CRM: highway to happiness or monstrously expensive blind alley

1
CRM highway to happiness - or monstrously
expensive blind alley?

• Drayton Bird
• CIM, Cambridge
• 12th November 2002

2
What do you think of Western civilisation?

• Journalist to Chou En Lai

3
It would be a good idea

• Chou En Lais response

4
Why is CRM like teenage sex?

• Everyone talks about it.
• Many claim they do it.
• But since few know how to do it well, it often
  ends in failure.
• Despite this, people keep trying.
• But if it were your money, would you?

5
Would you invest your money in dream castles?

• Many firms do
• They authorise CRM initiatives
• Hire CRM executives
• Create CRM departments
• Without even knowing whether it works
• Or even defining what it is

6
Youve heard lots of theory.How about some facts?

•   CRM would appear to consist of whatever that
  organisation happens to be doing at the time.
  Depending on whose figures you believe, the UK
  market for CRM will be worth between 2bn and
  15bn within the next three years. The
  likelihood of failure for large CRM projects is
  as high as 92 . Gartner forecasts 55 of CRM
  initiatives will fail.
• Marketing Week, 17th May 2001

7
Can firms be that stupid?

• Yes, they can
• CRM is now an accident waiting to happen.
• Top US firms spent 2bn on CRM last year, with
  precious little to show for it. Latest estimates
  suggest 70 fail to achieve their objectives.
• Precision Marketing, 11th May, 2001

8
Surely this cannot be true!

• Customer dissatisfaction is on the increase.
  This may be because people are becoming more
  demanding, but it is more likely a by-product of
  CRM strategies.
• Precision Marketing, 18th May 2001

9
What Branns worldwide survey discovered

• 1,800 people rated 22 marketing devices from 1
  ("doesn't bother me at all") to 10 ("makes me so
  mad, I don't want to do business with them
  again").
• Up to half seriously considering going elsewhere.
  Stunned by consumer rancour we found said
  Brann spokesperson.

10
You cant have a great restaurant without a great
kitchen and great service

• Too many managers simply see CRM as an add-on
  which can magically provide results. Of course,
  when it doesnt they are disappointed.
•  Philip Jones, Managing Director, Interchange
  Group, Marketing Week, 17 May 2001

11
A little commonsense, a few examples and three
serious questions

• 1.     Why is it so popular?
• 2.     Why does it go wrong?
• 3.     What can you do to get it right?

12
Seen any flying pigs lately?

• Just the facts. Start today and have global
  customer relationship management (CRM) in 19
  days.
• - Oracle ad
• Oh really?
• Man is a credulous animal and must believe
  something. In the absence of good grounds for
  belief, he will be satisfied with bad ones.
• Bertrand Russell

13
Some thoughts about miracle cures and magic
bullets

• Remember TQM? MBO? Downsizing? Re-engineering?
• Why do marketers fall for these phoney fads and
  fashions?
• Unreasonable expectations. False premises.
  Plausible waffle.

14
We think like consumers because we are consumers

• We love fancy labels.
• We fall for the latest thing from abroad
• We want to believe in miracles
• We desperately want easy solutions
• But life isnt like that, is it?

15
Relationship Marketing

• A marketing approach in which a company seeks
  to build close relationships with its current and
  potential customers in order to encourage them to
  concentrate a disproportionately high share of
  their value with it. The company pursues this
  objective by developing and continuously updating
  a deep understanding of each customers present
  and future needs, and by tailoring the choice,
  delivery and communication of its value
  proposition to these needs as closely as is
  economically possible.
• McKinsey

16
Whats missing from that definition besides
decent English?

• this is marketing without balls, because
  there is no mention of testing.
• If you cant measure it, you cant manage it.
• Aiming at nothing, they hit their mark

17
What happens when you test and measure

• We took the brochure out of a bank mailing. ROI
  almost doubled
• We added a face to a business schools ads.
  Response was 92 higher
• We tested a 3 page letter against a one page
  letter for a political party
• The 3 pager pulled 52 more money

18
All customers are not created equal

• Yves Rocher people recruited by a skincare
  benefit proposition cost 50 more to get - but
  had 3.2 times the lifetime value of those
  recruited by cheap offers.
• Women 35 - 45 had more than double the LV of
  those aged 21 - 27.
• Married women had LV 25 higher than single
  women.
• Mens average LV was over four times more than
  womens (Can you guess why?)

