| Introduction | | | | the overall level of sales of furniture in the US |
| | | | market six months in advance. Through “data |
| In 2000, the following prediction was made by IDC | | | | mining” of data on many industries that it |
| and reported by PR Newswire: | | | | purchased and obtained from publicly available |
| “According to the CRM Market Forecast and | | | | sources, the company’s statisticians (the data |
| Analysis prepared by IDC, the world's leading provider | | | | miners of their day) figured out that the strongest |
| of information technology data and analysis, the total | | | | predictor of furniture sales six months in the future |
| CRM market will reach $12.1 billion by 2004, | | | | was the current month’s national, regional and |
| representing an annual growth rate of 29.9%.”(1) | | | | local new car sales figures. The relationship was a |
| Hindsight is such an eye opener and although we | | | | negative one. That is, the lower the car sales were |
| have not completed 2009 data, it is highly unlikely | | | | for the current month, the higher furniture sales |
| that the customer relationship management (CRM) | | | | would be in six months. Armed with these data |
| market will reach anywhere close to $12.1 billion | | | | properly interpreted, Lane consistently make the right |
| dollars in 2009, much less 2004. In a recent study | | | | moves about what to stock in inventory, when to |
| available by Gartner Group it was concluded that | | | | buy other companies with excess supply or capacity |
| “Most CRM initiatives fail to deliver the expected | | | | and when to advertise to a receptive market. Lane |
| value because enterprises have not mastered this | | | | used data that would comprise part of a |
| rapidly evolving business competency at a strategic | | | | comprehensive and well thought out CRM system, |
| level.” (2) reported in 2003 that in 85% of all | | | | broadly defined, as a predictive tool that gave it an |
| cases, CRM users could not show any quantifiable | | | | “insight advantage” over their competitors. |
| results and 12% of all CRM installations were | | | | By Lane feeding this data analysis to employees and |
| complete failures (3) CRM is extremely challenging | | | | managers, their sales force had the intelligence to |
| and to justify CRM’s multi-billion dollar price tag | | | | know when to hit the pedal pushing sales with |
| users of CRM will need to treat CRM as both a | | | | advertising and sales force expansion and when to hit |
| “discipline” and as a predictive tool. | | | | the brakes with their sales efforts. This information |
| CRM in the Beginning and “Middle Ages” | | | | was critical to a company like Lane, because it could |
| Customer Relationship Management is as old as | | | | not get customer level data that allowed it to predict |
| business itself. Legend has it that Herbert Marcus of | | | | which customers would be buying furniture in the |
| Neiman Marcus once said, “There is never a good | | | | next six months or allow it to predict, using customer |
| sale for Neiman-Marcus unless it's a good buy for the | | | | level data, how much furniture would be bought in |
| customer.” In order to understand the current | | | | the aggregate in the coming six months. |
| shortcomings of CRM, we need to evaluate the | | | | Conversely, EMC, the data storage company, is able |
| strengths of previous incarnations of CRM systems. | | | | to get significant customer level data. EMC gets the |
| One story from what some of us would consider the | | | | proposed IT budgets of some of its major |
| Middle Ages (the 1960’s), regarding CRM will | | | | customers three years in advance. This allows EMC |
| show how history puts the capacities of CRM today | | | | to know, or at least accurately predict, exactly what |
| to shame. Consider this case analysis from the | | | | each of its major customers is planning for IT and |
| personal observations and experience of one of the | | | | storage requirements over the next three years. |
| authors: | | | | This gives EMC a strong advantage over other data |
| The setting is a shoe department in a large | | | | storage companies who are not able to get their |
| successful retail store of upscale clothing. There | | | | hands on such intelligence from their customers. |
| were no computers. The store had no electronic | | | | And, while Wal-Mart does not ask for any data from |
| databases. Inventory was taken on paper. The | | | | its shoppers, it demands huge amounts of data from |
| salespersons kept small notepads which had | | | | its “real customers,” the vendors who think |
| information on their best customers. The notepads | | | | they are selling to Wal-Mart, but who are actually |
| included rudimentary information including name, | | | | buying a sales opportunity from Wal-Mart. Both EMC |
| address, phone number and shoe size. | | | | and Wal-Mart have significant market power. Lane |
| Every few weeks a new style of shoes would | | | | had great statisticians analyzing national sales data |
| arrive. The shipments of 36, 48 or 64 pairs of a | | | | from every conceivable vantage point, well before |
