White Paper. CRM Defining the Value of Customer Loyalty

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1 White Paper CRM Defining the Value of Customer Loyalty

2 CRM Defining The Value of Loyal Customers Written By: Barton Scott Introduction Before we begin our discussion ask yourself this question: What does Customer Relationship Management (CRM) mean to me and what is its value? Thousands of companies have endeavored down this same path many successful and others not. The reason may lie in the fact that CRM is sometimes viewed incorrectly and not fully understood. This paper will provide some insights to consider about the value of CRM in defining customers, increasing loyalty and increasing profits. At C2 CRM we believe executives should realize that Customer Relationship Management is really not a technological issue, but rather an organizational mindset. This mindset can be evaluated by looking at three different aspects of a company: People or Culture, Business Processes and finally a company s use of Technology. 60% of a CRM strategy revolves around the culture of a company. Successful CRM implementations typically require changes or enhancements to the behavior or culture of a company. Specifically, this has to do with employee and management attitudes toward customers, as well as specific behaviors in dealing with those customers or prospects. In other words, the company is changing from a product or commodity centric mindset to that of being customer centric. 30% of a CRM strategy deals with changes or enhancements to the work processes people use to interact with customers and fulfill requests. If those processes are inefficient, automating them will not eliminate the inefficiencies. As part of a CRM implementation, companies often must re-evaluate what they do, why they do it, and how they do it. 10% of a CRM strategy is about technology. If the first two requirements are not adequately addressed, the use of technology may bring no benefit to the company. However, having said this, C2 CRM also believes that once the necessary changes have been made in behavior, culture and business processes, then the technology becomes 100% important. In other words, the technology must be capable of executing and supporting the business that is relying on it. A Culture of Customer Centricity According to Bob Thompson (founder of CRMGuru.com), businesses can differentiate themselves in one of three ways: 1) the core product/service offering, 2) the price or total cost of ownership or 3) the total relationship and customer experience. Unfortunately, businesses are learning that simply competing based upon product quality or price is problematic at best. Why? Today companies are constantly introducing new products that have similar quality. The reality is that product quality distinctions are being marginalized by the competition from both within the US market and from global competitors. This increase in product competitiveness is coupled with the issue that very few organizations have the scale and efficiencies to simply compete on a low-price basis while also maintaining profitability. The reasons for both of these forces are varied but they include global trade, easier access to competitive information via the internet as well as the maturation of certain markets.

3 In essence, CRM was conceived to specifically address these competitive pressures and by its very nature CRM is a new business strategy that offers organizations a way to create customer loyalty without necessarily relying on the traditional models of best product, best price. CRM is a strategy that allows a business to have a better understanding of their existing customers by providing more information to those stakeholders that actually create and maintain those relationships with your customers. Organizations have found that by providing and sharing information about customers across their organization, they are able to leverage the talents and ideas of every department and consequently, increase the satisfaction of customers as well as their loyalty towards specific products or services. A great example of a customer centric organization is Southwest Airlines. According to Bob Thompson, a recent study within the airline industry showed that Southwest had a recommendation rating of 67 percent, meaning that two-thirds of respondents said that they were highly likely to recommend the airline to their friends and colleagues. This was more than double the industry average and nearly seven times higher than struggling United. This referral behavior is a key reason why loyalty matters: Genuine feelings of loyalty drive referral behavior and that propels growth and profits. In fact, the success of Southwest Airlines has resulted in a new term within the airline industry called The Southwest Effect. As soon as Southwest Airlines enters a new market airline travel increases dramatically. A study by the Greater Philadelphia Tourism Marketing Corporation found that when Southwest Airlines entered their particular market 69 percent said their friends and family were more likely to visit Philadelphia because of Southwest. As for outbound travel, 92 percent of these respondents were also more likely to take a trip to another city. Ask yourself this - How much loyalty does Southwest earn from these new travelers? Early indications say a substantial amount. As the graph below indicates, Southwest s far exceeds their competitors in customer satisfaction and this means loyal customers who continually refer business over and over and over again. Southwest Airlines is a great example of a customer centric organization. They may lure customers in with low prices, but they keep those customers thru superior service and more importantly their uncanny ability to understand who their customers are, what they desire and then subsequently tailor