19
Critical facts

• Your customer is 3-8 times as likely to buy as an
  identical non-customer.
• A contest entrant is twice as likely to buy.
• A past enquiry is up to twice as likely to reply.
• A recent enquiry is even more responsive.
• Anyone with any relationship with you, however
  slight, is more likely to buy.

20
And one simple fact most firms blithely ignore

• Research reveals that customers dont want a
  relationship with you.
• Who wants to get cosy with an insurance firm? Or
  a bank?
• Most of us cant even manage a relationship with
  our spouses.
• What we want is something better.

21
How Hello said goodbye

• Loyal readers?
• Hello (Hola) had 506,000 readers to OK!s
  221,000
• Then came the Spice Girls
• In 3 months OK! overtook Hello
• What about the relationship with all those loyal
  readers?

22
1. Poor data

• Bad customer information lets firms down.
• Many have old legacy software systems they cannot
  easily upgrade yet which hold essential data for
  running the firm.
• These are useless when you need new CRM systems.
  The technologies differ.
• Different points of contact from you to
  customers, and them to you cause chaos.

23
One comment

• How many selling all this have done it? How many
  can make a communications plan?
• They treat it as a system, a process none have
  ever had to put together a communication.
• How many have the knowledge and experience of
  what you actually do marketing for? Or how things
  get made, briefed, conceived, executed, budgeted,
  etc.? They are all theoreticians.

24
2. No interest from top management

• In 75 of UK firms, senior managers have no
  regular direct contact with customers.
• Only just over half of UK firms have a senior
  manager i/c customer management.
• Most people have their faces to the Chairman and
  their asses to the customers. Jack Welch

25
3. Not enough patience

• In 1903 the Wright Bros flew the first plane for
  about 12 seconds. 32 years trial and error
  before first commercially successful flights.
• Many new technologies needed - variable pitch
  propeller, retractable landing gear, strong
  lightweight fuselage, air-cooled radial engine,
  wing flaps. Had to work as an integrated whole.
  Till then, commercial flight a freak show.
• Jim Maxmin, Chairman, CIM

26
To sum up, why it goes wrong

• Too much bullshit.
• False hopes sold by experts at talking, not
  action.
• Bought by marketers who seek a magic substitute
  for hard work.
• Lack of infrastructure.
• Lack of patience.

27
You think a loyalty programme is the answer?

• Loyalty is what is left when the bribes are
  removed
• Victor Ross,
• Former Chairman, Readers Digest, Europe

28
A rewards programme can only work as part of your
strategy

• Many firms bolt them on them for the wrong
  reasons.
• Hoping short term results will solve long term
  problems.
• This leads to me-too formats to get programmes
  going quickly.

29
But loyalty is not bought simply by offering
rewards

• It is earned by consistently delivering better
  value.
• Your companys culture must entirely centre on
  customers.
• So you can guarantee to deliver the product or
  service promise every time.
• Every time customers contact you and
  vice-versa.

30
It affects your culture, structure and people

• Who people report to.
• How you train employees.
• Computer systems and procedures.
• If you think a rewards programme is just a
  marketing tool, you cant appreciate these are
  crucial.

31
Some practical details

• How will you allocate and record points or miles?
  
• How will you tell customers what they have
  earned?
• How will you handle redemptions?
• These processes are not part of many firms
  structure.They dont realise what skills you need
  to manage them.

32
More practical details

• Many programmes fail to tailor the type of reward
  to the customer's status.
• Soft" rewards that give privileged service and
  recognition become more important to the more
  loyal customers.
• Hard" rewards like free flights work better for
  acquiring customers or rewarding infrequent ones.
  

33
How do you measure success?

• Many measure "success" by number of members
  rather than value.
• They waste money trying to convert promiscuous
  users into loyal customers.
• Costly statements and newsletters are mailed to
  customers who havent bought for ages.
• Why not spend less on them and use the money to
  reward those likely to become loyal?

