LEC Tip Sheet...

6 issues you should know about CRM and customer relations

Are CRM systems really the marketing miracle fix you've been looking for?

Holding on to your customers is hugely important. Did you know it can cost 5-8 times more to find and attract new customers than to keep your existing ones?

Recently, CRM systems have been cried up to be yet another miracle fix to generate stronger customer relations, and accordingly loyal customers. So what's the deal about CRM programmes and customer relations?

(1) Firstly, there are plenty of reasons to keep your head cool about it.
Yes, "CRM" can contribute to customer retention. But what can a CRM system really do and how does this connect with creating stronger relations to customers?

The truth is that, in and of itself, a software system can hardly create better relations with customers. Only people can.

Undoubtedly, CRM offers many possibilities. However, most focus on the fact that CRM systems enable better relations with customers which, in turn, can facilitate stronger customer loyalty.

A number of analyses have shown that the primary reason that customers switch supplier is that their current supplier doesn't demonstrate sufficient interest in creating a closer relation. That's why it's a captivating notion that a software system can create closer relations to customers.

(2) Relations are between people
It's worth remembering, though, that a "system" - e.g. a company - can hardly have relations with customers. It's more useful to think of relations as being between people.

Consider what must be present in a strong relation:

The parties know one another
The parties understand and appreciate each other
The parties trust each other
The parties respect each other

That's why only people can be parties to a relation. When a company attempts to build relations with a CRM system, it's not much more than a pseudo-relation. In itself, that doesn't create loyalty.

(3) Consider how customers really interact with you
Even if software systems do not automatically lead to better relations and increased customer loyalty, they can be a step forward. They can give you a good overview of a customer situation.
Over time, customers tend to have several different, yet often simultaneous, contacts with people within your company.

Before you start thinking seriously about software, it's a good idea to consider the following:

How do you actually identify customer prospects?
How do you attract and convince customers?
How do you keep your customers?
How do you develop - and grow - your customers?

You'll probably find that it looks something along these lines in your company too:

Once you make customer information available to everybody across your organisation, you are much better positioned to create strong relations with your customers.

But where do you get the necessary knowledge to do that? By registering every single customer interaction. That is, for example, every time a customer calls with an enquiry, every time you provide a quotation, every time you receive an order confirmation, every single complaint, comment or criticism you receive, and so on.

(4) Treat your customers differently
A good CRM system allows you to treat your customers differently. Unfortunately, many companies pursue the policy of treating every customer the same. Even companies that have decided to treat customers differently come up against the problem that they don't know exactly who to give "extra special treatment" and who to give just "good service".

This problem is usually the result of not knowing which customers make you money and which customers have the greatest potential for being highly profitable.

This reiterates the point about logging all customer interactions. When you work intentionally with this information, you can create a framework for how a single customer should be dealt with, and how you can increase your chances of profitable add-on sales.

So, in theory (and in practice with the right implementation), CRM allows you to increase your revenues and reduce your costs.

(5) The CRM system is often the smallest investment
You face significant internal changes to ensure the successful implementation of a CRM system. Frequently, the system investment is not the most expensive part of the project. Measured in man-hours, ramifications on business processes, organisation, business style, and information flow can be many times more costly.

In the longer run, it's probably worth the money. However, don't try to do everything at once. You're far better off splitting your project into several, more manageable phases. That'll considerably increase your chances of success.

Have you actually checked whether your customers want a closer relation to your company? If they do, how is it going to take shape?

(6) Getting the basics right first
You can't create instant customer relations. It takes time and effort and it is not done simply by deploying even the greatest CRM system.

Also, bear in mind that CRM is actually not just a piece of software. Rather, look at it as a framework to gather data about your customers -- store the data in a format that is easy to access, analyse the customer data, and use this customer information to market to or communicate with customers.

So, think of a CRM system as part of a systematic process and framework for an on-going dialogue and for building lasting customer relationships.

Whichever way, don't throw yourself into a new software adventure, but spend some time getting your basics right. Consider conducting a professional customer analysis -- with that you can locate relevant customers and get a much clearer picture of your situation.

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