Measuring the Success of Your CRM Strategy

jasminem
Member

Posted 16-Aug-2005 07:29 AM
Hi,

I am trying to do some CRM research particularly with a view to the financial sector in the UK.

How does one measure the success of your CRM strategy- is it or isnt it all about the money?

Thanks

Jim Barnes, CRMGuru Panelist
Advisory Board
Member
Picture of Jim Barnes, CRMGuru Panelist

Posted 18-Aug-2005 07:30 AM
Hi Jasmine

You have raised an important and wide-ranging issue, namely how one measures the success of a CRM strategy. It's a question that would take much more time to address than we have available in this forum, and one that has been occupying the thinking of many managers in organizations who are trying to determine exactly what CRM is and where it fits in their companies.

I will attempt to at least begin to shed some light on the issue. To a very great extent how one measures the success of CRM depends on how broadly one defines the concept or the strategy. Many companies that view CRM in a technology context seem to be trying to gauge its success in terms of the impact that a CRM installation will have on driving short-term customer behaviour, repeat buying, share of wallet, reduced churn, etc.

My view has always been that CRM is much more of a corporate orientation or culture that implies a commitment to customers and to the building of long-term relationships with them, utilising a variety of techniques to get there. Thus, in response to the implementation of a CRM strategy, the company should expect a combination of short-term and longer-term results. Therefore, we need a combination of measures to assess the effectiveness of our strategy.

In short, to obtain a clear picture of how well a CRM strategy is being received by customers, you will need to implement a measurement programme that captures data not only internally, but also directly from the customer through surveys, most likely. We need to know whether the customer has noticed that we have been spending a lot of money on a CRM strategy.

Also,, and as a result of this, we need to collect what I refer to as both "hard" and "soft" information. We not only need to know what effect the strategy is having on moving some of the short-term behavioural indicators, but also how we are doing in establishing a genuine relationship, an emotional connection with the customer.

This is not an easy step for many companies to take, because they are often not accustomed to measuring some of the more emotion-related customer variables. I would also suggest that it is not the kind of information that the company will be able to get from conventional marketing or customer satisfaction research. To get at the real effect of a CRM strategy, you will need to customise the measurement approach.

I hope this is useful.

Regards

Jim Barnes

Jim Barnes specializes in Customer Strategy as a member of the CRMGuru Advisory Board. For more information, please visit Barnes Marketing Associates.

Graham Hill
Guru
Member

Posted 05-Sep-2005 04:12 AM
Jasmine, Jim

To answer your second question first , the success of a CRM Strategy is NOT all about money. For sure, it is about increased profits (money), but it is also about increased customer share of wallet & loyalty, increased customer satisfaction and a number of other factors that drive short & long-term business success.

Answering your first question is much more difficult. A large part of this difficulty is in many business people's perceptions that a CRM Strategy is a thick paper document that describes the all encompassing way in which the business will manage customers over the next few years. This stems partly from the days when Michael Porter's "Competitive Strategy" was the strategy bible and strategy was all about defending your position against a fixed number of competitors in the same industry. As recent history in the airline, financial services and now the mobile telecoms industry show us, today's competitors may not have come from the same industry and may not even have existed a few years ago. It also stems partly from the illusion shared by much of senior management—particularly business planners—that business can be controlled from above and that business success is just a matter of executing the defined strategy. The failure of most of the biggest names in business over the last century to stay as the biggest names (or even in business) suggests that the very nature of strategy needs to change. And not before time.

Today, at least in competitive industries, CRM Strategy is best viewed as a "portfolio of strategic customer management options" rather than as a fixed strategy. The portfolio is executed using the collection of "customer management capabilities" that the business has available to it. A capability is a mixture of processes, enabling technologies, organisational routines and other resources and assets that together allow the business to earn profits. An example might be "lean customer service", that combines lean call centre processes with CTI technolgy to enable incoming calls to be routed to the right CSR to handle a customer enquiry effectively on the first contact.

What does this mean in ordinary business language? A simple four-part framework should suffice to explain.

SCENARIOS

Well, firstly, it means that the CRM Strategy for a finacial services institution (FSI), rather than simply describing a single, standardised way in which it will manage all customers over the next few years, will instead contain a number of "scenarios" which describe how customer management is expected to evolve. The scenarios will be based upon how it expects customer needs, wants & expectations to evolve and how it thinks competitors are likely to react. In short, it is based upon the assumption that the FSI doesn't know what will happen for sure and that it would like to hedge its bets in light of this uncertainty.

CRM Strategy needs to be based upon these customer management scenarios, not on a single, unchanging "vision" of how customers will be managed. Actually "managing" customers is about as hard as herding cats.

Kim & Mauborgne's Value Innovation approach provides a broad range of tools to develop scenarios based upon customer requirements.

CAPABILITIES

Secondly, it means that different bundles of capabilities will be required to deliver each scenario and to enable the FSI to compete profitably. The near future scenarios will be largely based upon what the FSI can do today, but the further out the scenarios look, the more new capabilities may have to be developed to deliver the scenario. Today the emphasis may be on branded push-marketing, but tomorrow it may need to be on marketing resource management, trust-based marketing or even customer co-creation. The more uncertain the future, the greater the value of having a broad range of customer management capabilities available to the FSI.

