Assessing Launched CRM Program

Carol Smalley
Managing Editor, CRMGuru
Member

Posted 09-Dec-2003 02:30 AM
Posted by Carol Smalley (Editor) on behalf of Gregory Yankelovich [gregoryy@cadence.com]

We have implemented a first phase of CRM two years ago, and worked hard to foster adoption and manage the changes. It is the time to assess our progress, review our strategy, and to refresh our roadmap going forward.

I am charged with development of metrics, which indicate an impact of CRM implementation and their trend. The revenue per salesperson, average transaction size, customer satisfaction trends, and other metrics are looking really good even in challenging economic times as we are experiencing. However, since a business is a complex model, rather than a controlled test, it is very difficult to justify any single result with any single action or initiative. What would be a prudent approach for allocation? Should a negotiated and agreed percent of ROI impact be assigned to CRM impact? Any other suggestions or ideas?

Carol Parenzan Smalley
Managing Editor
www.CRMGuru.com
carol@CRMGuru.com

Graham Hill
Guru
Member

Posted 10-Dec-2003 12:26 AM
Gregory

It is unfortunate that CRM was implemented at Cadence (I assume) without first looking at what it wanted to achieve and how it would measure success. C'est la vie!

One approach that I have used in the situation you describe (in fact, to reengineer the performance measures that were needed to manage an operational airline loyalty programme) is to build a simple systems dynamics model of the business system that CRM was implemented within. This approach provides the big picture with which to understand what really drives business success, what influences what and over what time periods.

You can start by getting managers to brainstorm the key factors that drive the business, the factors' relationships with each other and their relative strength. Simple influence diagrams drawn by hand on flip-charts will do for this. The benefit of getting managers around the table to talk about how their business really works is not to be underestimated.

In the high-tech B2B environment at Cadence you should consider using the influence diagrams to develop a proper computer-based systems dynamics model that you can simulate the real business with. You can run sets of historical business data through the simulation as you refine its effectiveness. The simulation tool will allow you to look how your business would have changed without the CRM tool compared to how it did change with the tool.

Either way, the systems dynamics model will provide insights into what measures are key in measuring the heart-beat of your business, and therefore of how CRM should impact its performance.

Armed with this insight, you can look at how the key measures changed as CRM was introduced over the prior two years. Ideally, there should be a positive relationship between the introduction of CRM and changes in the key business measures that you would expect to be changed by CRM. Be prepared for a significant lag phase before some of the measures move.

Business is a lot more complex than suggested by the simplistic pipeline models often implemented within CRM systems. Use the power of systems thinking to look at how your business really works and you will be able to understand what drives the sales pipeline, not just measure what is in it.

Graham Hill
Independent Management Consultant

Barry Trailer
Guru
Member

Posted 15-Dec-2003 06:04 AM
Gregory,

Graham's suggestion to look at Cadence's operation and performance as a system looks like an interesting exercise—and may reveal important relationships and interdependencies.

I would go easy on doing extensive modeling with historic data, however, as much of what has been stored in CRM and other systems, partcularly in early phases with little inspection, can be pretty 'squishy' (read: inaccurate/unreliable).

While I agree that the pipeline analytics in CRM packages are far too simplistic to be helpful, there are tools available now that are much more sophisticated that can be readily implemented. These focus on operating performance metrics and have two benefits.

First, operating performance metrics track leading indicators (eg, process step times, fallout per step, relative success of lead sources, etc) which reflect how the sales/marketing production engine(s) is operating.

Second, these indicators can be the basis for tuning the engine as you operate while recording the improvements—hence, you will have specific measurable results over time (usually after a quarter).

I've written a number of articles on this topic and would be pleased to refer you to those that are appropriate.

Barry Trailer
CSO Insights

Edwin Setzpfand
Member Council
Member

Posted 19-Dec-2003 06:12 AM
Gregory,

You aim to develop metrics to measure the "impact of CRM implementation and their trend" While in the first line you wrote about having implemented a "first phase of CRM" to be followed by "working hard to foster adoption and manage the changes". No doubt that measuring a great positive impact on ROI will help you to reach your goal. The proof of the pudding also here is in the eating Smile

However valuable the inputs from Graham and Barry, I think you should realize (and quite probably you do) that working from an adequate and complete CRM approach results in a business that is fundamentally different from the "old style" business you had before.

It's a pity you haven't been more explicit about what actually makes up your "first phase" and what you envisage to be contained in the next phases. (But I recognize that you may have good reasons not to reveal too much of your plans in a public forum Wink )

Indeed, the business is a complex model and so is setting up CRM. And there are various ways to define ROI, about which many books and articles have been written (as you also can find on this Forum and elsewhere on CRMGuru). On one end you maybe can calculate a ROI for the whole CRM initiative. But on the other end the introduction of CRM enables you to conduct marketing campaigns that are much more sophisticated than before. And when the CRM really leads to a more efficient and more effective processing, also handling of inquiries, sales orders and after sales service may cost you less.

