COM B. Eisenfeld, S. Nelson
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1 B. Eisenfeld, S. Nelson Research Note 25 September 2003 Commentary CRM Best Practices: From Processes to Metrics Managers who apply customer relationship management best practices in such areas as processes, information, technology and metrics will derive maximum benefit from their CRM initiatives. Gartner analysts are often asked to outline the best practices in customer relationship management (CRM). This is a complex area, because CRM is a technology-enabled business strategy that no two enterprises approach in the same way (see "Successful Strategies for Initiating CRM Programs"). However, a common thread in discussions of CRM best practices is that enterprises need to approach it as an enterprisewide initiative, with IS and line-of-business (LOB) managers looking beyond their stovepiped perspectives to plan within a strategic framework. Gartner has developed an overall methodology, which we refer to as "The Eight Building Blocks of CRM" (see Figure 1). This framework groups effective best practices for each component of CRM. Using this framework, we identify best practices for each of its building blocks. Here, we will focus on the last four building blocks. (See "CRM Best Practices: From Strategy to Collaboration" for a discussion of the first four components.) Gartner 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved. Reproduction of this publication in any form without prior written permission is forbidden. The information contained herein has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The reader assumes sole responsibility for the selection of these materials to achieve its intended results. The opinions expressed herein are subject to change without notice.
2 Figure 1 The Building Blocks of CRM 1. CRM Vision 2. CRM Strategy 3. Valued Customer Experience 4. Organizational Collaboration 5. CRM Processes 6. CRM Information 7. CRM Technology 8. CRM Metrics Source: Gartner Research Processes The actions an enterprise executes to manage the customer life cycle and interactions with those customers are referred to as CRM processes. These effectively manage such life cycle processes as welcoming new customers, handling inquiries and complaints, and winning back lost customers, as well as the analytical and planning processes that build knowledge bases related the customer. Design Your Processes From the Customer's Point of View: Your processes should be developed from the outside in, rather than the inside out. Many enterprises fall into the trap of simply automating their flawed established processes. As a result, they continue to do the same things that have annoyed the customers for years, only they do them more quickly. A best practice is to redesign processes from your customer's point of view, enabling your enterprise to begin remaking itself into an entity from which customers expect and receive satisfaction. Constantly Re-examine Your Processes: CRM is not a "one and done" business strategy, so CRM processes cannot be designed once and then left alone. Such processes need to be continually reexamined, based on changing customer expectations, competitive changes and evolving market conditions. Successful CRM practitioners are always looking at this area, trying to create win-win situations for themselves and their customers. Tie CRM Processes Into Broader Enterprise Processes: Although each area has different goals and issues, CRM should not be divorced from enterprise resource planning (ERP) or supply chain management (SCM). In many cases, the boundaries created by enterprises and vendors are artificial anyway, and the real benefits can only come via the integration and improvement of these broader enterprise processes. Focus on the Highest-Value Processes for the Customer: Rather than trying to focus on all CRM processes at once, you should identify the top-10 highest-value processes for the customer. Focus your initial process efforts on these. Determine the minimum standards for each process. Consider promoting 25 September
3 these standards or service-level agreements (SLAs) as a competitive differentiator. And when you fail to meet the minimum standards or SLAs, consider compensating your customers. Information To support the desired analytical and operational (interaction) processes, it is important to collect the right customer data. This information enables enterprises to glean insights regarding their customer bases. This data must be sourced, managed and deployed throughout the organization, to all employees involved in customer-facing processes, so that consistency in interactions is clearly evident. Determine a Data Strategy: CRM managers should identify and create processes for managing customer data. Their strategies must consider the short- and long-term views and address several key questions: What do we need to know about our customers? Do we have that data? What do we need to do to get there? Start focusing on data early and be brave enough to postpone CRM if the data is not in a ready-tobe-used condition. Cleanse the Data and Keep It Clean: A well-thought-out and properly executed strategy calls for the acquisition of tools to manage the data, including developing processes to clean it (initially) and keep it that way. Use Customer Data to Derive Customer Knowledge: Collecting data that will enable the enterprise to deliver value and relevance to the customer is key. Data collection for its own sake does not add value. Neither does delivering tons of data to front-line personnel. Most important is analysis that turns data into insight, which enables you to derive knowledge about customers that provides value to those customers. Technology This involves all of the tools and computer systems, the underlying IT infrastructure and architecture, the hardware, software, networking and telephony infrastructure that manage data and information, as well as the workflow to enable customer-facing applications. Don't Rely on Technology as Your Total CRM Solution: Many enterprises mistakenly view CRM