| style only included a few pairs per size/width in order | | | | other furniture companies were contemplating |
| to allow the shoe to stock as many styles as | | | | augmenting their sales force with national level sales |
| possible. When the shoes came to the store, the | | | | predicting analysis. CRM augments the sales force |
| shoe salespersons, who had state of the art | | | | with predicting analysis. |
| customer relationship management systems in their | | | | CRM Today |
| little notepads, did the following: | | | | CRM today is about tracking and analyzing explicit |
| - They studied the product (often they were not | | | | information about current customers and sales |
| told in advance what was ordered by management | | | | prospects. The software products require a hard |
| or when it would arrive) | | | | cash investment and significant time, as shown |
| - They looked over their list of customers in their | | | | above, which must be budgeted accurately over |
| little notebooks | | | | several years. Unlike many other software |
| - They decided which customers from their list might | | | | products, CRM software needs to be deployed in a |
| like this pair of shoes | | | | rigorous, disciplined, coordinated manner to achieve |
| - They pulled the size from the shelf (or even pulled | | | | any promised potential. The collection of data and the |
| it while the shoes were still in the carton from the | | | | storage of such CRM data are not beneficial unless |
| factory or shipper and before the shoes were put | | | | the data collected are accurate and the right data, |
| into “inventory’) | | | | collected at a reasonable cost, analyzed diligently, |
| - They called the customer and told them about the | | | | reported in a clear and timely manner, and kept |
| shoes and asked if they could personally deliver the | | | | secret from the competition. The value of the CRM |
| shoes to their house | | | | generated data is like the value of any intelligence the |
| - They put a slip of paper with their own name on it | | | | CIA might get. The data and their analysis are |
| in the place where the shoe would go into inventory | | | | worthless unless one has the capability to develop |
| that stated that the shoe was being | | | | and execute winning strategies based on the data |
| “shown” to a customer | | | | analysis. |
| - They did not charge the shoes at this time to the | | | | Thus, an organization must, at the outset of |
| customer | | | | considering using a CRM system, decide whether the |
| - They drove the shoes to the customer and left | | | | main goal of the CRM system is to guide future |
| them there for a few days | | | | behavior of the employees of the organization to |
| - They called the customer and asked if the | | | | shape the future (increase sales, number of satisfied |
| customer wanted the shoes and if she said no, they | | | | customers, number of new leads generated, reduced |
| arranged to pick up the shoes the next day. If the | | | | turnover of key sales personnel, etc.) or to predict |
| customer said, yes, they asked if the customer | | | | future sales so that the company can position itself |
| wanted to put the shoes on “lay-a-way,” | | | | appropriately to meet the expected demand. For a |
| pay cash, or charge the shoes to the company credit | | | | CRM system to provide both types of services |
| account (This was before the days of bank credit | | | | (predicting the future and helping shape the future) |
| cards). | | | | to a company or large non-profit a huge undertaking |
| - Then, the shoe salespersons either booked the sale | | | | must take place and one that understands that these |
| or put the shoes back into inventory | | | | two uses of CRM are separate. Using CRM in both |
| That was CRM in the 1960’s. Now you can see | | | | of these ways at once, (predicting and shaping the |
| one reason the CRM of today is greatly inferior to | | | | future of sales for the organization) may even |
| the CRM of the 1960’s. The CRM of the | | | | require separate, but integrated planning teams to pull |
| 1960’s was all about direct service. Today, it is | | | | off this type of “daily double.” |
| more about management analysis. Analysis does not | | | | CRM – At Midlife |
| sell anything, never did and never will. Service sells. | | | | Once a CRM system has been implemented and is |
| Analysis can predict what will be sold, but in the | | | | being used with some success in an organization, |
| 1960’s it was very rare to be able to do | | | | there is no “cruising.” Like in car racing, |
| predictive analysis with customer data, especially | | | | there are walls and opportunities to crash at every |
| individual customer data, since it was impossible to | | | | turn. Once CRM has reached a midlife, which may |
| compile the data or run mathematical formulas on the | | | | be three years from conception and two years from |
| data. | | | | the original implementation of a major CRM package, |
| While this 1960’s CRM system was great in | | | | the entire CRM software and processes need to be |
