The logic behind customer relationship management (CRM) is hardly rocket science: if you design your business around your most desirable customers' wants and needs, they're likely to become better, more profitable customers. But whether your business is selling jet propulsion engines or cheese crisps, organising the enterprise around customers' needs is easier said than done.
Contrary to current marketing hype, you can't go out and buy CRM. "CRM is really a business strategy, not a suite of products," says Wendy Close, a research director with GartnerGroup (US). Though vendors would have you believe that they offer "end-to-end CRM solutions", Close maintains that no single vendor today really does everything well. And if you decide on a best-of-breed strategy, you must do the integration yourself - or pay someone dearly to do it for you. "Integration of all these systems is pretty damn hard," says Robert Mirani, director of the Yankee Group's CRM practice in Boston. Equally difficult is the cultural challenge of getting employees to focus on customers, not products. "Utopia is in some ways very easy to design but very hard to make happen," Mirani explains.
Few companies have truly transformed themselves into customer-centric organisations. But to give you an idea of what's possible with CRM, here's one view of how an integrated CRM strategy might translate into practice. The following scenario shows how the fictional Behemoth Bank built and maintained a profitable relationship with the prototypical good customer, Jane Gogetter.
Once upon a time, Behemoth Bank built a data warehouse. When Behemoth's marketers sliced and diced the bank's customer data, they uncovered a shocking fact. A third of their customers accounted for 90 per cent of profits - and many of the rest actually cost the bank money. What's more, the longer customers stayed with the bank, the more profit they generated. So Behemoth's MD decreed that the bank must hold onto its best customers by recognising - or better yet, anticipating - their individual needs. And thus was born Behemoth's CRM strategy.
Although the bank already collected customer information, it lacked a holistic view of each customer. Behemoth tackled the enormous job of integrating its operational systems and data warehouse with new CRM software. Now, no matter which channel a customer uses, the bank knows the history and potential value of its relationship with that customer. And that helps Behemoth focus on retaining the customers it most wants to keep - customers like Jane.
Targeting Profitable Customers
1 The stage is set for the first interaction between Behemoth Bank and Jane Gogetter when Mary the marketer delves into Behemoth's data warehouse to study the bank's existing customers. An OLAP query confirms Mary's assumption: customers with MBAs tend to earn - and bank - more than the average Joe. She designs a campaign to entice MBA students to open accounts and rolls out a multichannel pilot. Campaign management software shows that e-mail yields the strongest response, so Mary launches an e-mail campaign to a list of MBA students, including our heroine, Jane Gogetter.
Jane Opens an Account
2 When Jane gets Behemoth's e-mail offer for free cheques and online banking, she clicks on the URL for more information and decides it's a good deal. She completes an online application, which asks for basic account-opening data as well as her preferences: should the bank communicate to her via e-mail, phone, fax or Australia Post? In what language should the ATM speak to her? What PIN would she like? Which banking products interest her most?
As Jane submits her application, her data flows from the Web interface through the bank's front-office CRM software and into the operational customer information database and triggers a series of workflows. An e-mail shows up in a customer service agent's inbox instructing him to mail an ATM card, welcome letter and signature authorisation form within 24 hours. And an account is automatically set up in the back-office account system, to be activated upon arrival of Jane's signed authorisation form and initial deposit.
Jane Goes to the ATM
3 Jane's preferences are stored on her ATM card, so when she visits a bank machine, she's welcomed by name in English and asked if she'd like her usual $100 with receipt. When she deposits the paycheque from her part-time job, it's read by the ATM's scanner. An image of the cheque prints on her two-sided receipt; her endorsement appears on the back. Jane is confident that the ATM isn't devouring her cheques, and Behemoth has diverted Jane from expensive teller visits.
Have Plastic, Will Charge
4 Jane shows up on a list of good credit card prospects. A data mining query has identified customers with profiles similar to Behemoth's best credit card holders - those who make regular deposits and generally run a small overdraft. Jane's next bank statement includes a pre-approved, low-interest credit card offer. When she calls the toll-free number, computer telephony integration (CTI) software in the call centre sends her phone number to the CRM front-office software, which pulls her account record from the customer information database. The agent knows which offer she's received and signs her up on the phone, triggering a workflow to open a credit card account in the bank's back-office systems.