4 a product offering based upon those insights. This is creating customer loyalty and it is what CRM is all about. Step#1 to Fostering Customer Loyalty Create a culture centered around customer information So if you see the value of becoming a Customer Centric organization, the next question is - What helps an organization achieve this goal? The main distinction between Customer and Product Centric organizations is simply how much information a company has about a customer and more importantly who within the company has that information. Take the following Customer Centricity Test to see how your organization rates: 1. Do you have to go to several departments to find out the entire scope of activities that are occurring within a given account? 2. Does your sales organization have difficulty proactively managing customer service issues due to lack of information? 3. Do the various departments in your organization have difficulty communicating and sharing information about customers on a daily basis? 4. Are there delays in meeting customer requests due to inefficient account management? 5. If you could be more pro-active in your responses and management of customer requests, do you think that would increase their loyalty to your business? If you answered Yes to any of these questions then your organization should consider implementing a CRM strategy. How can a CRM solution solve these problems? Simply put, by creating a framework whereby all account information from sales quotes to customer service issues to marketing promotions are stored in a single repository that can then be accessed by your employees. The end result is that CRM creates a 360 Degree View of the Customer. You begin to understand who the customer truly is, how valuable they are to your organization, the opportunities for growth and account penetration, as well as the frustrations they may have with your company that you need to resolve. This sharing of knowledge means a more satisfied and loyal customer, because they receive a level of service from your organization that is different from other vendors. In other words, your entire organization is able to Listen, to Remember and then Act as a unified team. These are the keys to creating a culture within your company that fosters Customer Loyalty. Step#2 to Fostering Customer Loyalty Streamline Business Processes to provide superior service Creating a culture that is Customer Centric is only part of the solution. Your organization also must have effective business processes in place that provide timely resolution and feedback to customers. Sharing information is great, but if your business processes are inefficient resulting in delivery delays, poor quality or errors you have gained nothing.

5 This is the second aspect of loyalty driven corporations and is epitomized by the following axiom: Understanding the customer targets their propensity to buy, effectively managing customer relationships increases their propensity to buy from us. (Sir Richard Heygate, Sophron Partners) Understand the Customer Deliver Better Service Improve Productivity Increase Loyalty Increase Profitability How important is effective business processes to creating a Customer Centric organization? It is imperative! Ernst & Young LLP recently published their 10 key principles to effective customer management. As you will see 6 out of the 10 criteria involve some form of efficient business processes. This process change can occur manually thru shear effort and determination or it can occur thru the leveraging of technologies such as CRM and Workflow. Principle Definition Type of Change Economic Segmentation A company makes marketing, sales, and service decisions based on an explicit understanding of customer value in addition to their needs and preferences. Culture Change Institutional Memory Collaboration Touch-point Alignment When a customer interacts with your company, everyone in the enterprise (from customer service to support and sales) is aware of prior interactions, outstanding issues, and pending opportunities. Customers are involved in the specification, design and/or delivery of a desired result. Customers are able to do business with your company through multiple channels, which are aligned with customers needs and their value to your business. Culture Change Culture Change Culture Change One & Done Customer needs are solved during the first contact Business Process Change

6 Principle Definition Type of Change Real-time Information Customer Scorecard Closed-loop Processes Listening Posts Total Experience Management Management Employees have real time access to the right information in order to make customer driven decisions and resolve issues immediately Link employee performance with customer specific behavior metrics (e.g. loyalties, share of spend, average customer value) Integrated front office and back-office information to ensure that information workflow carries through the entire enterprise to its logical conclusion, closing the customer loop and automatically updating all IT systems. Companies listen and apply customer input regarding quality, performance and value and continually incorporate it into business process and operations Mapping all touch points between your company and your customers and are consistent, high quality experience that provides added value to then customer. Business Process Change Business Process Change Business Process Change Business Process Change, Cultural Change Business Process Change, Cultural Change You may be thinking to yourself, Ok. I agree, but these principles seem very broad. How do I specifically address each of these principles?. It is a fair question and is probably the biggest issue that managers have when evaluating this strategy called CRM. It all boils down to Where Do I Start?. Before we answer that question, a word of caution should be offered. While these principles are great over reaching goals, it should be noted that organizations should not try to take all of these issues on at once. The issue of trying to do Too Much at One Time is the single largest reason why CRM implementations fail. C2 CRM strongly recommends an approach that focuses on making small measurable improvements that demonstrate clear results. As progress is made, new projects that expand the scope of CRM within your company can be created.

