For the past few years, CRM marketing has been touted as the Holy Grail for marketing, and promised to revolutionize business. Recently, the luster has come off CRM with businesses simply unable to implement CRM across their organization, or unable to realize the gains CRM initially promised. This article attempts to dissect the current state of CRM marketing, and answer lingering questions surrounding CRM marketing.

1. What are the advantages to implementing CRM, or is CRM simply just another marketing buzzword?
In the current environment of corporate downsizing the term CRM has to some extent become merely a buzzword. However, there are companies that have made the investments and are realizing gains from adopting a CRM marketing mindset. What CRM attempts to accomplish is improve ROI of individual campaigns. It does this through developing an understanding of individual customers’ & prospects’ needs and then meeting them as cost-effectively and efficiently as possible. CRM can help the marketer identify the prospect needs before they come and ask for it.

An analogy can be drawn between CRM/Database marketing and predicting the weather. Customer behavior can be as unpredictable as the weather. Each individual day or prospect is unique and can behave erratically. Archiving and trend analysis are two keys that have improved both fields.

If you watch the weather reporter on the news they will sometimes quote a record high occurring over 100 years ago. The 100-year sample size allows a forecaster to reliably conclude what is normal and abnormal. The progressive archiving of past phenomenon, or in CRM terms, performance, paints the landscape from which solid trends can be identified. Many CRM managers have been put in the unfair position by management expecting large, immediate returns by implementing CRM. With many marketing managers dealing with only a year’s worth of data, it is unreasonable to expect massive CRM gains within that time frame. Rome was not built in a day, and CRM allows for progressive marketing gains, not overnight doubling of profits.

Once you have performed the archiving and have a solid sample size you can begin to establish trends. Compiling and archiving weather data has allowed scientists to identify a trend of global warming. Market behavior never continues along the same continuum, and there are factors that change the landscape. The Dot Com boom, and the Corporate Accounting Bear Market are larger trends that affect marketing returns right down to individual prospect performance. Unfortunately, many trends are not as sweeping, or as visible as these examples and require statistical techniques, and the capabilities of CRM marketing to capitalize on them.

CRM takes trend identification a step further offering the satellite capabilities to identify the micro-trends. Often with winter weather, meteorologists try to predict the nor’easter path. Will it go out to sea or hug the coast? How do they decide? What they do is use statistics and past performance to try and identify the most likely scenario. CRM allows the client a mechanism to alter the marketing mix and measure changes in performance. Archiving performance through the course of time, allows the marketer to begin to experiment with the marketing mix, and see the effects to identify actionable opportunities to improve. The key to this experimentation is having complete and accurate data input into the CRM engine so the proper conclusions can be drawn.

2. How can companies better meet each consumer's individual needs?
There needs to be a centralization of knowledge throughout the organization. CRM takes all of the consumer touch points, transactional data and brings them into a central database. This allows for the entire organization to see a complete picture of a customer, and recognize him or her and the products they purchase. Once this is accomplished, trends can be identified both from a demographic/segmentation perspective and a micro/customer view. From there, the CRM engine can execute micro targeted, on-the-fly initiatives for a select group. This limits extraneous offers, and serves up only what your customers are asking for, keeping their attention to your communications with them.

3. How can companies develop and maintain one-to-one relationships with consumers?
Companies can establish one-to-one relationships through loyalty programs, and other continuity marketing programs with their high profile customers. Companies need to maintain contact with those prospects on a rolling basis. Perhaps equally importantly, marketers need to identify through the database what is the most efficient frequency of mailings. Once segments are established, you can begin to customize offers on a prospect-by-prospect basis. Each customer has different triggers to purchase, and CRM can highlight those triggers. If the right mixes of incentive, discounted pricing, and frequency can be obtained, ROI will be progressively maximized.

4. What can be done to increase individual customer loyalty and lifetime-value?
Optimal lifetime value is not solely reached from a ramping up of sales, and in many cases reduction of costs and waste can carry greater importance. Certain segments of the database will be more price/offer sensitive. Why offer a discount unnecessarily, and reduce profit margin? Quite often in loyalty programs, subscribers or house records become trained to respond only when the product is discounted. Through the course of time, this can drain profits significantly. The key is to identify those price sensitive customers, and make a determination where the ideal cost/revenue price point is reached.

