Companies have been successfully implementing CRM strategies for several years and are investing heavily in CRM today. It is no coinci- dence that these are the same companies that set the standards for levels of customer experience and for speed in responsiveness. The leading exponents of CRM are the companies that are revolutionizing both themselves and the markets within which they operate.
Forward-thinking companies understand that CRM is a core disci- pline requiring process, organizational and technology revolution across multiple dimensions. It is not a single step, a single phase, or a single programme; on the contrary, it is many capabilities coming together to enable positive, fundamental change in how an enter- prise approaches, manages and profits from its key relationship. One 2003 IBM study found that 52 per cent of executives believe that CRM is relevant or highly relevant to improving shareholder value. Nearly 90 per cent recognize CRM’s positive impact on driving value in sales, marketing and customer service. Leading enterprises know that customer management can pay. In an increasingly commodi- tized world, customers’ experience of a company can make or break the business.
The IBM/Ogilvy alliance is an organization that measures CRM performance and implementation worldwide. They have found a
strong correlation exists between business performance and customer management. Companies can expect to gain between 2 per cent to 50 per cent increases in turnover from improving customer management. A more reliable guide is that companies can also expect a 400 per cent return on investment from well-managed programmes. Customer satisfaction is linked to profit. In their Ogilvy/QCi State of the Nation report of 2003, they reported a close correlation (0.88) between the Dow Jones and the American Customer Satisfaction Index (ACSI) (see Figure 7.4).
Ogilvy also showed strong correlation (0.8) between good customer management performance and business performance. In other words those companies that look after their customers and are truly customer-centric are more likely to return better financial results. In a global study of major corporations, IBM’s Institute for Business Value found that across industries, CRM creates the most value by improving the customer experience and expanding the existing customer base. The results are highlighted in Figure 7.5.
Studies like these are showing that CRM is thriving. Companies are pursuing and executing multiple CRM initiatives and they are succeeding. On average, approximately one-third of European companies are gaining benefits from CRM, particularly in the areas of customer service, brand management and loyalty. In customer service and brand management, close to 50 per cent state that they are achieving ‘some’ or ‘full’ success.
CRM is creating value, particularly through improving customer experience and underpinning the retention and growth of existing
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centage changes in DJIA
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centage changes in ACSI
0 -3 -4 -2 -1 2 1 3 4 Q1, 95 Q2, 95 Q3, 95 Q4, 95 Q1, 96 Q1, 96 Q2, 96 Q3, 96 Q4, 96 Q1, 97 Q2, 97 Q3, 97 Q4, 97 Q1, 98 Q2, 98 Q3, 98 Q4, 98 Q1, 99 Q2, 99 Q3, 99 Q4, 99 Q1, 00 Q2, 00 Q3, 00 Q4, 00 4045.0 10,608.6 ACSI LAGGED DOW JONES
customers. The profound and tangible benefits of CRM are recog- nized. More than three out of four European businesses determine the success of CRM by its proven customer impact, with a further 70 per cent rating it by its contribution to revenue growth. In a world that is refocusing on the top line, CRM has a critical role to play.
Most of the benefits that have been achieved by CRM are in the traditional fields: improving the retention and satisfaction levels of customers, enhancing revenue growth and improving customer insight. Yet there are still benefits which many companies have yet to tap into. Segmentation, for example, which up until now has tended to be based on a batch-based labelling of customers according to needs, is moving in the direction of on-demand segmentation. Companies can now fuse real-time deployment with ‘what if?’ scenario planning, resource optimization and complex clustering. This is being driven by the complexity of doing business where goals are often in conflict with each other and where constraints can be found at all levels of customer communication across the enterprise. Some leading banks have had to revolutionize their marketing and offer allocation so that it works for several hundred propositions, in real time. Entirely new types of capability are being developed in order to ensure immediate customer relevance and marketing effec- tiveness. Customer insight is becoming more than simple analysis and reporting. Comprising elements such as data gathering, data
66% 67% 75% 77% 84% Relevant Customer experience
Deeper customer relationship
Wallet growth/retention
Customer acquisition
Process efficiency
Figure 7.5 How does CRM create value?
warehousing, analysis, data mining and predictive modelling, the results are then being made available at the point of contact with the customer. This means that it can be modified according to what the customer says or does during the transaction.
Such advanced uses of marketing and analytics are reaping rewards for leading-edge organizations. One North American provider of roadside assistance and auto services, seeking to protect market share while growing and improving customer marketing, has seen its campaign revenue increase by 68 per cent and produce an ROI of a staggering 442 per cent.