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Q&A WHO's WHO:
Rhonda Germany is a VP at Booz Allen & Hamilton's E-business Competency Center, where she leads the U.S. e-business team. Past engagements included repositioning technology and capital investments for a large global conglomerate.
Peter Grambs, principal, specializes in the telecommunications industry, working with billing and customer-care operations.
Michael McKeon, managing partner, is in the Financial Services group, where he specializes in banking and capital
markets. He has completed partner-development programs at Harvard, Wharton, and the Aspen Institute.
Q: Do we treat CRM as a specific application? CRM
is e-business, isn't it?
RHONDA GERMANY: CRM should be melded into the organization's entire supply chain. Only then can businesses realize the value of technologies, whether in the front or back end.
PETER GRAMBS CRM is where each department understands its connection to customer focus in the organization and does something about it.
Q: CRM can't be out of the box?
RHONDA GERMANY: Absolutely not. CRM, to create any value whatsoever, cannot come out of the box. Our test questions are: Does it create any value for your organization? Does it increase your market share? Does it reduce your costs? Does it enable you to be in a business you could not have been in before? Our thesis is that a number of unsuccessful dot-com business models in the marketplace did not create any value in the first place. As for those that did, they were unable to capture the value they created.
Q: All the same, has the Web not had a huge impact on CRM usage?
PETER GRAMBS: CRM has been Webified. If you put any application in HTML format, then you have an intuitive environment. At the same time, the Web is only one channel.
Q: So a good strategy is seeing CRM as a
multichannel initiative?
PETER GRAMBS: The Dells, the Ciscos, have a high percentage of people coming in through the Web, while companies like Lands' End are going to see various customer zones. It's all about segmenting the customer base and not trying to force customers through specific channels.
Q: Not many call centers have been integrated with the Web. Why the lag?
PETER GRAMBS: Call centers still need to understand how to integrate with Web interfaces. It's just a period of maturation. Companies like Charles Schwab see the power of the Internet and make sure they support it, while other companies are just beginning to learn. Another stumbling block has been that call-center reps were not necessarily trained in writing skills and had difficulties in handling e-mail responses, an issue now being addressed.
Q: Where can CRM initiatives go wrong?
PETER GRAMBS: Implementing complex CRM systems
is a brute-force
task that calls for integration-and system-architecture skills. The stumbling block is when executives treat CRM as technology and end up with fancy systems and money spent on linking many data systems without creating value-add.
Q: As for CRM implementations, focus traditionally was strong in telecom, retail, and financial services. Is attention to CRM evident across all industries today?
PETER GRAMBS CRM: is absolutely across industries. Every company needs to understand how elements of the company impact the customer, whether "customer" means "wholesale" relationships, alliance partners, or other relationships throughout the supply chain. Every team needs to ask how to position assets and resources to have the most positive impact-and how to make a feedback loop happen.
Q: What are your views on Open Source as a beneficial foundation for CRM software?
PETER GRAMBS: I don't see why not, with the complexities of implementing CRM systems. If working with proprietary interfaces, difficulties may occur in the need for additional coding. Successful software vendors are those that provide systems that enable interactions to as many applications as possible. One school of thought is to go after a one-stop shop, as one complex undertaking. On the other side are IT people who, through open systems, pick best-of-breed elements and put them together, avoiding lock-ins, avoiding building one huge, monolithic system.
MICHAEL MCKEON: A best-of-breed approach is better. There are so many pieces of the CRM puzzle that to think one vendor can supply everything is naive. Peter is right in noting that some CIOs have a philosophy of just buying from one vendor. But in CRM, technology is evolving so quickly that to go with one vendor would be a silly idea. A good computer-telephony vendor, for example, may not supply you with the kind of data models useful for your type of management. The game is about the data. As for open systems, conceptually, yes. Since the business strategy is toward a focus on better customer management, there will be an appetite for technologies that serve that goal-for open architectures that enable plug-and-play.
Q: As a managing partner building e-commerce capabilities for large financial-service companies, what key CRM shifts do you see in this sector?
MICHAEL MCKEON: There's a lot going on. Some dot-coms have motivated financial-service companies to focus better on customer experience.
Q: Didn't financial services have a CRM focus early on?
MICHAEL MCKEON: Call-center management is something financial services did well early on, introducing CTI technologies effectively, and other technologies for how we sell and service customers. Today, there is a good deal of focus on the cross-sell of financial services with successes in information-based marketing up to real-time, behavior-based marketing. That is why I say some dot-com industries have caused impetus in connecting their transaction-processing systems to their information systems. The realization is there are insights to be gained in seeing what transactions say about the customer. Companies can capture and track information in new ways with emerging capabilities.
Q: What's ahead in the use of CRM?
MICHAEL MCKEON: Expect to see channel integration, and customers traveling across channels will feel better served than they are today.
TABLE:
How a 5% increase in customer
retention affects profits:
| Profit Boost |
Industry |
| 25% |
Credit Insurance |
| 30% |
Auto-Service Chain |
| 35% |
Software |
| 45% |
Industrial Distribution |
| 50% |
Insurance Brokerage |
| 75% |
Credit Card |
| 85% |
Branch Deposits |
*Retention costs are 3x to 6x less than acquisition costs.
**Calculated by comparing the NPV of cash flows for average
customer life at current retention rates with that of a 5% higher retention rate.
Source: Reichfeld and Sasser, "Zero Defections: Quality Comes to Service," HBR.
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