7 Companies that try to do too much at once often report that their projects are not focused and the result is a disjointed implementation that in some cases can result in a decrease in productivity. The advice we provide our customers is to select 1-2 business processes that generate measurable results for both your customers and your bottom line profits. Implement your solution around solving these initial problems and then grow your CRM strategy slowly over a period of 3 to 5 years. This approach will result in a higher success rate and minimize the risk associated with implementing a new business philosophy. Every company is different so the business processes that should be selected are really up to you. Typically, what issues you select will fall within one of the 10 principles outline by Ernst & Young. We have provided an example that deals with their second principle Institutional Memory to help you understand how CRM can help make a business more effective. PCB Peizotronics, Inc. Creating Institutional Memory thru CRM PCB Piezotronics was founded in 1967 as a manufacturer of piezoelectric quartz sensors, accelerometers, and associated electronics for the measurement of dynamic pressure, force, and vibration. The backbone of the company is its mission statement: Total Customer Satisfaction. Recently, PCB took a bold move to consolidate nearly 40 years of customer and sales history information into one common data repository. Jeff Cowen, COO for PCB explains there efforts to become a customer centric organization this way our desire [was] to automate several unique business processes including customer management, sales force automation, advanced product diagnostics, RMA processing, and a true 360 degree of our customer s experience [into a single solution]. He continued by stating that Today, we have a very difficult time obtaining a clear, painless way to capture the activity that occurred for a particular customer for a given period of time. With C2CRM, we will have a real tool to analyze account needs, track activity, improve customer responsiveness, and measure success. C2CRM will be seamlessly integrated to our back-end System (Mapics) ERP application and Microsoft Outlook in addition to integrating to our phone systems to offer CTI integration to our service representatives to enhance efficiency and truly give them a 360 degree of our customers. PCB is an example of an organization that struggled with simply understanding all of the various activities that occurred with each particular client. They have a long history of listening to and serving their customers, but they needed a solution that allowed them to remember, recall and analyze all of the details within an account. The end result, is that they chose solving the problem of Institutional Memory as their first objective when implementing CRM. Why did PCB Inc. select C2 CRM? We chose C2 CRM over Siebel Systems principally because C2 conformed to our business model and objectives, and most importantly, C2 CRM accomplished this quickly and affordably. The people at Clear C2 did a thorough job of quickly understanding our needs, while at the same time demonstrating they had a superior product regarding ease-of-use, apparent conformity to our business needs and an affordable cost.

8 Step#3 to Fostering Customer Loyalty Choose Technology that can adapt to your organization The final part of creating an effective CRM strategy is selecting technology to support your efforts. As you have seen, technology is not the primary solution to creating customer loyalty, but at some point it does become 100% important. C2 CRM is a solution that is built to adapt within an organizations existing technological environment. If you are ready to take the first step towards a Customer Centric business then here are a few reasons why C2 CRM offers you a compelling choice: Tailored for Mid-Market Organizations C2 is a solution specifically designed for companies who want a system that supports vs. controls their employees. We have found that small to medium businesses don t want huge applications. Our customer s are looking for a concise and powerful solution that simply helps them establish better relationships with each of their customers. Multi-Platform Solution - C2 is the leading CRM application for local government running on all major hardware platforms, including iseries, zseries, RS6000 and Windows NT. We specialize in providing a powerful front-office solution that runs on the most stable and reliable hardware architecture developed by IBM. Web-Based Applications C2 is a completely web based application. This means it is easier to support, easier to install, and can be accessed from any place in world. Our XML based architecture gives our customers leading web technology that can be deployed in Windows NT, Linux, Unix and ISERIES environments. Easy to Use Have you ever purchased a product and then had to get weeks of training to learn how to use it? C2 is so easy to use that you could be up & running in a matter of hours. Implementing a Non-User friendly application is a major reason CRM implementations fail, C2 CRM is by far the most comfortable and functional CRM solution available today. Affordable Simply put, C2 is the most affordable enterprise CRM solution in the marketplace. Low Total Cost of Ownership Our web-based architecture and integration to both MS-Outlook and Lotus Notes means that we can provide you a system that requires minimal support from your IT staff and works in conjunction with your existing client communication infrastructure. Supports the Evolution of Your Business - C2 CRM s unique Modular Architecture provides you with a low impact, low-cost migration path as your business needs change. As your business grows and your business processes adapt to new business conditions, C2 adapts by allowing you the ability to easily add new modules to address your growing business requirements. C2 is a Enterprise CRM solution that will support your business today, tomorrow and beyond.

9 Conclusion This paper introduced you to the concept of CRM and its vision of creating increase loyalty and profits thru becoming a Customer Centric organization. We discussed the three main aspects of a business that impact a CRM Strategy Culture, Business Process and Technology. Finally, we reviewed how each of these challenges can be met, addressed and overcome using CRM Technology. I trust you found this paper informative and useful. If you would like to receive additional information or subscribe to receive White Papers on other topics, please give us a call and we will be happy to help. Thank you for your time and consideration of our product. Regards, Mickey Patton President and CEO of C2 CRM, Inc.