Interview: Simon Knox and Stan Maklan. Customer Relationship Management: Perspectives from the Market Place

Transcription

1 Interview: Simon Knox and Stan Maklan Customer Relationship Management: Perspectives from the Market Place Hello, this is Steve Macaulay and this is a Cranfield School of Management Podcast. Customer relationship management or CRM promised so much, and appears to have delivered so little. I am here today to talk about CRM to two of the authors of the book Customer Relationship Management: Perspectives from the Market Place. Simon Knox and Stan Maklan I will start with you Stan, why did you write this book? Well, as you mentioned in your introduction massive investment in CRM has not always led to improved customer experience or better financial return. The theory had not necessarily provided the guidance, or if it was developed, it was insufficiently developed. So we thought we could learn from best practice; we broke CRM down into some prime components and we provide examples of best practice in each component. So the cases we use in the book cover a wide range of industries in B2B and B2C. I think also we were very aware that many practitioners regarded CRM as a database manipulation activity and from our perspective we are very clear that it was a people issue and a process issue as well. So in our book we make clear, I think, that it is a combination of technology, people and processes that are required to make CRM work effectively and efficiently. That is very interesting. Thank you for that comment Simon. So what would you like people to get out of this book Stan? Well, I guess the first realisation hopefully people will make is that there is no one roadmap, there is no here are the five steps, you follow the prescription and guarantee you are going to get a better result. CRM is very context specific, the context of the company, the context of the market that you are in, etc. So you need to look at your individual situation and you need to work with your customers, developing an ideal or if not ideal at least a better basis of working together. So we illustrate how a comprehensive CRM programme might break into a few core areas and readers of the book will start to understand the challenges and the opportunities in each of those areas, but it is up to the managers to contextualise their own situation and Knowledge Interchange Podcasts Page 1

2 relate it to the examples and concepts that we present. I would also add that CRM in many senses has been developed through the IT folk without a business. Stan and I are both marketing people and therefore what we wanted to do was present a more marketing orientated approach to CRM development and, in our view, without customer insight, without knowledge of customers, and going into the future, then it is highly unlikely that companies will succeed without very effective CRM systems, so a marketing orientation to the CRM approach we regarded as an essential additive component. I mean one of the interesting things we have mentioned a couple of times IT if you Google CRM you will get no end of entries about database companies and software companies. Isn t it really a rather outdated concept this idea of databases and CRM? Well, yes. If you look at CRM as an acronym, people have said well, CRM dated or not dated and people have played with replacing it as an acronym, but in fact it has such currency that I think it is a rather pointless exercise. I think we just need to be clear that we understand what we mean by customer relationship management. There was, as you mentioned earlier on, a wave one of great enthusiastic investment it hasn t always led to delivery of the promises. We are certainly seeing now a more mature, more balance wave two, which is more grounded in, which Simon suggested, marketing and customers and customer value and less related purely to IT. So we are seeing a maturing of the CRM. If you look at the data there is no let up in the investment behind CRM programmes, CRM solutions you see companies with managers now with the title of Director of Customer Insights, so you still see a tremendous belief in investment in this whole area it s just, I think, we are hopefully a bit more mature about what we can expect and how we go about it. Having customers is not an option for most businesses. You have customers you are going to have to manage them, or at worst you have to ignore them, but you need some sort of policy for them and therefore, I think, the objective of managing your customers in a systematic fashion with clear objectives and understanding those who you need to invest in and those who you can t afford to invest in as much. I think that will carry on. I don t see a way around that really. I totally agree. I think there is also added pressure on business leaders to be accountable for the investments they make. So CRM on the one hand is an investment, but on the other hand is Knowledge Interchange Podcasts Page 2

3 a conduit to better management of investment returns. For instance, understanding the profitability of your customer base, how much to invest in key accounts based on what profit they are generating at the moment and perhaps potential profit in the future. CRM enables that kind of conversation, I think, which previously had been lacking. So accountability and complexity of business developments through multiple channels, through multiple customer linkages, means that we have to have one view, one message around our customer base and I think CRM can help in formulating that policy or that strategy. I am very interested in getting to, if you like, what the practitioner would say is what is a successful CRM, what is not successful you hear all these scare stories, you don t hear that many successes. Tell me, from a practitioner perspective, because I know both of you are not just academics, but that you have actually done it for real. I think the real discriminators here are the quality of your customer insight that you as an organisation have. The development of the appropriate capabilities within the organisation and frankly some time and persistence. I am not a big believer and my research suggests that the big bang approach to CRM may work. I think that if you don t really know what your customers want from a relationship and you haven t tested out if you can engage with them meaningfully in a different manner, and if you don t have the capabilities, if you have always been a product or transactional marketing type organisation, it is a high risk to spend a lot of money quickly and drive through a lot of changes very quickly, and how you handle your customers. So start with insight why does the customer want to have a relationship with you? What is in it for the customer? I don t want a relationship with the provider of my aluminium foil for the kitchen frankly I don t see the basis of it. Maybe that is an absurd reaction. But you have can have transactional relationships with suppliers you like without having the interactive relationship with them. So there has to be something in the relationship, there has to be something in it for the customer. How important are you, the organization, to them? How will they react to your offers and stimuli? It takes time to build up this insight. It doesn t come automatically from having a data warehouse and data mining tools. You need to spend time, you need to spend the effort on it. And that really takes me to the second key determinant of success and that is about marketing capabilities. You need to have the capabilities, you need to be able to learn from customers and you need to be able to respond to that which you have learnt and you cannot get that learning just from a software package. It is the people skills, it s the Knowledge Interchange Podcasts Page 3