| terms of service, it had severe shortcomings, | | | | reassessed. |
| especially from management’s perspective. | | | | Some companies at this stage have run utilities to |
| First, only the salesperson was deploying CRM. | | | | clear fields of certain data within a CRM database and |
| Management had no idea what was going on at the | | | | start over in the clean collection of such data |
| customer interface level. Second, management did | | | | because of misunderstandings and changes around |
| not use the knowledge of the salespersons in figuring | | | | the definition of a given field. Certainly user defined |
| out what shoes to order, since in the 1960’s | | | | fields are the most susceptible to miscommunication |
| management did not ask the salespersons what kinds | | | | and are important to check, but other fields can also |
| of shoes their customers wanted or in what | | | | be interrupted differently by different people. There |
| quantity. Third, the retail store level management, | | | | is a tendency of data to become more and more |
| above the shoe department level of management, | | | | corrupted and inaccurate as the process gets older |
| was totally clueless about the knowledge the sales | | | | and employees learn how to cut corners and cut the |
| people had and thus, they could never predict | | | | data input costs of the onerous system. Without |
| accurately what the sales figures would be for the | | | | rigorous oversight over data input, a CRM system |
| shoe department in upcoming months for particular | | | | can easily go awry and lose its power either to |
| styles of shoes. | | | | predict the future or help a company use this |
| This led to substantial waste and when shoes could | | | | strategic intelligence to shape the future. |
| not be sold, even at half-off sales prices, they would | | | | CRM - Examples of the State of the Art |
| be jobbed out at less than 10 cents on the dollar of | | | | Hallmark used its CRM system to track credit card |
| their cost. And, at the corporate level, above the | | | | purchases by shoppers. When a shopper purchased |
| retail store level, no information from a CRM system | | | | a product on March 15th of any given year using their |
| like this was of any use in determining how to | | | | credit card, this purchase was recorded. In the |
| allocate resources across stores. All in all, while this | | | | following year as March 15th approached a note was |
| CRM system was great for the shoe salesperson and | | | | sent to the customer thanking that shopper for last |
| their lucky customers, it was useless for | | | | year’s purchase. This note gave Hallmark an |
| management in making buying and financial decisions. | | | | additional sales opportunity to offer similar products |
| And since all of the information in this CRM system | | | | to that specific shopper using appropriate timing. |
| was in the heads of the salespersons and their little | | | | Many people who shop at Hallmark have annual |
| notepads, it was what we call “wetware,” | | | | needs to purchase date sensitive gifts. This predictive |
| that knowledge that exists only in people’s | | | | model allowed Hallmark to predict these annual buying |
| minds. (Wetware is the grey matter between our | | | | sprees as well as help push potential customers into |
| ears). No surprise, then, that when the salesperson | | | | the actual customer category. This system of CRM |
| left the company, the customers followed the | | | | shows a thorough understanding of both uses of high |
| salesperson to the next shoe store. | | | | level CRM systems using easily available customer |
| From Wetware to Software | | | | level data. |
| | | | Another example of using customer level data |
| One of the goals of the current versions of CRM is | | | | includes a large insurance company that had a |
| to change valuable customer related data from | | | | corporate rule preventing customers from changing |
| wetware to software and from software to | | | | agents. This rule was developed to avoid fostering a |
| corporate knowledge. This knowledge can only now | | | | culture where there was competition among |
| exist in a written, stored, accessible and analyzable | | | | insurance agents within the same company over |
| format that allows management and the sales teams | | | | current clients. This insurance company was |
| to use it to understand more fully the past and | | | | extremely good at cross reference data. Then they |
| current business environment and to shape and | | | | had a need to review “failure to renew” |
| predict future business results. CRM today is so | | | | rates when they noticed that their renew rate trend |
| much more than the tool that one buys off the shelf | | | | was way below industry norms. The company looked |
| or the tool that one develops using expensive | | | | through its CRM data to find any relationship it could |
| software consultants who integrate it into an | | | | to understand more fully why customers were |
| enterprise wide data collection and analysis system. | | | | leaving their agents and buying insurance with another |
