Value Comes First
When customers and prospects consider a company's value proposition, they typically consider a number of factors, notably, the product, supporting services, and the absolute and relative prices. Many companies begin their CRM efforts by dedicating the largest part of their investments to service support, a.k.a. customer relationship management—delaying investment in customer relationship marketing until the infrastructure is in place.
There are two major issues with this approach:
• Much of the potential value gained from CRM initiatives is delayed, often for years, and
• Frequently, the developed CRM infrastructure (if, and when, finished) doesn't allow for effective and efficient high-value marketing communications. In general, many organizations lack discipline in establishing specific targets and performance metrics to drive CRM strategy development and investments.
As with many major investments, the ability to extract some value as early as possible from CRM programs is key to success. Early ROI gains imbue confidence in the investments and often help shape the later stages of investment programs. Here are a few specific tactics that will aid in extracting initial value:
1. Set Targets. Set long-term measures and targets around essential drivers of value, e.g., 1) customer retention, 2) customer acquisition, and/or 3) upselling and cross-selling customers.
2. Develop Test Programs. Create intermediate targets and develop specific programs to achieve these short-term objectives as well as demonstrate that the eventual long-term goals are achievable.
3. Use Knowledge. Incorporate lessons learned in the early stages into broader CRM initiatives to ensure "institutionalization" of successful approaches.
Now, let's examine how this prescription could be applied to the previously described situations:
Situation 1. The financial services company should begin with analysis of its current customer base and transaction history to determine purchase associations and sequencing, and try to predict what products/services are likely to be most attractive to each specific customer or customer segment. A test process could be set up, targets could be determined, and test and control groups could be established to measure the results. Results would then feed the design of more durable and company-wide processes and technology.