Abstract
Comprised of several distinct disciplines and cutting across just
about all business units within most companies, customer relationship
management (CRM) measurement is complex. Companies use CRM measurements
for different purposes; digital channels provide for new measurement and
product/service distribution options; businesses are fractured
internally with inconsistent communication and often incompatible
systems. Despite this complexity, companies are adopting measurement
systems, or frameworks, that have acceptance in the marketplace.
These frameworks range from the strategic to the operational. How
companies build and deploy a CRM measurement framework depends on the
planning horizon under consideration, the market volatility, the
company’s overall strategic posture and goals, and how much of the
organization and customer base is impacted by
the CRM solutions considered. In addition, how customer knowledge is
created and utilized for benefit is under continual debate with
different points of view. This paper reviews the key issues in CRM
measurement, offers some attributes for describing and evaluating CRM
measurement frameworks, and suggests several implementation approaches.
Introduction
A customer relationship management (CRM) practitioner at a large
consumer goods company once said many in his company have determined the
three-letter acronym CRM stands for “Can’t Really Measure. That phrase
stuck in my mind for some time. It seems odd in light of the fact that
over time businesses have been quite clever about measuring a great many
things. Why would this company, filled with some very bright people,
feel measurement and CRM just don’t get along? The answer probably lies
in the fact that companies have just started measuring customer activity
in any real depth and breadth. Implementing CRM software can be done
quickly. It takes companies time to learn how to measure properly.
Many businesses have bought technology solutions at a rate faster
than those solutions can deliver real value. While the reasons for this
are varied, the ability to properly measure customer-facing activity is
obviously crucial for successfully managing CRM programs. To complicate
matters further, measuring customer-facing activity is one of the most
complex and varied measurement endeavors businesses can undertake. The
area of study is relatively new and undergoing significant change as new
technologies are beginning to blur the lines of distinction between
information channels. Customers are interacting with businesses across
far more information channels than they did 25 years ago. More and more
activity is being pushed to interactive, real-time digital information
channels, providing businesses with unprecedented potential for
observing and measuring customers in new ways.
The way businesses have been traditionally organized, along
functional and product lines, may be insufficient to take full advantage
of the apparent and latent opportunities in measuring customer
activity. Many companies are seeking to shift the central focus of
corporate activity away from products and on to customers or at the very
least to learn new ways of managing customer-facing activities. To
effect this change, businesses will need to build out new, more robust
measurement systems, replacing or standing alongside existing product
oriented measurement systems. Designing and managing these measurement
systems and the CRM technologies around them requires new combinations
of skills and roles, for which many companies have not planned.
Change begins with knowing. In order to successfully build out these
new customer-oriented capabilities, companies will need to build out new
ways of knowing customers.
Target Audience
This paper was written with the CRM practitioner in mind. Many
companies have created new staff positions to assist in building out
customer-facing capabilities and skills. These positions have various
titles, often with the term CRM, 1:1, interactive or integrated
marketing and e-business in them. People holding these positions have
varied backgrounds and come to the position with a partial view of the
measurement approaches available. The purpose of this paper is to give
these practitioners a starting place from a high enough level where the
full CRM measurement field can be surveyed.
CRM Background
Definition
In order to understand CRM measurement, we must first define CRM.
Definitions abound. Many vendors, consulting firm, and even companies,
build their own definition of CRM partially mindful of how other are
defining the term. Because of this, while definitions are diverse, the
market seems to have coalesced along three “kinds of definitions:
- Technology centric
- Customer lifecycle centric
- Strategy centric
Technology centric definitions of CRM evolve out of the need for
vendors to position their particular product, which often automates just
a portion of the CRM problem, in the best or broadest possible light.
These definitions include the use of technology within them. For some of
these definitions, CRM is nearly synonymous with technology.