| CRM software when used properly helps create a | | | | company. The company found, to its great surprise, |
| playing field for good business practices. In order | | | | that the best predictor of whether a customer would |
| for CRM to be an integrated part of a very | | | | renew or not was the age difference between the |
| successful business model it requires serious players, | | | | customer and the agent. The wider the age |
| just like any other winning game played at the | | | | difference, the more likely the customer would not |
| professional level. This human component needed to | | | | renew the policy. |
| plan, design, tweak, deploy, organize and analyze | | | | Armed with this knowledge, the insurance company |
| CRM software and generate data requires a discipline. | | | | then developed a number of new policies. These |
| CRM systems can never be just an | | | | policies were sensitive to age discrimination laws and |
| “add-on.” Management’s involvement in | | | | were designed to find the best ways for the |
| bringing a CRM software system to a company, or | | | | company to match customers and agents of similar |
| large non-profit, must start well before any “go | | | | ages. This newly found knowledge also supported |
| no go” decision is made to buy the software | | | | creating age specific marketing messages and |
| tool. Management must understand what it takes to | | | | marketing placement based on age specific niches. |
| use technology to increase profits and change the | | | | CRM - Uses beyond Tracking and Promoting |
| business paradigm. Months before the decision to | | | | Predictive Capability |
| integrate a CRM system is made, management must | | | | For large companies, millions of records can be |
| agree on the exact results it wants the CRM system | | | | processed in the blink of the eye and sophisticated |
| to produce. Management must quantify these | | | | analytical formulas can be run in mere seconds. |
| results. Management must know exactly where it | | | | Storage and retrieval technology including data |
| wants the company to expand sales. Management | | | | warehousing and OLAP routines are providing analysis |
| must know exactly what the company’s niche is | | | | on a daily basis to companies with offices or stores |
| or will be. Management must carefully carve out the | | | | all over the world. Newer technologies are moving to |
| description of the most ideal customers, those | | | | instant or real time analysis. Data access at remote |
| customers worthy of tracking and analyzing through | | | | locations and 24x7 time frames now yield insights at |
| a CRM system. | | | | an ever accelerating rate. Technology is now |
| Thus, a CRM system, in the planning stage, must be | | | | available so that years of data properly analyzed can |
| based on accurate answers to such key questions as: | | | | yield patterns and trends that were not available to |
| - Who can best benefit NOW from the special skills, | | | | the human mind just a decade ago. Such patters are |
| services and products that the company has to | | | | being used in the music industry to predict hits and |
| offer? | | | | are especially important when a sales period for a |
| - What is the best way to approach them? | | | | product can be merely months, if not weeks. |
| Defining Your Customer – The Key Questions | | | | Fewer mistakes are being made in predicting sales |
| Who are your ideal customers? Who are your ideal | | | | forecasts by the state of the art firms because of |
| prospects? How big and numerous are these | | | | CRM technology. This is the true potential of state of |
| customers or prospects? How many offices do these | | | | the art CRM systems -- forecasting based on years |
| customers or prospects have? What is the | | | | of pattern and unknown, but predicted variables. |
| management team’s style? When were they last | | | | |
| in the press? Do you get their company newsletter? | | | | |
| Who are their customers and what products do they | | | | |
| offer? What are their pain points? What are their | | | | CRM as a Discipline |
| business goals? Who is their ideal customer? What | | | | It is well known that the development of every hour |
| does their strategic plan (either written or still stuck in | | | | of stand up training or education, properly done, |
| wetware) suggest they will buy from you in the | | | | takes 40 hours of development time. And for |
| foreseeable future? | | | | e-learning systems properly created, (not talking |
| Training – The Key Questions | | | | heads or simple PowerPoint or word presentations |
| | | | that offer little over giving a student a book), it |
| What training and appreciation for CRM will be | | | | takes 125 hours of development time for each hour |
| required by our sales persons and management in | | | | of an e-learning presentation. This is the discipline |
| order to maximize the likelihood of a CRM system | | | | that is behind state of the art training. |
| implementation contributing positively to the | | | | A similar level of discipline must lie behind each CRM |