4 management capabilities around that. So there is no point really in engaging in CRM, in engaging in a cycle of learning from customers if you, as an organisation, are unwilling or unable to respond to that which you have learnt. So you need to have both the insight about customers, the capability of learning from them and responding to them and then it takes time because depending on the context, depending on the interest in your category, depending on the nature of your relationship, offering new ways of working together may take time for people to take up, may take time for you to learn, may take time for you to respond. So you need a bit of patience and persistence. My research suggests the fact that companies that start with their capabilities, start with the insight and capabilities, learn what works and then extend and expand the programme over time, have a greater chance of success than those that don t and obviously will have a lower risk because they are not investing all of their money up front. Just building on Stan s point about trial I totally agree that in developing a CRM strategy, trial is critical. In other words investing a little bit, learning, assessing and then reinvesting as the understanding and knowledge develops. And a practical example that we were involved in a few years back was BT Commercial Division where they developed a CRM approach on a trial basis with a number of major customers and what they learnt from that was how best to manage those customer relationships more effectively and what was so interesting about this trialling and learning was they were able to serve customers more effectively and at lower cost, which of course is the gold standard. So in BT, the commercial arm of BT, this proved to be very successful and then was subsequently rolled out across a broader category of customers. So trialling, learning, reinvestment is I think critical. So picking up that word investment Stan, do you feel there are any rules that you can apply to investing in CRM? Well, maybe not rules, maybe more of an approach. Typically you see these big IT led change programmes, it s all about saying OK the whole company has to be committed, the top management, the big budget, let s drive through the change programme. It s not the way, for example, venture capitalists work and I would look at sometimes these investments in CRM are akin to a venture capitalist. If you go to a venture capitalist they will look at you, what is the quality of your abilities, how good is this idea here is a little bit of money, come back in a few months and show me what you have done. That s interesting, here is a bit more money, do some more. Here s a Knowledge Interchange Podcasts Page 4

5 bit more money, show me some real customers. It s very much knowing how much to fund it to allow the idea to prosper and develop, to build the capabilities and when you scale up the investment and that is the trialling things that Simon mentioned before. Think about a venture capitalist, think about options pricing type approach of models. Think about learning about the customers, investing enough so you can learn and respond to some customers anyhow, read that, build the management systems around that experience so that it is sustainable, that it can be scaled etc. and build it up over time. I guess the advice I would give is don t be in a hurry, don t rush into it, because learning is by nature an interactive and time consuming process, and invest behind the learning and development, as opposed to invest up front and hope to heck that the learning comes at the end of it. So I would think more of a venture capital as an investment perspective than a typical large investment with a discounted cash flow at the end of it. So, if I look to the future then where is CRM going and what advice would you give business leaders? Well, as I mentioned before, hopefully if you are a business your customers aren t going away and you need to manage them. So I don t think CRM is a fad or a trend, we will manage customers one way or t'other, whatever three letter acronym we wish to do it under. I see the big trend now is about this whole customer insight piece. Companies are spending a lot more time and effort on truly understanding what different types of customers want and the sort of customer experiences they would like to have and how best the organisation can deliver them. I would suggest that managers tolerate a bit of experimentation and learning and that means diversity. It means that perhaps the development of your CRM isn t neatly summarised on one powerpoint slide with a few neat boxes and arrows between the boxes. You might have different programmes and different experiments going on in different parts of the organisation. Ultimately those involved in managing the customer experience will come together around a view of what best practice is, but I think perhaps we shouldn t be too managerial, too top down driven imposing a one size fits all solution allow a bit more experimentation and learning to develop and I think that is the way that successful CRM is taking off right now. Simon, have you anything to add? Yes, I would just add to this the internal perspective. I think it is very important that business leaders view these experiments that Knowledge Interchange Podcasts Page 5

6 Stan has talked about without top support for a CRM system, albeit an experimental or trial approach, it is doomed to failure. It is a change management process and if the change management isn t guided and endorsed by the top team then it s going to disappear as some sort of functional activity. So even if it s a small experiment it has to have exposure at the top level if CRM is going to have a resonance for change for a more customer focused business. That is a very useful note, I think, to end on. So Stan, Simon, thank you very much indeed. Knowledge Interchange Podcasts Page 6

7 Cranfield School of Management Produced by the Learning Services Team Cranfield School of Management Cranfield University 2008