Jane Lands a Job
5 Armed with an MBA and a crisp, navy blue Country Road suit purchased with her credit card, Jane lands a job at an Internet start-up. An OLAP enquiry looking for significant changes in customer data picks up on the sudden increase in Jane's biweekly deposits and her request for automatic deposits. Her account is marked as a good prospect for term deposits, mutual fund or super. Jane's account is flagged so that the next time she contacts the bank, regardless of channel, she'll receive an appropriate offer.
When Jane calls to check her account balance, a pop-up window on the agent's screen indicates that she probably has a new job and may want information on investing. As he gives Jane her account balance, the agent asks whether congratulations on a new job are in order. When Jane says yes, he offers to send her a free financial planning kit and e-mails a kit request to the fulfilment department. The agent makes a note of her new job in the customer care software, which updates her record in the customer information database. He also authorises an increase in her credit card limit, announced on her next statement with a congratulatory note.
Jane Gets Wheels
6 Six months later, when Jane's automatic deposits increase by 12 per cent to reflect a raise, Behemoth's data analysis notices the increase. Other customers her age have proven likely to spend extra income on new cars, so a marketing analyst reviewing account status changes sends her a personalised e-mail offer for a new car loan. Jane, who has been tempted by thoughts of a new Honda CRV, clicks on the car loan URL and logs on to Behemoth's site using her online banking password. Web personalisation software serves up a car-loan application prepopulated with her account data. It requires little effort to complete the application and the rate is attractive, so Jane finances her car through Behemoth. Her application triggers a return e-mail offering car insurance from Behemoth's insurance subsidiary. Buying a car is easier than Jane expected.
Jane Buys a Unit
7 Jane has found the Unit of her dreams and needs to get approved for a mortgage quickly; Behemoth has treated her well, so she doesn't bother to shop around. As she fills out an online application, she realises she wants to borrow extra funds to finance kitchen renovations. She clicks on the "call the agent" button, and within 30 seconds an agent's voice booms through her PC speakers, "Hi Jane, this is Bob from Behemoth. I understand you have a question about your mortgage. How can I help?" Knowing that Jane does a lot of business with the bank - and will do more if it secures her mortgage - he gives her the OK to apply for up to 10 per cent more than the mortgage amount. Jane completes the online application and is told she'll get an answer within four hours. Her application triggers an automatic credit check and her data flows into Behemoth's mortgage scoring application. Jane receives an e-mail within a half hour telling her she's approved for the desired amount.
Jane Gets Distracted
8 For the first time in five years, Jane forgets to pay her credit card bill on time. But an automatic business rule in the front-office CRM system waives the finance charge applied by the back-office credit card system; this is the first time it's happened and her lifetime net value projection is above a certain threshold. Jane gets a letter with her next statement saying that because she's a valuable customer, her grace period for payment has been extended by a month without a fee. Jane is impressed.
Jane Strikes It Rich
9 Jane's start-up goes public, and she cashes in some of her stock as soon as she can after the wildly successful IPO. A routine OLAP query looking for major account changes flags an unusually hefty deposit to Jane's account - hefty enough to warrant close scrutiny. When an analyst looks at Jane's information in the front-office system, he sees that she works for a start-up and surmises that the sizeable deposit is likely a windfall rather than from illegal sources. Knowing that large, unprecedented deposits often herald churn as customers look for more lucrative investment opportunities, the analyst authorises an invitation for a free session with a financial adviser. When Jane calls, an agent goes into Behemoth's front-office system and schedules an appointment with Sarah, the financial planner who covers Jane's area. Jane's credit card is automatically upgraded to platinum status.
Behemoth's sales force automation (SFA) software notifies Sarah of her appointment with Jane. At their meeting Sarah uses the custom financial counselling option on her SFA application to generate a range of investment scenarios. She taps into data on Jane's income, savings, expenses and risk tolerance that's stored in the customer information database and shows her how modifying her risk profile will affect her long-term investment portfolio. Jane decides to open a stock mutual fund with monthly automatic cheque account deductions. Sarah activates the mutual fund account from her laptop.
Happily Ever After
10 Other milestones in Jane's life will trigger new opportunities for Behemoth. If Jane gets married, Behemoth will want to attract her joint account and her husband's investments. If she becomes a parent, Behemoth will try to get her to invest in an education fund - and open a savings account for the baby, through which the bank will cultivate what it hopes will turn into a lifetime relationship with the child. Later, the bank will offer Jane help with retirement planning and estate planning, perhaps managing the trusts she leaves for her grandchildren, opening the door for a third-generation relationship. But that's the subject for another story.
Senior editor Alice Dragoon does not work for an Internet start-up and therefore has to pay her Visa bills on time
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