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April 25, 2008

Watch Out Below

We were on a nature paddle. The manatees were pretty much gone for the summer, but we still had hopes for spotting big game. Reports of wild boar and abundant gators had us on the lookout, multiple cameras at the waiting. A sunny spring afternoon should have provided plenty of opportunity to at least see the large reptiles out getting a tan. However, the herons and egrets were about our only company. On our way back, having given up on shooting anything noteworthy I practically smashed the poor fellow in the snout. He dove under my boat with such a fury I thought for an instant that I was going over. Admittedly, I was caught by surprise.

The problem was that I was not only looking in the wrong place, with my eyes peeled on the St. John’s River bank, I was also looking for the wrong size object. The floating stick that essentially escaped my attention was a 13 foot long suitcase in waiting.

Naturally the first thing that came to my mind was how much that alligator reminded me of customer data. Yes, you are correct, I am pretty much crazy. I like to get up close and personal with prehistoric fauna sporting serious dental capabilities. On top of that, these close encounters with the toothy kind have the propensity to get me thinking about CRM. Well, there is a connection here, just give me some latitude to put it together.

Most of my clients have more value stored in their customer data than they are seeing. What is on the surface is only a fraction of what is truly there. What is below the surface is also a much more realistic representative of the whole. Just like a gator sticking up a couple of eyes and nostrils, the data poking through the surface within your CRM program is small compared to what you really have on your hands.


Now, it is possible to take this metaphor down a strange path, such as the comparison with gator wrestling and how hard it can be to deal with customer data. While this is a reasonable analogy, and customer data can be a real beast, my preference here is to just focus on all that unseen and untapped intelligence. One of the challenges is that the data below the surface can be a little hard to see when the water gets murky, habitat especially favored by alligators.

Ultimately, the knowledge within customer data is better seen when separated. Looking at the numbers in too large of an aggregation is what causes the loss of clarity. For example, I encountered a situation where a client was finding their inbound service calls had increased in length, leading to a higher cost per service incident. Well meaning call center supervisors in some of the service units worked hard to get their reps to reduce call time. On the surface everything looked good – those units had lower costs and as a result that would foster better margin for the business. But a closer look at the customer data showed that retention was higher with customers who were serviced at greater length. Higher retention led to higher customer annuity value and better margin. Looking below the surface proved that what was visible at first glance was inaccurate.

I have seen similar situations with marketing campaigns. A new program gets launched but the numbers indicate that there was no net effect as a result of the offer. On the whole the business unit revenues were not impacted. But, with a deeper examination of the activity in the field, it was determined that some customers bought considerably more as a result of the campaign while some bought less. Looking at differences with the sales activities of the two sets of customers this client learned that certain sales activities encouraged the customers to wait, while others encouraged the customers to buy. Had the sales force all followed the same approach with following up the campaign it would have been successful overall. Separating the customer data by sales activity was the critical analysis.

Looking below the surface is really what business intelligence is all about. Measuring customer activity at a level of detail that enables better clarity also enables better decision making. This ensures that sales and service activity are honed for maximum performance. This is far superior as compared to getting surprised by what is below the surface.

April 18, 2008

Make Money or Save Money

Within the same week I was told by two different clients, quite emphatically, that CRM can only produce increases in revenue but not reduce costs, and that CRM can only reduce costs but not increase revenue. So, the big question is which point of view is correct? I say, “let them eat cake!”

When I look at my own experiences I can recall clients who have wanted to make more money, but ended up only able to reduce costs. I have some clients who have wanted to reduce cots but have only been successful with improving revenue. And then of course, there are those clients who were not able to achieve either.

So, what to make about all of this? Taking a look at a recent editorial in the April issue of CRM Magazine some trends are reported that offer up a little insight. In this case, those organizations that are looking to increase revenue from CRM are focusing on the sales force. This certainly makes a lot of sense because if you use CRM and SFA tools to improve efficiency it will either lead to better use of time driving better sales or it will lead to sales people being able to spend less time at home or in hotel rooms doing admin tasks. But, it won’t reduce any cost (although the sales force is happy about having more time with their families).

Bank Stocks

Back in the 90’s a lot of my CRM experience was focused on call centers, much of which were dedicated to customer service. Unless you use CRM to migrate service personnel into blended sales and service roles, your only hope for bottom line results is through driving out costs. And, I believe there were plenty of examples of success where CRM improvements within the call centers led to cost reduction – mostly in the form of being able to scale the call center to handle growth without adding comparable headcount.

Taking this all into account, it may be that the answer to the question of whether CRM is good for making money or saving money is that it can do either one, but it might depend on which function you are supporting with the program. But, to complicate things, let’s throw the marketing function into the mix.