Customer lifecycle definitions evolve out of the need for CRM
practitioners to describe a new business capability, or a new
arrangement of capabilities, that focuses on the customer lifecycle, not
the product lifecycle. The customer lifecycle, often described somewhat
differently, has four phases:
- Attracting
- Transacting
- Servicing and supporting
- Enhancing
In the attraction phase, a customer becomes aware of the product or
company, develops interest and tries to understand the product or
company. In the transacting phase, the customer has moved to the next
level of commitment and decided to procure a product or service. In the
service and support phase, the customer requires the company’s
assistance installing, using or servicing what was procured. In the
enhancement phase, the customer may be thinking about purchasing
additional products or services. For the majority of companies,
especially larger ones, the parts of the companies that interact with
the customer throughout this lifecycle are separated from each other and
not optimally coordinated or integrated. The customer lifecycle
definition of CRM often describes CRM as the ability to seamlessly
interact with or market to the customer across this lifecycle.
Strategy centric definitions look primarily to free the term CRM from
any technology underpinnings and to a lesser extent from specific
customer management techniques. These definitions describe CRM as a
technique to compete successfully in the market and build shareholder
value.
Definition Used in the Paper
For the purposes of this paper, CRM is defined as a business strategy
aimed at gaining long-term competitive advantage by optimally
delivering customer value and extracting business value simultaneously.
As such, this definition lands squarely in the strategy-centric camp.
The reason for this is two-fold.
First, anything that measures customer-facing activity has the
potential to measure those activities that create the business value in
the first place. Having the best manufacturing capability is useless if
customers don’t buy. Customers have differing mindsets and needs to
fulfill and companies need to be able to understand that mindset, sense
those needs and deliver solutions. Technological innovation and
information liquidity have changed competitive landscapes. Fewer and
fewer companies can exploit propriety, one-of-a-kind technology or
captive and exclusive supply or distribution channels to maintain
competitive advantage (Chew, 2000). For the vast majority of businesses,
the ability to acquire, retain and enhance customer relationships is
the last place left to find advantage. CRM and its accompanying
measurement potential, is then a key technique for understanding
customers and managing ongoing customer activity (and by argument,
shareholder value).
Second, while technology is deployed to provide customers with a more
seamless experience across channels and throughout the customer
lifecycle, that capability alone may be an insufficient long-term
competitive advantage. Once every company has mastered the art and
science of providing a seamless customer experience, what is next?
Because CRM measurement systems can be used to understand past and
future customer behavior, the ability for companies to convert that
knowledge into business results can be a significant form of competitive
advantage (Peppers & Rogers, 1997). Knowledge about how a company
interacts with its customers is specific to the company’s brand and its
customers and therefore is proprietary to that company. Knowledge about
this unique relationship is not easily transferred to another context
(another company, brand and customer). One can argue that CRM
measurement systems and CRM analytic capabilities are the last refuge
for significant competitive advantage. Interestingly enough, because of
the skills challenge companies face, the vast majority of companies do
not fare well in this area, which also makes for a strategic opportunity
for competitors (Buytendijk & Hersche 2001)
Technology-Driven Change
Technology is the primary impetus behind CRM approaches. Despite that
fact that this paper uses a strategy-centric definition, most likely
you would not be reading this paper had it not been for the explosion of
technological capabilities. These new capabilities affect how
information and products are distributed and how companies integrate and
communicate across product and functional silos.
Information Channels
CRM technologies now can automate or manage how information is delivered to customers across the following channels:
- Face-to-face
- Mail
- Phone (wired and wireless)
- Fax
- Web and e-mail (wired and wireless)
Companies have tended to (and to a great extent still do) optimize
their capabilities on a channel-by-channel basis. Companies typically
build out the organizational and technology capabilities, look at
benchmark data, and then working towards meeting key single-channel
metrics. For example, many businesses have call centers, which over the
past two decades have undergone technological and operational
improvements, yielding performance improvements in that channel. Today
however, the vast majority of businesses with call centers have yet to
develop superior multi-channel coordination capabilities.
With the tremendous Internet build out over the past six years,
history has repeated itself. Nearly all companies with web sites have
focused on single-channel excellence and are just now realizing the
cross-channel implications, benefits and the concomitant measurement
hurdles. For web-based customer interactions, single-channel measures
abound and companies struggle to relate these metrics to other channels.
