CRM in tough times - in Tough Times by gyvwpsjkko


									                                                        Third Wave Software

CRM                                                     White Paper 2004
                                                        A Third Wave Software White Paper

                                                        3 January, 2004

         in   Tough                                     +27 11 462-6871


Many Industries have experienced a downturn. Will CRM work
for you in a recession (2 successive quarterly declines in GNP) –
many customers are asking the question what role CRM should
play in these tough times.

It is no surprise that tough times have arrived. Financial Reports reflect less than good
results. It seems as if the current down turn will last for a year or two. In a down turn
of this nature companies are looking for initiatives or projects that give instant

Why is CRM still number one priority in most IT budgets? Even as companies scale
down on capital spending CRM still maintains a high profile. In most businesses
managing Customer Relationships is a difficult task to undertake, requiring not just an
IT investment in the software but also the ability to organize major businesses
processes as well. CRM requires an investment in software, and as just as importantly
an investment in time.

What is the reason for CRM projects not being put on the shelf like other investments
and non-mainstream activities? As other business activities are put on hold CRM
projects abound. What’s going on here?

There are 4 primary reasons why CRM efforts are important in tough times:
   1. It is economic sense to manage customer relationships. It can improve
       business results in a more direct way, with more efficiency and less waste –
       even to the extent that short-term sales and marketing costs are slashed. In
       essence it is a “inexpensive growth” option for any company
   2. CRM provides executives with reporting tools for greater clarity in the
       decision making process during turbulent times – regardless of industry or
       product offering. It is in turbulent times that it is great to be provided with
       systems that can transact, analyse, modify, create, communicate, collaborate,
       and so forth
   3. CRM projects can be implemented in small steps. There is no need for the big
       bang approach we are used to in implementing ERP systems and the like. Each
       incremental implementation step heralds increased sales and reduced costs.
      More importantly each incremental CRM investment can generate instant,
      measurable cash flow benefits. It is no wonder then that the Financial Director
      is often the champion behind CRM initiatives.
   4. Solid customer relationships, like marriages, can weather both the good and
      the tough times. The strength of customer relationships will determine the
      competitive performance of a company both in good times and bad.

Let us consider the impact of the four ideas above, one at a time in order to better
understand the benefits of the Customer Relationship Management (CRM) concept.

CRM Makes Inexpensive Growth a Reality
CRM assumes that all customers are different. Each customer has different needs to
be fulfilled. Some Customers are highly profitable – while others are not so profitable.

Cheap growth comes about by making individual customers more profitable. In tough
times the traditional, non-CRM company continues to bash away at the universe,
however this mindless approach will yield less profit. Knowing your customers via
the CRM approach allows you to concentrate on the types of customers and would be
customers who are more likely to generate meaningful profits. The worse the tough
times the more important it is to have a CRM system in place.

Conversely in good times not every customer is going to be profitable. In the
customer base there are likely to be some customers who cost more to service than
they are ever likely to generate a profit. Simply put the strategy for growing cheaply is
to serve fewer unprofitable customers.

Cost reductions and marketing efficiencies are just one aspect of the “cheap growth”
philosophy. Another reason for concentrating on one-to-one relationships with
customers is that the company can better insulate itself from price competition. If your
customer tells you something about how he wants to be served, and you adjust your
company’s behaviour to meet that need, then the customer himself has a vested
interest in his relationship with you. To recreate his relationship with your competitor,
your customer would have to re-teach the competitor what he has already taught you.
Thus, the more any customer teaches you, the more loyal they will be, which makes
him more resistant to price offers from competitors.

Clarity during turbulent times

CRM provides clarity in turbulent times, and allows for many users and customers to
transact with one another. If these verbal or face-to-face transactions are not captured
in a system such as CRM then it becomes impossible to be clear about anything.
Executives resort to gut feelings and so on. It is said “ He who takes the minutes,
controls the situation”, such is the case in CRM.
Whilst competitors operate in a frenzy during tough times, CRM users calmly and
clearly transact with who they want to do business with. Long enduring relationships
stand the test of time. It is now that the customer base shows its value.

CRM projects can be implemented in small steps

The majority of companies do not want to implement comprehensive, all-or-nothing
CRM projects – even in good times. Complete technology replacement and process
change is not only expensive but is also risky. In a downturn, it is more important than
ever to allocate investments and capital spending to the kinds of activities that cannot
only be measured in the short-term, but will also, as in the case of customer
relationships, have a long-term competitive payoff.

Most companies can launch a comprehensive CRM initiative with a series of
incremental, bite sized projects. Moreover these smaller bite sized projects can almost
always be self-funded with immediate, measurable cost reductions or efficiency
improvements. Many current CRM initiatives start off as a pilot project – scope say
limited to a branch or region or product range. A small population of the Customer
universe becomes the subject of a “pilot site” to prove the best way to improve their
overall profitability

Therefore, rather than an “all-or-nothing” approach, CRM is something that any
business can do incrementally, and it can implement it in ways that generate proven

Doreen Howard, National Sales Manager of Labotec, local supplier of laboratory
equipment says about her CRM implementation using the Advantage CRM solution
from Third Wave Software. “We started by loading a customer base and using our
sales calls to update the information. Then we supplemented direct calling with direct
mail inviting customers to product launches and functions. Integration of the CRM
system with our financial system was our next step to provide a better information
base for us to work with. Once our sales staff were familiar with the system we added
a quotes automation function to improve productivity. Now we are equipping our
sales team with PDA devices so they can use the information and capture call reports
in a mobile environment. All these phases were implemented in manageable steps –
both financially and technologically.”

Using strong Customer Relationships to lock in Profit

Importantly, CRM allows a company to stay extremely close in harmonious ways to
its customers. A company can detect problems earlier than before and be better
prepared to act responsively. An organization that really knows its customers well is
better equipped to find creative or even customised solutions optimal for both buyer
and seller.
One of the foundation principles for cultivating better relationships with customers is
to focus the company on increasing its “share of customer” with each individual
customer. This means that a company will do more cross selling and up selling of
other products and services.

A CRM-enabled company can give the customer exactly what it wants by adding
services, rather than reducing prices. Profits increase.

Tough times – An opportunity to realize your CRM Investment
As financial resources dry up, the temptation is to reduce strategic investments and
instead focus on the short-term. CRM benefits can be almost immediate, with cash
flow immediately feeling the boost of a well-executed CRM implementation.
It is during these times that CRM more than pays for itself. Executives need to focus
more, not less on CRM

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