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The right (and wrong) reasons to use CRM software in your business

Those guys at Harvard do a great job of reminding me to remind my readers about the pitfalls and opportunities that come from using CRM software.

You might expect that a trained geek (“Don’t try this at home”) would simply implement all the software and move on, in order to eliminate all those pesky employee type people. Well, unlike the scarecrow, I have a brain (yes, I realize that the peanut gallery is likely to have contention with that<g>) and know better – and so should you.

So how do we avoid the pitfalls, take advantage of the opportunities and sink that 37 foot putt to beat Tiger at the PGA?

The CIO Insight article by the Harvard guys has a few things worthy of comment that apply to your small business.

For starters, some info about CRM (customer relationship management) software spending:

Spending on CRM dominates investment in categories of software. Retailers are particularly enamored of CRM technology, with one survey in 2003 finding that already 65 percent of retailers had implemented at least one CRM application and some 80 percent of those surveyed say that investments in CRM were a good way to build their business. Ironically, much of the investment in CRM software has been oriented toward reducing the costs of servicing customers, not building new or stronger customer relationships.

The problem with software like this is that it is rarely used for the right reason. Simply by virtue of its existence, it should reduce service costs (as noted above). But that isn’t where the real value happens – and it’s the value most often ignored by companies who have actively implemented CRM software.

The value? Learning what your customers do and want so that you have that “message to market match” that Dan is constantly talking about.

Learning which kinds of customers buy what and how often. It’s easy for almost any retailer to say “Our average transaction size is $42.37. Our store serves an average of 48 customers per day on weekdays and 79 on Saturday.” (Ok, the latter isn’t as common, but it should be)

Big retailers know much, much more than this. They know by the hour how many people are in the store and what the average transaction size for that hour is – and they know it for a specific day of the year, as well as for specific weeks of the year. And lots more.

That’s why WalMart is constantly pushing the envelope on database storage. I read something yesterday that said their next database was going to be measured in petabytes. I’m a geek and I didn’t even bother to see what that meant in English.

But I digress (I do that a lot).

What a CRM can tell you that most people don’t bother to pursue and utilize is not that the average transaction size is $42.37, but that the average transaction size for a married woman with 2 kids is $98.12, she visits about every 17 days and she owns a home in a specific zip code. And that her kids are in elementary school. And that her husband never visits the store on weekdays with her, but almost always does on weekends, when the family’s purchases almost double to $181.19 and usually involve home improvement purchases.

On the other hand, the average single man under 35 years of age visits the store every 42 days, spends $121.75 and rents his home.

So what’s that worth? If you advertise to the family, you advertise home improvement and kids stuff. You use families in the materials, you focus on the busy executive mom’s needs for weekday promotions and the big purchases on the weekends that might be a bit more attractive to the husband.

Likewise, your marketing to the single man avoids home ownership related products and services, and focuses on areas that become obvious based on his purchases.

Then you group all this data together (the geeks say “aggregate”) and figure out what groups your customers naturally create among themselves. And that’s another set of marketing pieces and promotions – focused specifically on the needs of those groups – and you don’t send promotions for single men to a mailing list of widowed seniors (seems like common sense, but…).

Contrary to what is often said about these actions, this is not depersonalizing your business, but doing just the opposite. You are finding out more about each customer so that you can offer them things that are more germane to their lifestyle. IE: Stuff they really want.

You want depersonalization? Try “Dear valued customer” on a letter or email.

The Harvard article continues, noting:

But before you can manage a customer relationship, you first need to build or create that relationship. And customer relationships are not really built by fancy data-mining and statistical analysis packages that track people’s behavior, nor by the now ubiquitous automated phone systems that basically just irritate people. Rather, relationships and their quality are determined by what happens to customers when they actually make contact with the organizations that have so avidly sought their business through advertising and other promotions.

No question that the phone system does save money. It also wastes a ton of it through lost sales and annoyed clients. Should you have automated phone systems so that I can check my order status at 1am, or make a payment via my phone from St. Kitts? Sure. Should your phone be answered by a real person during reasonably normal business hours so that I can solve a problem that cannot be solved simply by typing in my account number and pressing the # key? Unless you’re a fool, absolutely.

The big gotcha on these systems is that businesses abandon what they are already doing and move wholesale to the automated system. That’s not what customers want. They want BOTH automated service when appropriate AND a comforting handholding experience when things are screwed up. Some portion of the customers prefer the automated service for as many functions as possible, while others want to deal with a real person. It’s really tough to get by on just one and doing so risks alienating the people whose money funded that new system in the first place.

Next up in the article…

Interactions between companies and their customers are still, even in this Internet age, often conducted by, of all things, real live human beings. That’s why successful organizations in industries such as airlines, hospitality, retailing, and financial services are relentless in their attention to hiring people who will fit into a service-oriented culture; diligent in inculcatingâ?? through extensive trainingâ??service skills and attitudes; and, most importantly, scrupulous in taking care of their people so they will feel good about and be proud of the company and want to deliver a great customer experience.

“Inculcating”. Wow, that’s a 50 dollar word. How about this: Hire caring people and give them the motivation, tools, training and opportunity to do everything within reason to improve your customers’ experience with your company.

Last but not least, the article noted:

So maybe instead of splurging on automated phone systems and software to analyze people’s buying patterns, or even on fancier robotic telephone answering technology, if companies want to invest in technology to actually improve customer service and retention they might be better served to first invest money in software that helps them hire better people who are more likely to stay.

Sure, anything to help someone select a better employee (once you define “better”) who will stick around longer is an advantage. Software that analyzes a person’s likelihood to steal has been around for some time. Written tests that examine personality traits in the same areas, even longer. Tests and software to analyze a service rep’s ability to relate to a frustrated client – even that is available.

Me? I think trivial day-to-day interactions and behavior are a good indicator, perhaps not of the likelihood of theft, but of something valuable to me: Initiative.

For example: When interviewing someone, I leave a balled up piece of paper on the floor between the entrance to the interview location and the chair where the person will sit. Doesn’t matter if the interviewee is cleaning staff, support or sales.

In plain view: a trash can.

Someone asleep at the wheel or without much initiative will walk in, perhaps glance at the paper, and leave the paper as is, or ask if I want them to pick it up. While asking is better than nothing, I don’t need more children. If you need permission to toss a wadded up piece of paper in the trash, you probably aren’t what I’m looking for.

Someone who shows a little initiative will pick it up and toss it in the can without a word. This is the minimal expectation if the interview is to have any meaning at all. Anything less than this and we’re just having a pleasant conversation.

Someone who is on the ball will pick it up and find a way to work it into the conversation – perhaps even recognizing that it’s a test, and ask about it. I haven’t experience that one yet.

Someone who knows me well would probably pick it up and toss it to (or at) me and ask me why I keep my office such a mess 🙂

PS: regarding the putt vs Tiger – all I can say is practice more often.

One reply on “The right (and wrong) reasons to use CRM software in your business”

Really enjoyed reading about the interview test with the ball of paper and the trash can, it makes me think of how the people around me would react in such a situation, crm development and crm software if used correctly should help any business reach it’s full potential.

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