predominantly as technology. This could not be further from the truth. CRM is more about the elements around technology than the technology itself. The technology alone does not make a business more customer-centric. Of all the business strategies, CRM is the one that affects cost containment, as well as revenue enhancement. CRM managers should recognize the importance that technology plays in enabling the strategy, processes, customer experience and organizational collaboration; however, they must recognize that technology will not address the more-critical issues of a CRM endeavor. Realize Your Total CRM Solution Is Likely to Be a Mix: Enterprises will be combining best-of-breed tools, suites and building their own applications. You need to ensure that the CRM technologies you implement support the broader concept of the enterprise nervous system (ENS). Applications must be built for integration exposing services, publishing metadata and using standards, such as Web services. CRM applications must have an appropriate fit with the needs of the enterprise with respect to real-time, online and batch capabilities to support customer-centric processes. Link Technology Requirements to Business Requirements: Use the scalability, multichannel capability, availability, configurability, integratability, maintainability (SMACIM) framework (see "Evaluating CRM Application Architecture") to cut through the vendor marketing rhetoric on functionality, features and technical superiority. SMACIM is an evaluation framework used to assess a CRM application's 25 September
4 technology and architecture. Evaluation of CRM technologies using this framework enables CRM managers to set a more-business-oriented focus on the acquisition of technology to deliver business value from technology. Metrics CRM metrics are the internal and external indications of accomplishment used to justify, monitor and track CRM programs. They provide a feedback mechanism for the continuous development of strategies and tactics. Start With a Baseline: If you don't have a sense of where you are, you can't determine if you're making progress. Therefore, at the start of your CRM initiatives, identify and gain consensus regarding somewhere between three and five metrics per domain (such as sales, marketing or service). Define them, and then agree on their calculations. Next, agree on how often they will be measured in the future. A best practice is to develop a baseline measurement based on these metrics so that, after your enterprise has pursued CRM, you can monitor its progress toward achieving your goals. Develop a Business Case: Most people don't just wake up one morning and decide to build a new house. Most weigh the costs vs. the benefits before making the commitment. CRM is no different. Enterprises should build a realistic business case that identifies the costs, benefits and anticipated return on investment (ROI) when they decide to pursue CRM. Clearly understanding the financial picture will help you answer the question, "Why are we pursuing CRM?" For example, having developed its business case, an enterprise could answer the question this way: "By improving the cross-sell rate by 1.5 percent, we expect to see the net present value of a revenue increase of $1.137 million, with a 90 percent confidence that we can achieve this goal." This is preferable to simply answering, "to increase revenue." Don't Make the Business Case the Responsibility of the IS Organization: Funding for CRM initiatives must be derived from the beneficiaries of those initiatives. This ensures that behavior is not contrary to the enterprise's CRM strategy and processes and that the process changes required to deliver success from the initiatives are implemented. This only happens when the funder is the recipient of the benefits derived from CRM. The most-important guiding principle must be to ensure that funding parties receive ROI that is in line with enterprise's CRM realistic expectations. This generally means that the business units must take responsibility for building the business case, and they should be held accountable for delivering results from CRM investments. Monitor/Measure During and After Implementation and Link to Employee Compensation: It's not enough to develop a business case to obtain funding and then "forget it exists." Ongoing management of the business case serves as a foundation for managing costs during implementation and a basis for measurement after implementation. Measuring according to the time periods agreed on when developing the business case serves as a guide for making adjustments to the strategy, processes and technologies as business conditions change and the evolution toward becoming a customer-centric organization and culture progresses. Tie metrics and measurements to compensation for all employees, from the most senior executive on down. People behave according to the ways in which they are compensated. Tying all employees' incentive and compensation to becoming customer-centric will dramatically shorten the trip to becoming customer-centric. 25 September
5 Recommended Reading and Related Research "Creating a CRM Vision" "Developing a CRM Strategy" "Customer Experience: The Voice of the Customer" "True CRM Requires Organizational Collaboration" "CRM Change Management: Creating Organizational Collaboration" "Customer Process Re-engineering: Talk to Your Customers" "Customer Information Is the Lifeblood of CRM" "Technology Decisions Are Key to Enabling CRM Strategies" "Getting the Best Out of CRM Performance Metrics" Bottom Line: Enterprises embarking on customer relationship management implementations should understand the CRM best practices and apply them to their organizations. You need to design your CRM program around this information, because doing so will help you be more successful than your counterparts that do not. What separates superior implementations of CRM from run-of-the-mill programs is the ability of CRM managers to plan and learn from those who have gone before them. 25 September
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