Product distribution
With the Internet, companies have the ability to distribute all or
portions of their product or service digitally and direct to the
customer. Information-based products, such as news and research are
being distributed digitally. Books are now being distributed digitally.
The photography market is undergoing some major transformation as
digital cameras are beginning to replace film cameras. Where
digitization of the product is impossible (soup for example!), parts of
the product service bundle are quickly getting digitized. When a
consumer asks a soup manufacturer, via its web site, for ideas on new
uses for the soup, the manufacturer can now send tips and recipes
electronically. Product specifications and reviews, prior customer
experiences with those products and consumer reports are all available
online.
For those companies that can’t go direct to the end-user or the
consumer and have channel partners to contend with, extranets and demand
chain digitization are allowing electronic movement of pieces of the
product/service bundle. Insurance carriers and brokers use electronic
forms to communicate insurance risk, quotes and contracts between
end-user and carriers. Auto dealers and manufacturers share electronic
documents that manage warranty repairs and maintenance on consumers
cars.
The complete or partial digitization of the product/service bundle is making new forms of customer measurement possible.
Functional Silos
Companies have long since decomposed themselves into groups that have
historically been considered a set of closely related skills. Typical
groupings that touch the customer include:
- Marketing
- Sales
- Manufacturing
- Logistics and distribution
- Field service
- Contact center
- Billing and accounting
Over the past two or three decades, technological advances have had
significant impact in these functional groups. In nearly every case, the
goal was excellence within the functional silo. For example, call
center technology has increasingly utilized technology to accept
incoming calls, route them, measure call traffic and collect and
distribute customer data to call center agents significantly improving
the contact center’s capabilities. However, many if not most of these
contact centers have not integrated other communication channels such as
fax and web interactions effectively. In the web world, brochure-ware
product and service web sites went up first, since these were the
easiest to build from a technology perspective, and since this
represented the digitization of a single functional silo: marketing.
Later, as the technology matured, the sales function followed with
electronic transactions over the Internet. And today, many web sites are
not well integrated with other technologies running other areas of the
business such as point-of-sales, inventory and call center systems.
Again, as with single-channel focus, functional area focus created
isolated technology and business process islands. Business processes and
the technologies deployed did not and still do not easily accommodate
cross-functional silo planning, coordination and execution. Enterprise
software vendors have begun to address this cross-functional silo
problem with some technology integration, but the vastness and
complexity of the customer-focused part of the business has still left
the customer-facing business processes fractured in several dimensions.
Product Silos
Still another key dimension involves product silos. Again companies
have historically aligned themselves around the means of production,
that is, around products or product groupings and either have replicated
all or some portion of their customer-facing teams (sales and service)
across the product silos. Many manufacturing and consumer goods firms
are organized this way for good reasons. The wide range of difficult
issues in managing products requires management to limit its focus and
build core capabilities from the product outward. While modular
manufacturing has let businesses decompose products into assemblies that
are brought together later and even customized for customers, designing
a modular system is much more difficult than comparable non-modular
ones (Baldwin & Clark, 1997). Many managers continue to look at
business through “the twin lenses of mass marketing and mass production
rather than with the “twin logic of mass customization and one-to-one
marketing. (Pine, et al., 1995).
The challenge for traditional, product-oriented companies is in
pulling together customer measurement data from across the different
product silos so that customer behavior can be researched more
comprehensively. Having cross-category and cross-product sales and
marketing data helps companies bundle several products into better
solutions as well as identify customer needs that extend beyond one
product category. Especially for consumer packaged goods firms that have
dozens of different and sometimes competing brands, the real challenge
is in figuring out ways of leveraging the product portfolio to sell more
of their brands to their customers.
Data warehousing, data integration, data quality and data mining
tools have all been brought to bear on this problem. Data warehousing
and data integration tools help companies consolidate customer data.
Data quality tools ensure that data is accurate, reliable and
consistently presented across the company. Data mining tools have helped
companies find information within data faster than would otherwise be
done. These tools serve as the backbone driving CRM systems and have
enabled the measurement frameworks in place today.
by Vince Kellen
March, 2002
full article : http://www.kellen.net/crmmeas.htm