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The Harvard Business Review recently conducted a study on customer retention and the link to company profitability. It found that for many companies, if an organization can increase its customer retention rates just ten to fifteen percent, it can double profits. This should come as no shock to business owners and managers today that already know their best source of income is their current customer base. The challenge comes in identifying the most profitable clients and then devising a system that assures their retention – all while increasing the customer base. CRM, or Customer Relationship Management, is first and foremost a business strategy. It is a deliberate and systemic method in which companies implement customer facing processes to accommodate customers, continually develop customer relationships and increase revenues from customers. Information Technology (IT) facilitates CRM objectives and processes by using sophisticated software programs to automate customer facing and back office operational activities and processes. In many cases, the CRM software suite can integrate with Sales Order Processing and Inventory Management solutions; further increasing automation and efficiencies. CRM software automation has enabled today’s managers and C-level executives to increase the visibility and transparency of their companies, as well as to allow them to better control each aspect of their business – all without negatively impacting current support staff or needing to hire additional personnel. Studies at Hewlett-Packard have demonstrated that a properly integrated and customized CRM system can significantly impact a company’s top line revenues and bottom line earnings through defined, systemic and realized savings. The Field Sales Automation components of a CRM suite alone can not only increase the aforementioned visibility into the sales process, but has also decrease redundant data entry by 20% to 25%. The study also showed a 15% to 30% decrease in pre-campaign analysis and campaign planning through an integrated Marketing Campaign module. As a matter of fact, each module showed clear and incontrovertible evidence that CRM solutions increase productivity across the Human Resource spectrum and resulted in measurable decreases in operating costs. For many companies, a primary focus and benefit point of CRM is business process efficiency. Every executive knows it is easier to enhance the bottom line by decreasing costs as opposed to increasing revenues. CRM can do both. For example, a company with an eight percent profit margin and one million dollars revenue achieves $80,000 profit. In order to increase profits by 25 percent, the company would have to increase revenues by $250,000, or cut costs by $20,000, or two percent. A quality CRM solution leverages the abilities and time of the entire human resource pool. However, depending upon the CRM software application and particular implementation objectives, organizations may differ as to who are the primary benefactors of CRM automation and efficiencies. For some companies, the main beneficiaries are the users, be it customer support representatives, marketing staff or sales professionals. Their real-time access to information and leverage of software automation empowers them to achieve their key performance metrics, goals, projects and quota. CRM software utilization allows users to be more self-reliant and in most cases, dramatically. For other companies, the main benefits are seen at the decision-making and managerial level. CRM solutions empower decision and corporate strategy makers with clear business process visibility on a real-time scale. It gives them detailed snapshots of operations from customer service initiatives to sales and marketing campaigns. Results from efforts are seen in both running time and cumulative – allowing for quick and accurate decisions and strategy implementation and or changes. Real time visibility into operations is a major power tool for today’s C-level executive. More than that, with growing competition and rapid market changes posing constant challenges and pressures – it is imperative. The real time visibility aspect to CRM gives a company heretofore unseen flexibility. It allows for near instantaneous reaction times and the ability to be proactive in meeting customer and prospect needs. CRM software solutions also afford senior management with competitive intelligence visibility, hypothetical business strategy modeling and the added time needed to exceed the efforts of their competition. How companies’ reach out to new markets is another make or break business proposition. Years ago, companies had a limited number of ways to contact prospects, measure responses and view trends. Today, there are e-mail campaigns, faxes, cable advertising across multiple channels, print advertising, network marketing, various Internet promotions, trade shows, VARS, distributors, seminars, radio and much more. Furthermore, prospects are hammered every day, through multiple venues with someone’s marketing initiative. Within a robust CRM solution is the ability to cut through the noise, target specific markets, collect and segment consumer data and then design, test and automate marketing initiatives that are based on quantifiable analysis – resulting in the most cost and time affective marketing programs possible for your company, product and marketing budget.