CRM Strategy needs to be based upon a proper understanding of what the FSI can do today (its capabilities) and what it will likely need to be able to do in the future. A part of the strategy will thus be building the capabilities it thinks it will need.

Jones & Womack's Lean Consumption approach contains a broad range of tools to develop "lean", customer-delivery capabilities.

PERFORMANCE

Thirdly, it means that the measures that define success in CRM Strategy terms will be partly based upon achieving strategic goals and partly on the performance of the capabilities that underly the strategy, and that both will change over time as the market changes. Both need to be measured, monitored and pro-acticvely managed if the CRM Strategy is to be successful.

Kaplan & Norton's Balanced Scorecard approach provides a broad range of tools to do this effectively.

ADAPTATION

Finally, it means that the CRM Strategy will evolve over time as the market changes. How the CRM Strategy will be executed tomorrow is reasonably sure—it is based upon what the FSI does today. But as tomorrow comes and goes, as customer expectations increase, competitors respond with new products, new data protection laws are introduced and the market changes over time, the CRM Strategy and its execution must change to keep pace. This places a strong emphasis on being able to hear the voice of the customer (and the broader market), being able to make sense of it and being able to respond in double-quick time. This may mean giving more responsibility to empowered staff to respond to customers' needs immediately (within an agreed framework) than is comfortable for most FSIs.

CRM Strategy needs to be flexible enough to allow it to evolve and change in response to changing market conditions.

Stephen Haeckel's Adaptive Enterprise and Parry et al's Sense & Respond approaches contain a broad range of tools to sense and respond to changes in the market.

Underlying all these is a thorough understanding of the FSI's value-drivers: including its revenue drivers that define how each scenario will drive revenue growth, its cost drivers that define what the capabilities cost to develop and operate, and its risk drivers that define how the business risks associated with CRM will decrease revenue, increase costs or otherwise whittle away the profits that good CRM generates.

In the past I used to estimate the profit impact of a CRM Strategy whilst it was being formulated, but I found out the hard way how this stiffles the longer-term thinking that CRM Strategy should stimulate. Today, I estimate the profit impact afterwards to ensure that the CRM Strategy isn't limited by too much profit-oriented thinking too early. Although CRM Strategy will ultimately be decided by its profit impact, the different scenarios shouldn't be constrained too much by it from the outset.

CRM Strategy is a difficult area that many businesses get wrong in their apparent over-reliance on their own wisdom. But if you take the simple "scenarios-capabilities-performance-adaptation" approach outlined above then, although success cannot be guaranteed, it is much more likely in the competitive, ever-changing world we find ourselves in.

Graham Hill
Independent CRM Consultant

PS. See John Kay's article on "Mastering Strategy: Resource Based Strategy" (available at http://www.johnkay.com/strategy/135) for a more complete description of how strategy should be formulated. He expresses it much better than I could ever do.

John Turnbull
Member

Posted 19-Jul-2006 05:51 PM
In assessing the success of your strategy, it is important to not only measure the intention to take action, but also the realisation of this intention, and ultimately the effect that the strategy has had on the organisation over time. An example of an assessment approach that looks at all three of these dimensions is CMAT (Customer Management Assessment Tool); it assesses 13 dimensions of CRM (including value proposition, people, process, information, etc) and scores your organisation in terms of intention, reality and effect. It also provides a benchmark based on 600 other assessments around the world, so you can compare yourself to best-in-class and best-in-industry. Check out www.qci.co.uk
www.customerconnect.com.au

John Turnbull
CRM Consultant
www.customerconnect.com.au

Graham Hill
Guru
Member

Posted 25-Jul-2006 01:09 AM
The more that I look at this tricky area, the more I come to the conclusion that the QCi CMAT tool has fallen behind current thinking in CRM.

A CRM audit tool needs a number of things:

It needs a comprehensive view of the different CRM capabilities that a business needs to succeed. Today, these capabilities must also include customer co-creation which is rapidly evolving as the next evolutionary iteration of CRM.

It also need a view of how complementary capabilities at distinct levels of maturity sit together in families that enable a business to create value. The failure of many CRM projects after the implementation of CRM systems is largely due to the failure to understand this view in detail.

It also needs a view of how the different capabilities deliver against the outcomes required by customers and create financial value for shareholders.

And last but not least, it also needs a view of how these things are stitched together over the end-to-end customer lifecycle. What is now euphemistically known as Customer Experience Management. This is the actual playground where value is created, played out over the lifetime of the customer.

Of all the audits that I have looked at, the most complete one is that developed by David Rance at the UK company Round. Having talked with David recently about his future development plans, I know that he is keen to keep the audit in line with current and future developments in CRM.

Note: In the interest of full disclosure, it should be noted that Customer Connect Australia lists itself as a QCi CMAT partner on their website.

Graham Hill
Independent CRM Consultant
Customer Value Management Guru at CRMGuru