CRM software and process improvements can help drive lead management efficiencies, plus automation can dramatically drop the cost of managing campaigns. At the same time, analytics that drive better targeting and evaluation can improve lift. Marketing can realistically achieve both benefits of making more money while saving money.

Getting back to those strongly convicted clients of mine - you can have your cake and eat it too.

April 11, 2008

Exercise Your Vote, and Your Website

No matter the outcome, if we gain nothing else from the presidential primary this election year it will be that Senator Obama has changed the rules of campaigning for ever. This happened once before in my memory when a very 5:00 o’clock shadowed Richard Nixon made a very poor television presence during one important debate as compared to the young and dapper John Kennedy. From then on presidential campaigns were conducted on television. From this year on campaigns will be done online with the same fervor as chasing the evening news sound bite.

While I admire the Obama campaign for this reason as well as others, to me the more important lesson from this is that even stodgy old political campaigning can benefit from the new reality of the internet. More businesses need to learn from this, and hopefully will as a result from a successful end to the Obama campaign. Check out the March 19 issue of Fast Company for a nicely written article on the Obama campaign and the impact of web marketing.

Back in the USA

It was no accident that the Obama campaign found success on the web. Fate was sealed better thanks to the recruiting of Chris Hughes of Facebook fame. And there alone is probably a lesson. If you are going to build a better web strategy you want to find someone who understands the segment that uses it most completely to help you build a useful strategy.

But there are some other lessons to be learned as well. Perhaps most importantly is the amazing success of social networking for the Senator from Illinois. Most of my clients have no aspect of social networking in their web strategy, not even a blog site. Heck, I am happy if I can get a web strategy built for many of the organizations I support. Don’t think that just because your customers are baby boomers that social networking does not matter to your business. Viral marketing does not only infect twentysomethings.

However, you don’t need to recruit a web wunderkind to build your internet strategy to develop some decent cyber reach. You don’t really need to be all that fancy to find success, but you are not going to experience the benefits of web marketing without taking a step beyond your obligatory web site with your product overview, pictures of your management team, and job postings. Start a customer community and allow for user generated content (whether you do or not there are people talking about your products on a blog site somewhere else). Be careful, one of your customers might actually have a good idea or even better, a good experience to share.

So, get out there. Leverage the power of the web. And, don’t let those voting muscles get flabby between now and November.

April 04, 2008

The R Word

Rather than use the euphemistic “economic downturn” is it possible that by actually typing “recession” into this blog entry there may be some search engine making tabulations of its repetition across the world wide web that then reaches a threshold causing a report to land on a famous economists desk who then declares “we are now officially in a recession because the last of the indicators has confirmed it from all sides!”

Talking about it can make it so. But if it is going to be, I would rather talk about it and get prepared. So, let’s talk.

I have been in quite a few conversations lately about recession proof this and recession proof that. Stocks, housing, customer segments, products, there seems to be no end to the list of topics that people think they have found that could be recession proof. Maybe it is something to consider, but most of us are going to be working with the situation that we have, so we might want to think about how to make it successfully through this bumpy ride. (For those of you who have specialized in serving customers who are mostly in the sub-prime mortgage industry, you probably want to seek out a different vertical).

Evil Coaster

So, I guess the question I should be asking given the nature of this site is what about your CRM program? What are you doing relative to CRM to ensure that you are going to ride this out well?

I have consulted to companies through a number of these cycles. The last time, brought on by airplanes flying into skyscrapers, caused many of my clients to want to find ways to cut costs. This is tempting. Figure out a way to keep your business going but in case the revenues drop, make sure your costs drop and keep the margin positive. I don’t know about this. Just this week I watched a segment on the evening news pitching this idea to consumers – offering all kinds of advice to cut spending. Hello! Fan those flames. Too many of those segments on the local news across the nation will cause the recession to go deeper. If we all cut costs we are going to dig a very deep abyss.

My recommendation is to take a tack that probably seems a bit counter intuitive. Build your CRM strategy to drive business development, not cost efficiencies. IBM hired extra sales people during the great depression rather than laying them off. We all need to sell ourselves out of this thing not hunker down and hope it blows over. A lot of hunkering is going to lead to a lot of recession. There, I typed it again

Go after the market with guarded confidence (as opposed to economic denial like our nation’s president). Improve your marketing reach if you don’t want to expand your salesforce. Invest in better sales effectiveness if you can’t invest in more actual headcount. Develop a new channel to expand your reach, maybe it is time to involve partners. Perhaps you need to analyze your customers to assure you are targeting the segments correctly. Going after the wrong segment with the wrong resources will become more exposed during an economic downturn. The investment in analytics will help to position your channels toward the correct segments and drive better results.

Either way, CRM can be a key to success, even if you do want to find a few places to make some efficiencies. Just don’t spend too little.