In almost any setting successful introduction of CRM will fundamentally alter your business and comparison between before and after may lead to comparing bad apples with better oranges.

I assume you know how your business processes add the greatest value to your products or services and I assume that your first phase of CRM focusses on that.

Another point is that as you have only implemented this first phase of CRM then how can you measure the progress? I don't ignore the possibility of measuring progress of a partial completed program, but you must be very careful in setting up these metrics and interpreting them as long as the program has not yet completed. And be sure all parties agree to your approach & metrics from the beginning.

You a/o wrote about "customer satisfaction trends .. [which] are looking really good". How useful can this customer feedback help you to review the intermediate results and the strategy?

Edwin

Graham Hill
Guru
Member

Posted 27-Dec-2003 11:32 PM
Building upon Barry's earlier response...

Identifying the critical operating performance metrics for Cadence is clearly the first step in getting its CRM programme under control.

A big part of that is identifying the detailed operational metrics that you need to understand in order to pull the right levers in the business at the right time. The sort of metrics Barry mentions (eg, process step times, fallout per step, relative success of lead sources, etc) are what you need here.

But you also need to understand what influences each of these metrics and their inter-relationships, if you want to successfully pull the right levers. Systems dynamics - particularly influence modelling - provide management with a range of tools with which to do that.

The people who really know how the business works are middle and lower managers. You should work with them to develop the required level of systemic understanding of your business BEFORE identifying which measures to concentrate on. Some of the measures you identify through this approach may be quite different to the ones you have been using. It will prevent you from concentrating on (with tongue in cheek) the operational performance measure of 'Call Handling Time' as a call centre measure without also measuring 'First Time Resolution' and 'Customer Perceived Call Quality' at the same time.

As for reliance upon existing data, well, you have to start somewhere when looking at whether the CRM system has improved how business is done. My experience consulting to blue-chip and Mittelstand companies is that the data is often much better than it appears at first glance. I would expect a high-tech company like Cadence to have pretty robust historical performance data.

Graham Hill
Independent Management Consultant

Posted 13-Jan-2004 11:31 AM
From: Michela Fabiani of Copenhagen Business School [Posted by Teri Robinson]

How does a company concretely measures the success rate of its CRM strategy? And since different companies may apply different CRM solutions and are indeed different, aren't there different methods to measure ones success rate?

I look forward to reading your answer.

Best regards

Michela Fabiani
Copenhagen Business School
Denmark

Teri Robinson
Managing Editor

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Luis Yndigoyen
Member

Posted 15-Jan-2004 12:32 PM
The way in that you can measure the result of the implementation of a CRM Strategy must be the same no matter what solution did you apply, while all the alternatives solutions have the same components.
I think that you can establish a set of indicators relevant to your business in a balanced way (see Patricia Seybold Group web page)and measure the situation of this indicators after and before the implementation of a strategy.
Examples of these indicators: Quantity of times that a customer must call to get solved an incident or Average billing to your customers.
If you want to be more exactly, you must establish a CONTROL GROUP. This CONTROL GROUP is a group of customers over whom you do not apply a CRM Estrategy. You must measure your indicators on this control group and the rest of your customer at one point of time and after a lentgh of time (depending of your business) you must measure both groups again and establish the differences. The differences in indicators like average billing can be good indicators of the economical results of your CRM programm. It is not exactly but it is a good approach. I use this in a retail company and it worked in a good way.

PDF Docdesigning_a_customer_fly_desk.pdf (249 Kb, 18 downloads) CRM Indicators- Patricia Seybold

Jim Mercante
Member

Posted 15-Jan-2004 02:02 PM
Michela,
I have read the response thread from the CRM Gurus and it is very good.
In its simplest approach, measuirng the benefit of a CRM initiative requires a clear understanding of your current business processes, and the opportunities for improvement that your customers as well as internal users see that the CRM strategy can provide to them.
So, the intent is most likely a blend of internal and external metrics.
Internally this may mean reduced costs, improved transaction times (order processing, order inquiry, proposal time, etc.). It's also very important to capture all relevant CRM operational and support costs so you can compare full benefits to full costs.
I have developed an "ROI Model" that I would be willing to disucss with you if you are interested.
On the customer side, it is essential that you have clarity around what is important to customers in dealing with your company, and how the CRM initiaitve enhances and differentiates your customer touch activities from those of your competitors.
Admittedly some of these "metrics" may be intangible, or difficult to quanitfy. And as one CRM Guru commented, they are rarely directly causal, many factors go into improved sales, reduced costs,and incresased customer satisfaction.
But there is great benefit to following this disciplined approach in order to better understand what you have, what you have accomplished, and where you need to go next.
I would suggest that you convene a group of internal end users and, separately, a group of customers in order to get their perspective. Nothing like going to the direct sources to get unfiltered feed back.
I hope my rather lengthy comments are of value to you.
Regards,
James Mercante