THE BENEFITS OF CRM CRM, or Customer Relationship Management, as a technology solution and application is not simply a product to be purchased with associated benefits enjoyed. CRM, in this light, is a business system that integrates and enhances a customer centric business plan of a given organization. A precursor to gaining a quality CRM application is the complete understanding of HOW the organization operates and interacts with customers. Most businesses have a clear picture of how they are supposed to run, but with a complete process review (the initial stage of any successful CRM implementation) often shows that the “what is” is separated from the “what was intended.” In many instances, this helps companies realign themselves or see better ways of accomplishing goals. Either way, productivity increases and management gets a better view of the actual corporate operations and a 360 degree view of the customer relationship. The second affect of a quality CRM application is realized as a result of the automation of each business process; creating a series of benefits, which include the integration of systems that are immune from system deviation. The workflow processes are all dependant upon earlier stage input in order to function correctly. This makes sure that all activities add value, each process is complete, necessary steps are not skipped and the end result is consistently accomplished. For instance, in the case of a customer request for information – the request itself starts a CRM process, which must result in an action (in this case an acknowledgement and response). This action can then escalate to a supervisor based on a subsequent or downstream stimulus (such as if no response is given within a pre-designated time.) As this type of process can occur in an automated and measurable fashion, the customer request is not ignored, or if ignored can continue up the supervisory chain until action is taken. In the case of a sales inquiry, appropriate notices and commands would go to appropriate functionaries in the proper departments. The bottom line in this instance is that nothing started can end without a defined resolution. All sales inquiries are responded to and sales managers are involved automatically. If an existing customer (i.e. one of a stand-alone electric generator company) places an order for a part, or needs their work redone, not only is the appropriate sales representative notified, but his or her supervisor, the parts manager, the permit department, and the accounting department are all notified and the appropriate forms and approvals generated. Everyone who is supposed to be involved in whatever process is required becomes notified and, held responsible for their own actions and contribution to the process. If any process member fails to do their job, the system stops and the appropriate executive is alerted with relevant information. Simply put, a company using a quality CRM solution has clearly defined workflow processes and message consistency. It has defined business rules, key metrics and customer value drivers. These benefits significantly improve productivity and, with the CRM solution’s reporting capabilities, provide real-time visibility across the process lifecycles. Everyone involved, from the customer to the CEO, gains from a shared understanding of what their roles are, what is expected of them, what they can expect from the business and how it will all be accomplished. This results in increased customer retention through higher customer satisfaction levels, increased efficiencies through enhanced operation analysis, lower employee turnover from better defined responsibilities and job satisfaction, and lowered operating costs as the need for support staff is lowered and operating redundancies are eliminated.
THE COSTS OF CRM The cost of any CRM (Customer Relationship Management) solution must be considered both in terms of hard costs (software licensing, hardware fulfillment, implementation consulting fees, IT labor) and soft costs (employee downtime, integration, training, etc.) While it still comes as a surprise too many, soft costs will normally exceed hard costs by a factor of at least two. Most analyst firms would suggest that the factor is closer to four and often more. Software as a Service (SaaS) CRM implementation costs are normally lower than traditional licensing and on-premise software installations, however, internal costs continue to apply. Companies like Microsoft (Dynamics CRM), Sage (SalesLogix), Epicor (Clientele) and other software manufacturers normally charge a per user license fee. Some, like Microsoft, also now offer a small business edition (this works in conjunction with Microsoft’s Small Business Server and is okay for up to around 50 users). Enterprise editions normally cost in the $1100 and up range per user (although Microsoft’s Small Business version starts at about $490 per user). Companies must also be cognizant of software add-ons and specialized modules that will increase the cost of the software packages. In addition, these programs need to reside on software platforms (SQL Server, Oracle, Windows Server 2003) and hardware (database servers, web servers, reporting servers, domain controllers, NAS (network attached storage), etc.) that will support them. Properly done and built with redundancy, this can be a significant investment even before considering the IT labor that will be forever required to deploy, maintenance, patch, administrate, trouble-shoot and upgrade both the software and hardware. It is important to look at the manufacturers recommended specifications for what the minimum requirements are for both supporting server software and hardware. The word minimum means just that – the absolute least you should be able to get away and still expect reasonable (not great) system performance. As a general rule, going with the minimum is an open invitation to higher maintenance costs and more problems. Given that a quality CRM technology solution is a mission critical business-centric application, most buyers are advised not be penny-wise and pound-foolish. In these types of situations, investing less does not save you money in the long run. For the CRM implementation on a Microsoft platform, it is usually recommended that Microsoft Server 2003 be used as a minimum as Server 2000 is off of support. Costs for Server 2003 start at around $1,000 and the Enterprise Edition starts at about $3,200. The difference between the two, as it affects the network and usage is that Enterprise will allow for much more RAM memory to be utilized which is one of the most influential components related to system speed and performance. Given how data intense a CRM solution is, do not skimp on RAM when equipping your servers. Having a great program that helps your business isn't really so great if it runs so slowly your employees are wasting time watching the computer and getting frustrated. What is important here is to know what you need today, and be able to forecast your needs over about a three year horizon. Similar to the software component, the hardware component will depend on the number of concurrent users, the volumes of data and integration with legacy systems. The primary focus should be on the memory, storage and processor speed. It is also important to note that you should make sure that your network can run as fast as the server. Ask about the NICs (network interface cards) on the computers being used and within the system itself. It makes no sense to get a fast server if the network cannot keep up. The costs for the hardware can run similar to the software. A major cost component comes with the configuration and customization of the CRM software application. Today’s CRM professionals are compensated $150 per hour and more for their time. For most implementations, each line of business and business process must be identified and then mapped or re-created within the CRM solution with a series of menus, drop down lists and tables. For a company of 25 users, this can easily take two to three months of elapsed time, or, 200 to 300 hours of work time. There is an economy of scale however, as the primary driver of cost here is not in the amount of employees, but in the amount and variety of business processes involved (i.e. sales, marketing, customer service, order entry, project management, etc.) Some CRM solutions include pre-packaged industry specific templates and formats which can increase initial fit and save time and money. A soft cost that needs to be considered is the impact on employee productivity during the investigative and implementation stages. Know going in that time must be spent on the project for not only the selection of the solution, but also the implementation, integration, customization and training phases. Few solutions come out perfectly and there is normally a period of adjustment while employees become accustomed and acclimated to the new system, as well as to the working out of any misconfigurations or bugs.