| organization’s bottom line? How will our sales | | | | application. CRM is an easily corruptible, hard to |
| persons, armed with this system, know how to | | | | maintain, focused approach to information gathering |
| approach a client or potential client and bring back the | | | | and analysis. CRM can have opponents who will |
| data we need find to put into the CRM system and | | | | actively seek to destroy not only its value within a |
| at the same time do what it takes to close the | | | | company, but its entire basis for validity. It will |
| sale? How will the added duties of putting all | | | | cause dissention within every organization that tries |
| potential clients and their data into our CRM system | | | | to deploy it. And, unless an organization is capable |
| impact our employee’s workload and how can | | | | of mustering and sustaining the discipline to spend |
| we prevent it from overwhelming them? How will | | | | millions and wait for months or even years to see |
| the need required by many CRM systems for all of | | | | positive results, then high level CRM software may |
| our employees to log all sales and service be met? | | | | not be right at this time for your organization. |
| What about related scheduled appointments, | | | | CRM's Potential Impact on Users |
| impromptu meetings, input written comments on all | | | | When purchasing a CRM system beware of the |
| appointments and the “status” of all clients | | | | “OBNU” phenomenon – “Owned But |
| and potential clients? How will all of this new data | | | | Not Used.” There may be numerous elements |
| entry work impact the “real job” of selling | | | | of any CRM system that are irrelevant to your |
| and servicing the client or prospect? How do we | | | | organization; however, OBNU is a warning sign that |
| get the “buy in” of all key users of the | | | | you may be buying more horsepower than you will |
| system? How do we insure that the system rapidly | | | | ever use. A court recently upheld a $50,000 license |
| dispenses information to all key users that is a 5x or | | | | fee charge by PeopleSoft to a customer who never |
| 10x return on the time, energy and pain that a CRM | | | | opened the software or installed it and informed |
| system causes them to deploy in the name of | | | | PeopleSoft a day after the software arrived that it |
| “working for the system”. | | | | did not meet its needs. |
| How do we properly train employees to use and | | | | Plans for CRM systems must be comprehensive. |
| benefit from the CRM system and what is the right | | | | They must chart the move of every person in the |
| budget for this training? How will the CRM system | | | | organization who will touch or will be touched by the |
| we deploy compare with the system our | | | | data going in, the information coming out and the |
| competitors will be using in six months or a year? | | | | customer who is the ultimate beneficiary of such a |
| How will our customers be impacted if we ask them | | | | system. In fact, each CRM system must have the |
| for significant data for input into our CRM system? | | | | customer’s interests in mind. It does not do |
| Will our customers or clients require training and does | | | | any good to identify the customer who might buy |
| our company have either the market power or | | | | the shoes as soon as they arrive at the store, if |
| relationship capital to get our customers to comply | | | | there is not a salesperson or delivery service able to |
| with our requests rather than merely going to a | | | | get the shoes to the customer’s house the |
| competitor with less onerous “customer | | | | same day as the phone call comes from the |
| requirements? | | | | salesperson. Without a marriage of a customer |
| CRM – Data Requirements | | | | service system to a customer relationship system, a |
| It is essential for an organization planning to use a | | | | company could easily have great insights and no |
| CRM system, to determine exactly what data | | | | ability to act on them with the speed required in our |
| constitute the most important inputs into the CRM | | | | fast-paced world today. |
| system. The answers to this question will vary | | | | Conclusion |
| across industries, companies, customer sub-segments, | | | | There are success stories to CRM system |
| and salespersons. The answers will also vary across | | | | implementation. CRM Software is but a tool and the |
| products that have different sales cycles and require | | | | implementation and use of a good tool is as |
| different sales approaches. | | | | important as good equipment in any professional |
| For example, one of the authors learned some time | | | | endeavor. As with most endeavors, this particular |
| ago that the Lane Furniture Company in the | | | | tool requires a total immersion from management |
| 1960’s used a unique analytical system to predict | | | | down through all the players on the team and a |
| future sales of furniture. With its stable and growing | | | | discipline that produces winning results. |
| market share, the Lane Company needed to predict | | | | |