Tuesday, March 1, 2011

The Business Case for CRM

The Harvard Business Review recently conducted a study on customer retention and the link to company profitability. It found that for many companies, if an organization can increase its customer retention rates just ten to fifteen percent, it can double profits. This should come as no shock to business owners and managers today that already know their best source of income is their current customer base. The challenge comes in identifying the most profitable clients and then devising a system that assures their retention – all while increasing the customer base.

CRM, or Customer Relationship Management, is first and foremost a business strategy. It is a deliberate and systemic method in which companies implement customer facing processes to accommodate customers, continually develop customer relationships and increase revenues from customers. Information Technology (IT) facilitates CRM objectives and processes by using sophisticated software programs to automate customer facing and back office operational activities and processes. In many cases, the CRM software suite can integrate with Sales Order Processing and Inventory Management solutions; further increasing automation and efficiencies. CRM software automation has enabled today’s managers and C-level executives to increase the visibility and transparency of their companies, as well as to allow them to better control each aspect of their business – all without negatively impacting current support staff or needing to hire additional personnel.

Studies at Hewlett-Packard have demonstrated that a properly integrated and customized CRM system can significantly impact a company’s top line revenues and bottom line earnings through defined, systemic and realized savings. The Field Sales Automation components of a CRM suite alone can not only increase the aforementioned visibility into the sales process, but has also decrease redundant data entry by 20% to 25%. The study also showed a 15% to 30% decrease in pre-campaign analysis and campaign planning through an integrated Marketing Campaign module. As a matter of fact, each module showed clear and incontrovertible evidence that CRM solutions increase productivity across the Human Resource spectrum and resulted in measurable decreases in operating costs.

For many companies, a primary focus and benefit point of CRM is business process efficiency. Every executive knows it is easier to enhance the bottom line by decreasing costs as opposed to increasing revenues. CRM can do both. For example, a company with an eight percent profit margin and one million dollars revenue achieves $80,000 profit. In order to increase profits by 25 percent, the company would have to increase revenues by $250,000, or cut costs by $20,000, or two percent.

A quality CRM solution leverages the abilities and time of the entire human resource pool. However, depending upon the CRM software application and particular implementation objectives, organizations may differ as to who are the primary benefactors of CRM automation and efficiencies. For some companies, the main beneficiaries are the users, be it customer support representatives, marketing staff or sales professionals. Their real-time access to information and leverage of software automation empowers them to achieve their key performance metrics, goals, projects and quota. CRM software utilization allows users to be more self-reliant and in most cases, dramatically.

For other companies, the main benefits are seen at the decision-making and managerial level. CRM solutions empower decision and corporate strategy makers with clear business process visibility on a real-time scale. It gives them detailed snapshots of operations from customer service initiatives to sales and marketing campaigns. Results from efforts are seen in both running time and cumulative – allowing for quick and accurate decisions and strategy implementation and or changes. Real time visibility into operations is a major power tool for today’s C-level executive. More than that, with growing competition and rapid market changes posing constant challenges and pressures – it is imperative. The real time visibility aspect to CRM gives a company heretofore unseen flexibility. It allows for near instantaneous reaction times and the ability to be proactive in meeting customer and prospect needs. CRM software solutions also afford senior management with competitive intelligence visibility, hypothetical business strategy modeling and the added time needed to exceed the efforts of their competition.

How companies’ reach out to new markets is another make or break business proposition. Years ago, companies had a limited number of ways to contact prospects, measure responses and view trends. Today, there are e-mail campaigns, faxes, cable advertising across multiple channels, print advertising, network marketing, various Internet promotions, trade shows, VARS, distributors, seminars, radio and much more.

Furthermore, prospects are hammered every day, through multiple venues with someone’s marketing initiative. Within a robust CRM solution is the ability to cut through the noise, target specific markets, collect and segment consumer data and then design, test and automate marketing initiatives that are based on quantifiable analysis – resulting in the most cost and time affective marketing programs possible for your company, product and marketing budget.

Thanks to The CRM Blog Guy for this outsanding article!