THE CRM JOURNEY Like most business strategies, CRM is a journey and not a destination. For this journey to be successful, it requires unwavering executive sponsorship, solid objectives backed with key performance indicators, streamlining of cross-departmental business processes, constant measurement with trend reviews and continuous process improvement. CRM does not end with a software implementation go-live, and in fact, the go-live is actually the start of the CRM strategy achievement. Before setting out on the CRM journey, today’s C-level executive or manager must ask him or herself why. Why are we doing this and what do we hope to accomplish? The journey must begin with clearly defined goals and expectations. Common goals often begin in the realm to identify and improve company business operations or customer facing processes, compare them to the business model and then integrate the entire system into something more automated, streamlined, responsive and productive. These types of grand goals are great starting point, however, must be more specifically defined in order to apply measurement and analysis. While there are a myriad of alternative starting points, step one is often to look at the company itself. How operations were intended to run, how they are being run, what are the strengths, weaknesses, needs, goals and, most importantly – the personnel (who are they, what do they bring to the table, what would make them more productive?) Step two is to do some research into CRM software vendors and solution providers. Software manufacturers offer varied solutions in terms of industry focus, market focus, geographic representation as well as major differences in features sets, flexibility and ease of use. If dealing with Value Added Resellers (VARS), find out who provides what in your area and then focus on how they deliver their solutions. Find one to three that offer the type of CRM solution you may be seeking and then begin exploration meetings which focus on implementation approaches, training curriculums and methods to achieve maximum software utilization. Some VARS will offer very well planned and comprehensive solutions. Others may offer cafeteria type solutions and some will offer unique specializations such as CRM software as a service (SAAS) or sometimes referred to as a “hosted” solution where the provider remotely supplies the hardware and software and you use it via the internet. A few meetings should be expected with each before you find enough of a comfort zone to decide whom you will utilize. I personally find the VARS reputation to be the greatest tell-tale of predicted performance. A significant part of your CRM decision may involve the state of your existing network. Some CRM solutions may require upgrades up to and including completely new servers and related hardware. If you are unwilling or unable to incur these type of investments, make sure the CRM solution can work within the limits of your current IT infrastructure. Much will depend on how robust a CRM solution you company can benefit from. If you have a website that includes customer information gathering, lead generation or e-commerce components, system integration will have to be included. Step three starts once a provider or implementation advisor is selected. You should expect representatives from your new “partner” to meet with everyone in your company except the janitor. If you have an IT staff, most of their time will be taken for this project for the duration of the engagement. The time for these initial meetings will vary depending upon your corporate structure. For instance, the sales manager will spend as much time as is needed to explain, in detail, all of the processes his or her staff goes through. Knowledge workers and data processors will also spend a good amount of time in this stage explaining how things are done. Accounting will be involved more in the manner of reports and the form of the reports they need for the accounting system. This is a very hands-on part of the CRM journey. Step four will be the actual configuration and integration of the CRM solution with your network. Implementation tasks will be staff facing and significantly detract from staff’s normal job activities throughout the project. Many technical tasks such as data conversion, system integration and testing can be handled in off hours or over weekends. Testing will be ongoing but should not impact daily work. However, there are bound to be kinks in the system that will only be made apparent through real time use. Step five is training. This is something that should start before the actual integration. Obviously the real time training cannot begin until the system is configured. However, for the sake of productivity, everyone involved should be trained on the basics of the CRM solution as early and as thoroughly as possible. A major aspect of this live state training is employee feedback. This will aid the provider in making whatever final adjustments are needed in order to make the solution as responsive as possible. The last step is using the configured system in a production environment. This step by nature is where you realize the benefits of all of the hard work and effort that goes into a quality CRM project. No business is static, nor does any business operate in a vacuum. Because of this adjustments will always be needed for the CRM solution. Expect it and make sure any solution you choose is flexible and will accommodate business process changes. In addition, this is where your relationship with the CRM solution provider is of particular importance. Prompt feedback and adjustments can be a key element to your continued growth. That and the ability to work with the provider to get the support needed to make sure your employees are using the CRM system to its fullest capacity. APLICOR CRM & ERP SYSTEM IMPLEMENTATION EXERIENCE I completed my first Aplicor implementation for a financial services firm and wanted to share some of the experience and lessons learned. I've previously completed on-demand CRM software implementations for