How to Get There From Here

At this point, everyone has seen a lot of “CRM.” We can implement CRM, purchase CRM systems and even provide CRM to our customers. But how can we transform our companies so that they are driven by customer relationship management initiatives?

Let’s broadly define CRM as optimizing all contacts with customers or potential customers. This is typically based on analytics, integrated touch-point systems and a variety of other enterprisewide capabilities.

Customer relationship management is similar to other direct communications channels – database marketing, direct marketing, one-to-one and integrated marketing communications. The primary difference is that CRM initiatives tend to be broader in focus, integrating marketing, sales, service and other functional areas that affect customer relationships.

This decentralization of CRM responsibilities within most organizations makes these initiatives virtually impossible to implement. Could direct sales, customer service, customer support, advertising and marketing all come together on this, or on anything? In most companies, the business focus, organizational structures and related business metrics are the biggest inhibitors of CRM efforts.

Several areas of your organization will have to change in order to truly support and foster CRM. The CRM transformation map above shows the various aspects of such change. There are five interrelated areas: business focus, organizational structure, business metrics, marketing focus and technology.

The map depicts typical phases of transformation within established organizations. The stages of transformation are shown from left to right – from product to customer.

It’s important to note that movement from one stage to the next does not equate to abandoning the previous stage. Rather, it is a matter of an organization gradually shifting its emphasis.

Let’s cover each of these briefly.

Transforming the business focus of an organization essentially means getting the company to buy into the customer-focused paradigm. The business focus may shift from “How can we increase the sales of our products?” to “What do our customers need, and how can we meet those needs?” There may be periods of sales, channel, marketing and service focus during the transformation process.

This business focus transformation is critical to the success of any CRM program. If the organization is only giving lip service to its interest in its customers, the CRM efforts are guaranteed to fall short – if not end abruptly.

Changing the organizational structure of a company goes hand in hand with a shift in business focus. Most organizations today retain a product focus, with product managers driving business decisions.

The transformation to a customer-focused organization should lead to literally organizing around your customers – assigning customer segment managers responsibility for the acquisition, retention and growth of different customer segments. This is a major hurdle for most organizations, as it often means augmenting their existing product or channel structure with customer management staff.

Transforming the business metrics should be a byproduct of the changes noted previously. In this case, the shift is from a single focus on product performance, promotion performance, or decentralized views of these metrics to a focus on customer lifetime value and loyalty.

Rather than simply measuring response rates and product profitability, you’re asking the critical questions, “Do we have profitable relationships with our customers? How can we make these relationships more profitable?”

Once again, this is a gradual change; you don’t abandon the necessary product, place, program and revenue measures, but you do begin to move some of your focus to the ultimate question of customer relationships.

Changing the marketing focus of your organization from mass marketing communications to interactive dialogue also is essential. This transformation seems to receive the most attention, if not all of it, in many marketing circles today. Marketing is often leading the thought process, but marketing cannot in and of itself achieve CRM without the broader, larger organizational efforts. It is important to note that while we increasingly invest in one-to-one dialogue, mass marketing communications still plays an important role in generating broad-scale awareness and interest.

Finally, there is an essential technology transformation. As with marketing focus, this area has received a great deal of attention in database marketing circles; it seems that everyone has a CRM system to sell. CRM technology must support and enable meaningful customer dialogue at all points of contact. Technology is actually the easiest of the areas to change – you could “buy your way” over to the right-hand side of the transformation map. Because of this, technology tends to get ahead of the other areas of transformation. Technology plays a critical support role, but it should not be the driver of CRM initiatives.

It is important to keep in mind that all five of these areas need to change, and in some shape or form become customer-centric, in order to effectively support CRM. Four out of five, or some other fractional level of participation, will not work, because an organization is only as strong as its weakest link.

Implementing customer relationship management will have a broad impact on an organization’s structure. A company first must identify where it stands and then develop a phased plan for change. Success will spring from the firm’s ability and willingness to make the necessary changes.