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 Chuck SchaefferWhat is Customer Relationship Management?

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For many people evaluating CRM software, CRM is not what they think it is

Summary

  • Customer Relationship Management is a business strategy aimed at growing mutually beneficial customer relationships at scale. That's strategic because achieving customer affinity is one of only four sustainable competitive advantages.
  • Strong customer relationships are a leading indicator of increased customer purchases, referrals, lifetime value and retention; all factors that deliver revenue growth and profits.
  • CRM software is the enabling technology. It delivers data management, process automation and information reporting. It provides the tactical execution to achieve the user, customer and business outcomes designed in the strategy.

Many people think that CRM is software. It's an easy mistake to make. The truth is CRM software is a tool to achieve CRM.

Customer Relationship Management (CRM) is a business strategy designed to improve customer relationships and the downstream financial outcomes such as increased customer acquisitions, customer share and customer retention.

The overarching goal of CRM is to achieve customer affinity, which means knowing your customers better than your competitors, and using that knowledge to better serve them, build relationships with them and earn their business.

Customer affinity is one of only four sustainable competitive advantages and a differentiator that is not easily replicated by competitors or displaced by new technologies. In fact, growing mutually rewarding customer relationships makes a connection that can withstand disruptive technologies, competitor encroachment and the erosion of other competitive advantages.

Increasing business relationships increases business.

CRM and CRM Software – Not the same thing

CRM strategy is different than CRM software. The former targets the most important business outcomes while the latter is the empowering technology to achieve the former. CRM strategy and CRM software are symbiotic together but ineffectual apart.

CRM Strategy and Technology

A CRM strategy is a lot like a map. It defines your baseline performance and starting point, then sets your destination in specific and measurable user, customer and business outcomes, then designs the processes to reach those target objectives in the shortest route, and finally applies technology to bring automation, information and reporting to achieve efficiency and scale.

Notice how the CRM software came at the end? When businesses skip the road map, prioritized business outcomes, redesign of business processes, and jump right to the software, they apply technology for technology's sake, and the CRM software fails to achieve business outcomes that matter.

CRM strategy defines and prioritizes the methods and processes that deliver the outcomes that most matter and avoids wasting time with activities that don't.

CRM software is the application that aids the strategy. It is the customer system of record and the central location for customer information. CRM software manages the end to end customer journey, including lead generation (marketing), customer acquisition (sales) and customer support (service) in an integrated and holistic technology stack.

CRM Strategy + CRM Software = Better Together

Without CRM strategy, the CRM software is aimless. Without strategy, most companies will incur random acts of customer management that either fail to achieve the most important business outcomes, or pursue a trial and error approach, and a much longer route.

CRM strategy is the linkage from the software to the business outcomes. It shows specifically how the software will achieve the objectives. Without strategy that link is left to chance, and the business outcomes are very unlikely to happen.

Without CRM strategy, CRM software is designed in a vacuum, execution is haphazard and achievements, if any, are insignificant and often temporary.

A CRM implementation without a CRM strategy is a lot like watching a foreign language film without subtitles. There is a lot of activity, but you are not really clear on where it is going.

Without CRM software, the strategy lacks management, automation, information reporting and scale.

The CRM strategy must define, and the CRM software must design meaningful business outcomes to satisfy users, customers and the company. When that happens CRM strategy and CRM software become the yin and yang of improved customer relationships and financial outcomes.

The Point is This

CRM strategy is a precursor to everything that comes after. Great execution will not get you very far if your strategy is wrong.

You can install CRM software without an accompanying strategy, but three things are likely to occur.

First, the deployment effort will incur a more random pursuit of business objectives as opposed to a prioritized path based on benefit or payback.

Second, the effort will incur a trial and error approach that increases implementation time, decreases user adoption and defers or forgoes the most meaningful company and customer benefits.

And finally, the results revert from strategic objectives such as increased customer acquisitions, customer share and retention to tactical goals such as getting data into a system, measuring staff activities or producing a sales forecast report – possibly valid goals – but do little to nothing to improve customer relationships or the company's top priorities. And if your CRM does not improve your customer relationships, well then you miss the point of Customer Relationship Management. End

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Quote

"Disappointment with CRM is usually the result of poorly conceived strategies that don't increase revenues or reduce costs."

Source: Forrester, Assess CRM Capabilities to Pinpoint Opportunities Report

 

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