Salesforce.com projects, however, I've not before managed an on-demand accounting software and ERP system so this was a little bit of an eye opener for me. The project hit an early delay as the data conversion revealed more dirty data than expected. However, when most of the dirty data was either removed or cleansed, the import of just over 1 million records (about 230,000 account and contact records and just over 900,000 activity records) was done and reconciled in less than two days (very cool). The back office accounting configuration was pretty straight-forward and quick as our CFO seemed to know exactly what he wanted and there wasn't a lot of group debate. We customized a few forms, but not much. We did more customization to the financial dashboards and reports as the management team insisted that the month end reporting package be replicated almost exactly to the current format. The front office CRM system implementation was much more of a group exercise - with strong input from our VP of Sales, Marketing Director, COO, Customer Support Manager and a few key users and influential sales people. We piloted a high number of configuration alternatives and business process maps before finally selecting the methods used for the go-live (since the go-live a few of the processes have been modified, but not much). The role-based Menus, Views, Queries and Screens in Aplicor expanded the implementation time frame, however, now each user-role sees only what is important or relevant for their needs and we expect to get a nice productivity payback from this. We trialed several workflow designs and ultimately implemented most of them, however, held back on a few until a later time (didn't want to introduce too much change all at once). I personally believe that the business process automation will be the number one payback or highest ROI event from the new system. Aplicor's business intelligence (BI) suite is very cool, however, we're not really sure which of our users are truly capable of transcending new found (dynamic and interactive) information into better decision making and this will be an item we come back to in a follow-on phase. For now, we're simply making available the dashboards, scorecards, data warehouses and OLAP (online analytical processing) to see how users react and leverage the information. Those experiences will ultimately determine our agenda and approach for the follow-on phase. We used a train-the-trainer approach for user training. We also divided up training classes into back office training (for the accounting staff), SFA training (for sales staff), marketing training and customer support training. All the training classes went exceptionally well and users gave thumbs up to the new system. SFA training took longer than the other training classes - largely because some of the role-based configurations were changed based on sales input. The go-live event was very anticlimactic (thank goodness). The system was well received and the expected initial user operational questions were quickly resolved. User adoption was very impressive (far better than the norm) and while we did have some remote sales staff test management's will, our executive sponsor was outstanding in meeting the challenge timely and head on (which resolved the issue). A by-product experience from this engagement was a new reflection of the old 'best of breed' versus 'enterprise wide' argument. The best of breed argument references various system integration approaches to link together business software systems from different vendors. What's not changed with this approach over the last 20 years is that the integration is never as simple, straight-forward or easy to maintain as the vendors suggest. What has changed is the challenge of system integration continually uses new marketing catch-phrases to suggest that the technical difficulties have been put to rest. When I started implementing business systems in the 1980's, the industry used the term EDI (Electronic Data Interchange), however, that eventually sounded old-school so the software marketing pundits created the term 'Web Services' and then later expanded it to 'XML Web Services' and then even later morphed the term into SOA (Service Oriented Architecture). Now with SaaS (software as a service), the unfashionable term for 'system integration' has been replaced by 'mashups'. Like all of its predecessors, I expect the term mashups will also be replaced by some new marketing concoction, probably something related to Web 2.0 or a social media term. However, irrespective of its buzzword evolution, the reality of integrating business software systems from different vendors is that it's never as easy as the vendors marketing brochures or sales people indicate. Further, it's only obvious that the different vendors use different user interface designs and navigation techniques (thereby increasing user training requirements and user adoption challenges), have different new product upgrade and release schedules and will probably distance themselves from system integration trouble-shooting problems that deal with a different vendor (the old finger pointing from one vendor to another we've all experienced). The Aplicor implementation was the first hosted enterprise-wide business system I've done (but hopefully not the last). It included CRM (SFA, marketing and some light customer support), financial accounting, project accounting, some light distribution and human resources - and all of it was integrated 'out of the box'. We avoided the need (and the costs) to merge together mashups and create web services exchanges between the front office and back office systems. Hallelujah. I'm scheduled to project manage a NetSuite implementation in about a month or two and look forward to both comparing the experience to Aplicor as well as sharing the lessons learned from that implementation. NetSuite is the other on-demand ERP and CRM system provider which also offers out of the box integrated front office and back office business systems.
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