A number of factors have contributed to the growing relevance of CRM as a source of competitive advantage. They can be subdivided into four classes (Hamil, 2000):
1. Market drivers,
2. Customer-related drivers, 3. Business drivers,
4. Technological drivers.
An evaluation of impact by way of company can be made for each of the above classes (Table 2.1).
In the past, a few companies have begun CRM projects, just developing systems based on new technologies and neither identifying an appropriate strategy able to support the business goals nor focusing on change management initiatives able to support the radical modifications of the processes involved (Burn, 1989).
The creation of a customer relationship strategy is the very first step in a CRM project. It requires various steps:
1. Knowledge: It is necessary to identify the most profitable customers.
2. Listening: The emphasis is on customer loyalty; therefore it is imperative to find out key values and needs for each customer class.
3. Growth: Through communication and value production in the most suit- able way for each customer class, the company is able to develop a rela- tionship with its customers.
4. Results evaluation.
Again, to face these stages properly, the company has to review and integrate its infrastructures and business processes, paying particular attention to two crucial factors: communication and knowledge sharing.
As for communication (PricewaterhouseCoopers, 2000), four main classes can be identified:
• Mass communication: It has a great impact, though it is generally not aimed at a particular market, and it is brought about through media and traditional channel advertising.
• Communication per market segment: The company seeks the optimum combination of channel and their relative frequency of use, so as to reach specific segments.
20 CRM Project Organization in the Financial Industry
• Direct marketing: aimed at a particular portion of a specific market seg- ment, using tools such as mail, e-mail, telephone.
• One-to-one communication: based on direct interaction between com- pany and customer, via e-mail, telephone, mail or sales agents. It is usu- ally supported by CRM systems.
Table 2.1 CRM drivers and impacts
Market drivers
Competitive environment, standardiza- tion of products and services, reduced switching costs, aggressive price com- petition, and saturation/maturity of markets
Customer drivers
End of mass marketing, growing im- portance of one-to-one relationships
Impacts
An effective CRM strategy is nowadays a criti- cal factor in achieving objectives such as dif- ferentiation and customer loyalty
Impacts
As a consequence of the end of mass market- ing, today "the customer is king": customers have access to a wide range of personalized products and services, can better evaluate pur- chase convenience, and can demand high-level post-sales assistance. In short, the traditional four P's of the marketing mix have been re- placed by the four C's of rational marketing:
Costs, Convenience, Communication, and Cus- tomer needs and wants
Business drivers Impacts
80/20 rule (80% of profits are pro- Production of added value for customers is the duced by 20% of customers); acquir- real source of a company's competitive advan- ing new customers is much more tage
expensive than maintaining existing ones; "loyal" customers are more profitable than new ones; a longer customer relationship brings higher profits
Technology drivers Impacts
Development of interactive communi- IT and Internet allow the use of new channels cation tools such as call centres, de- to enhance the retention rate of profitable cus- velopment of front office solutions, of tomers while reducing the service costs of the data mining, etc. less profitable ones
CRM Drivers and Key Factors 21 Communication has a fundamental role, as the level of company-to-customer dia- logue shows the degree of CRM strategy development reached by the company (Fig. 2.1).
For instance, if a company entertains a superficial relationship with its customers, the relationship will be concerned merely with product-based aspects (such as fea- tures, price). If, on the contrary, the company implements a fully customer- oriented strategy, it will be able to develop a deep and lasting relationship. The
Target group Answers (%) Number of customers
Figure 2.1 CRM development stages and different communication forms (Pricewater- houseCoopers Consulting, 2000)
depth of the relationship, customer value in time and the investment in mainte- nance of the relationship become critical success factors (Shesbunoff, 1999; Scott Tillet, 2000).
Another important issue is customer knowledge sharing (Keene, 2001).
The company has to develop systems that enable it to:
• Gather information on customers,
• Organize data so as to perform effective analyses,
22 CRM Project Organization in the Financial Industry
• Use the customer knowledge gathered to implement value-creating initia- tives,
• Share knowledge with the customer and within the company.
Since good customers are a scarce resource, it is important for the company to manage all contact points effectively, to gather all necessary information, and to attain ideal customer knowledge. It must be borne in mind that each contact or communication has to be regarded as positive from the customer's point of view.
Every new datum or piece of information about the customer has to be carefully saved and processed to improve the company's corporate knowledge.
All the information gathered must then be made available to all the company em- ployees, so that everyone can have a full understanding of the customer's charac- teristics and thus be able to offer a customized service answering specific needs.
The value of knowledge can be measured as the difference between the cost of acquiring a new customer and the cost of maintaining an existing customer. A fundamental issue for the company is to be able to increase the value of the cus- tomer and possibly reduce customer loss (churn rate). All this becomes possible only when a CRM programme is made up of strategies, CRM information sys- tems, and process re-engineering (Egan, 1999; Eager, 2001; Angel, 2000; Bielski, 2000).