5. What is the biggest challenge of implementing company-wide CRM integration?
The challenges of CRM are great. If one peruses the trade journals and publications, one will find the CRM landscape is littered with landmines.
One of the most common mistakes is making an extravagant investment into a CRM program without an understanding of its potential to pay out. Many clients would be better suited establishing "training wheels" with a marketing database in line with traditional direct marketing databases. A great deal of knowledge and marketing gains can be made from archiving alone. However, any system is only as good as the data it holds. Shockingly, many clients simply do not have their customer base coordinated into a central repository.

The guiding concept in CRM is building relationships. Those relationships have no way to grow if you do not have a true understanding of who your customers are. Simple data appending and enhancing alone is sufficient to bring a significant level of improvement in customer marketing programs. CRM is the next step, and should be considered only after the database has matured to handling more complex analysis and testing.

Once that point of competence is reached, another considerable challenge is changing the corporate culture. Many large companies with the resources to fund a CRM program have multiple product managers with potentially conflicting objectives. You need buy in from the entire organization, and their complete participation. Otherwise you run the risk of running conflicting offers, and overall disjointed messaging and strategy. In addition, you miss out on valuable data from non-CRM communication.

6. What are the biggest challenges in selling the concept of CRM to clients?
Quite frankly, one of the biggest challenges is price. To integrate all the data, establish links from a call center or website to the database, and keep a staff to maintain the program can be expensive. Combined with the technology piece of CRM, the toll can become steep. A "Cadillac" CRM program does not make sense for all organizations. Some products and services will never have the capacity for CRM to pay out through the course of time. It is highly dependent on the nature of their product or service and the margins they operate under.

7. How do you define what aspects of the relationship should be scored to measure customer value?
This will differ from product to product depending on the sales cycle, the product profit margins and other factors. I place the scoring elements into two categories: Profile characteristics, and transactional. The critical thing to concentrate on is collecting and analyzing actionable data points that are indicative of lifetime value and purchasing behavior. Otherwise, you will clutter your analysis with data for the sake of data.

If you want to understand your actual customers the first place to look is the cash register. Which individuals bring in the most revenue? How often do they purchase? Is the web or direct mail the vehicle of choice to respond?

By analyzing the purchase behaviors from the past, you can begin to predict the future of your marketing efforts and determine how to maximize return.

In other cases, the characteristics of a person or organization can be equally important. If you know which industry an entity belongs to, you can concentrate your marketing to products that are relevant to the customer. With many consumer-oriented products, a person’s income can preclude someone from even being considered a prospect. Marketers need to ask themselves what characteristics do their top customers share, and what profile characteristics or data elements can be predictive of performance. The data element’s importance is weighted and a record score or customer value can be established. With different products, each data element or field will have a different weight. This process should not be done subjectively, but backed with hard statistical data.

Conclusion:
CRM’s declining reputation may be due to the dot-com business environment by promising too much, too fast. However, CRM still has the capacity to improve companies’ bottom-line and be an effective marketing tool. In fact, the need for CRM is more compelling today than it was two years ago when CRM first came into vogue. CRM strategies are actually better suited for today’s difficult economy where marketers need to be accountable for results and maximizing return on investment.

CRM can help make your marketing dollars work harder, and DNA has the necessary experience to realize CRM success. The problem facing many organizations is adopting the direct marketing mentality necessary to make CRM work. Mailers can find the potential overwhelming, and not know where to focus their efforts. This can often lead to over testing, yielding unreadable results that lead to no verifiable conclusion. DNA has the direct marketing savvy and expertise to maximize your CRM engine’s potential. Whether it’s developing test matrices, integrating databases, or program analysis, DNA can help get your CRM program in gear. We hope you found our CRM insights valuable, and encourage you to contact us to speak to a DNA consultant about your CRM marketing.