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Is Customer Relationship Management (CRM) - just another business buzzword? Anything but! In fact, CRM often poses the opposite risk: it sounds so simple that many business people jump into it without the preparation, analysis and planning necessary for success. A CRM strategy can maximize effectiveness and build revenue, but it takes some upfront legwork to make that happen.

Given the high cost of customer acquisition, businesses need to realize the full potential economic value of each and every customer. A CRM strategy can help you to do just that, if you recognize and act on a number of key issues:

The benefits of the right CRM strategy will outweigh the costs - really. The financial and human resource investment in developing and implementing a CRM program is significant, but the improved customer retention, loyalty, and potential reduction in acquisition costs can provide unparalleled competitive advantage.

If you don’t understand what your customers want and need, someone else will. That means you need to ensure you have the data you need to assess the quality of your customer relationships. You need to track the types of customers you're serving, their unique needs and buying behaviour and how these change during the customer lifecycle.

The right CRM strategy can help you determine the true economic value of each type of customer. That allows you to ensure that the majority of resources are directed toward developing the most profitable customer groups.

You need to take a good, hard look at your business. CRM is critical to success, but it is initially time and resource intensive. Is your business ready? Are the resources available? If not, the development and implementation of a CRM program can be broken into smaller projects that can be taken on over a period of time, planned according to the capacity of the business for smooth implementation.

Wait!! Don't buy that software! At least, not right away. No matter what a vendor may tell you, no software application can deliver an effective CRM strategy on its own. CRM encompasses many factors including customer experience, support technologies and business strategy. Once you’ve assessed these factors, you're ready to consider the CRM technology options that will best suit your organization’s needs.

CRM strategy development and implementation is not a one-off project. The process is continuous, as business and customer needs continue to evolve. The success of your CRM program must be measured on an ongoing basis through customer and front-line staff feedback. This will ensure that service and product offerings can be continually refined to meet or exceed the needs of high-value customers.

The most important elements of a successful relationship marketing program are the choice of customer and the choice of program. Relationship marketing should be targeted to your most valuable customers and be realistic in scope relative to the size and capabilities of your business. Build the foundation for a successful relationship marketing program by:

Doing your homework.
You can never know enough about your customer. Collect information through market research, ask at least two questions on every customer visit and continually update your customer data

Analyzing your customer base.
Identify your most valuable customers, and select several new customers with whom you want to do business. Target last years high volume accounts who are spending half the amount or less this year. Look for customers who buy one or two of your products and a large number from other suppliers. Classify customers with an A, B or C ranking

Be a Customer.
Find out what customers experience when they interact with your company by "mystery shopping". Then, do the same at your competitors. Visit your customers but don't try to sell. Talk with them, listen to them and make sure that they are happy. Initiate more customer dialogue through surveys, personalized messages on invoices, personal letters. Call every customer your company has lost in the past to years - find out why, and invite them back

Customize your product or service.
Your research will show you the next steps in developing your relationship marketing program. It may be as simple customizing paperwork to save your customer time. It may be personalizing direct mail, filling out forms so your customers don't have to, inviting them to focus groups or involving top management in relationship building initiatives. Ask your top ten customers what they want most. Then respond to their suggestions. Then - do it again. It's not rocket science, but it isn't a simple, quick fix for stagnant sales, either. It is a long term commitment - and it delivers even longer term results


Customer defection is a costly problem and that makes Customer Relationship Management, (“CRM”) just plain good sense. But what about the silent majority? That’s right – you know they’re out there – the vast number of prospects that aren’t converting to customers.

In the bricks and mortar world, average prospect–to–customer conversion rates vary so dramatically it’s impossible to pinpoint a relevant figure, but a look at the online business world helps shed some light on the issue. Retail websites in the United States can expect an average conversion rate of visitors to purchasers of a pitiful 2%, according to Jupiter Research (2002). The remaining 98% of prospects leave retail websites because they can’t find what they are looking for or they can't figure out how to buy it.

But are online retailers making huge investments to figure out why the elusive 98% or so aren’t sticking around? No – the biggest spending is directed toward managing relationships with the 2% who do, or attracting new recruits to replace the 98% that flew the coop.

So let’s turn that flawed logic on its head. Should we be investing in our customers to keep them? Absolutely. Should we ignore lost suspects and prospects? Absolutely not.

Consider the conversion process: you start with a suspect – basically an unqualified prospect. Once qualified you have a prospect with the potential to convert and become your customer, and from there your client (a repeat customer). And finally – Nirvana! The client converts to that rare gem – an Advocate for your business, generating referrals through positive word of mouth, testimonials etc.

Managing that process is the art of Prospect Relationship Management (“PRM”), the lesser–known cousin of CRM and a critical contributor to the business development process. When executed effectively, prospect relationship management achieves two important goals. First, it shortens the selling cycle, creating a positive financial impact in the short term. Second, it lengthens the life of the customer for your business – and that creates a positive financial impact in the long term. So review your current approach to PRM and make sure it includes:

Knowing (what your prospects want, what they need, where they prefer to buy and how). Tailor your company’s ‘touch points’ or contacts with your prospect to move them through the various phases of the conversion process.


Follow Up. Whether in the direct marketing process or through opt–in features of your website, create opportunities to follow up with prospects that have made contact with your company through a telephone or in–person inquiry or online browsing.


Communication. To build strong, lasting customer relationships, beginning at the earliest stages is vital, building brand awareness and comprehension through a variety of media and messaging.


Tracking. You need to understand where your prospects are coming from, so you can focus more marketing resources in those areas. You need to know why customers buy, of course, but understanding why some prospects don’t is equally if not more important.


Refining. Once you know why potential customers chose not to buy, you have the ideal opportunity to refine your marketing initiatives to better meet the needs and preferences of your target markets. Make the most of it! Test various approaches, measure the results, and refine again – act on what you learn and watch your prospect–to–customer conversion rate soar.



© 2005 5th Business Management Practice Inc.
www.5th Business.com