine their CRM investments and IT expenditures. Successful corporations will continue to invest in CRM initiatives, but they will shift their efforts from customer acquisition to customer retention. They will try to maximize the value of existing relationships and use customer information to both expand those relationships and extend their brands to other marketplaces.

To meet those goals, they must also invest in serving customers according to their value for the company. They will apply technology and strategies to keep high-value customers (those that bring the greatest return), raise the potential of moderate- to low-value customers, and minimize investments in customers that cost more than they're worth to maintain.

Companies will compete for customer share, not market share. In 2002, the average customer will probably spend less than in previous years, so companies must focus on how they will maximize customers' spending by managing and increasing the value they deliver to those customers. As a result, customer share will be a top priority and market share will be secondary.

CRM will evolve to CVM. As companies recognize that satisfying all customers won't guarantee increased revenues or profits, customer value management (CVM) will become the standard approach to maximizing ROI in customers. Companies will try to exceed expectations with customers who contribute the most value, to satisfy customers who contribute some value, and to pursue lower-cost alternatives for low-value customers. To accomplish that, companies must engage in "customer shaping" activities, such as

  • understanding customer value drivers

  • focusing on the value contributions of each customer segment

  • applying differential investment tactics to manage customer value and maximize ROI.

To avoid information traffic jams, companies will focus on data organization and analysis. By doing so, they can better differentiate their customers, establish clear customer segments according to profitability, and create richer, more measurable marketing campaigns. Although companies have collected huge amounts of customer data in the past few years, they have not used them effectively. That will change when companies make managers accountable for the analysis, application, and ROI of customer data.

Customer satisfaction won't necessarily breed customer loyalty. People make purchasing decisions based on many factors other than satisfaction, such as shifting preferences and attitudes. Successful companies will move beyond contact center performance metrics and customers' stated happiness with their purchases to offer better value for the money. To fully understand individuals' behavior patterns, companies may ask why customers stay or leave a current service plan, and then apply that knowledge to adjust their product and service offerings to keep customers from leaving.

Companies will focus on "thoughtware," not software. According to the Meta Group, 55??????75 percent of current CRM projects don't meet their objectives. That's because companies often confuse them with technology. Successful CRM programs begin, in fact, with a broad business strategy enabled by company structure, core business processes, and technology.

To succeed, companies will go beyond software to include "thoughtware"-the thought processes and information application necessary to implement their strategic initiatives. If, for example, a company's strategy is to become more responsive to customers by helping them make informed decisions based on their own needs, then sales and customer service reps need more information and training to make that happen. In other words, they will know how to interact with customers to affect the outcome of customers decision-making processes.

Customer channels will come together. Companies will create, not just talk about, seamless interplay among all channels-customer service, field service, the web, marketing, and sales-to generate a consistent, valuable customer experience. By integrating those channels, they will create a true marketing portal that effectively manages the promotion of each channel and gives marketers a comprehensive view of every customer.

Partner relationship management (PRM) will maximize value to end-customers. As companies integrate their customer channels, they will begin to better serve customers by leveraging the company's business partner network. PRM enables businesses to integrate and collaborate with their indirect channels, such as distributors, value-added resellers, and resellers to enhance values that end customers will recognize, such as price, overall quality, and ease of doing business. The strategic and financial benefits of that include increased revenues from indirect channels, decreased product time to market, increased transaction efficiency, greater visibility of inventory levels and end-customer demand, and improved product/service design.

Companies will create CRM platforms and plug in best-of-breed applications. A return to large application suites, such as those provided by Oracle, Siebel, and Peoplesoft, will provide a holistic CRM platform that integrates best-of-breed applications for functions that create a competitive advantage. Companies will analyze individual modules of those platforms-for sales, customer service, and field service-determine which ones give them a competitive advantage, and supplement those modules with best-of-breed applications. That will help achieve both efficiency and customer intimacy, and internet platforms will begin to converge with CRM platforms.

Companies will shift their focus to the long term. IT departments will examine investments and ask: "How long will they last? What will happen, from a maintenance and support perspective, if we follow this path? What benefits will I see down the road?" The internet frenzy created havoc for IT companies and forced them to make short-term point or stand-alone solutions. Now companies must think about the total cost of ownership and the viability of long-term applications and focus on enterprise architecture and IT strategy.

As CRM moves from theory and concept to maturity and reality, 2002 will be a year of implementation and results. Some trends have been building for the past few years, and top priorities will be to leverage existing technology investments, refine in-house support mechanisms, and ensure quick value demonstrations. Companies must keep a tight rein on budget resources and attempt to optimize ROI, but 2002 will be the "do it" year for all.