34
Rewards no substitute for consistent service
and value

• You can easily create less loyal customers.
• They begin to expect an incentive to buy -
  diluting profit margins.
• They buy depending on the best offer.
• Most don't even redeem the points. Their attitude
  to joining is, why not, rather than yes,
  please.

35
Some practical points about CRM

• What sort of firm is it right for?
• How to see if you should even get involved.

36
What they did teach at the Harvard Business School

• It only works for certain types of firm
• Those where there is a contractual relationship
  with your customer
• Recency, frequency and monetary value criteria
  may not apply
• Longstanding customers are more, not less
  demanding and costly to handle

37
Imagine

• for a moment that all is well with the world
• Customers buy what you sell
• In fact, youre doing OK, even turning a profit
• So do you need the latest fad?
• Ask yourself the following questions

38
Step 1

• Do you really know what your customers want?
• Do you know what they think you promise them?
• Can you identify this, before and after they buy?
• If you dont, find out.
• There is absolutely NO point in boarding the good
  ship CRM unless you know the answers.

39
Step 2

• Can you deliver what your customers want?
• If not, what can you deliver now, and in the
  future?
• You must clearly understand their expectations -
  and meet them.
• Without this youll end worse off than if youd
  never bothered.

40
Step 3

• Do you know at what points in the relationship
  you should be telling your customers what they
  want to know?
• About their order? About their worries?
• To reassure them?
• Customers love to knowand they can end up buying
  more.

41
Step 4

• Can you identify the points from step 3 in each
  individual transaction?
• Are you sure your IT team can deliver?
• And if you have retail outlets, can the shop
  staff access this information quickly and
  easily?
• Now take a deep breath step 5 is the killer.

42
Step 5

• Can you accurately record what occurs at all
  points in the transaction?
• On a database the right people can access?
• Many firms have separate databases for customer
  and transactional data.
• If your marketing database cant access both,
  youre dead before you begin.

43
Take a breather

• Did you answer the first 5 steps with mostly
  yes?
• If so, CRM might work for you
• If you said mostly no
• Politely ask your charming CRM consultants to
  leave
• Their time is expensive, and youll lose your
  shirt.

44
Step 6 - start the ball rolling

• Tell your customers what you plan to do.
• Manage their expectations.
• Make sure your whole team - particularly retail
  staff - are given the same respect.
• Make sure you know what youve promised, and
  deliver it.

45
Step 7

• Set up a monitoring process inside your company
• Make sure you identify any weak links that appear
  in the chain
• Most customers wont tell you they are unhappy
• They tell all their friends, and they walk away
• So

46
Step 8

• Ask your customers how they think youre doing.
• Loyalty rates can improve just by giving them the
  opportunity to tell you what they think.
• Allow your customers to suggest improvements.
• Its the best research youll ever get.

47
Step 9 - it doesnt stop

• Keep listening to your customers

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Step 10

• Keep learning from your customers.

49
What was all that about?

• It was about the difference between theory and
  practice
• The difference between high-falutin jargon about
  strategy - and what really matters
• So before you do anything, take out those 10
  points and read them.
• You might even keep your job.

50
What three generals thought about strategy versus
tactics

• When asked his secret, the Duke of Wellington
  didnt mention strategy. He said, attention to
  detail.
• General Omar Bradley said Amateurs talk about
  strategy. Professionals talk about logistics.
• Napoleon was most influenced by a book called
  Essay on Tactics by Comte de Guibert.

51
Boring but important

• There are over 100 steps in carrying out a direct
  mail campaign i.e over 100 chances to screw it
  up.
• Many suppliers employ ill-trained, underpaid
  staff.
• Visit their premises understand the process
  fully.

52
Step by step to a better relationship

• Analyse every step in your customers experience
  of dealing with you.
• Before the sale
• During the sale
• After the sale

53
1. Your database acts as you do in real life

• Learns - and notes - who the right people are
• Finds out where they live - and how
• What they like and what they dont
• What interests them, what doesnt
• How they behave
• What they think.

54
Are you gathering and using data intelligently?

• Dear Mr. Nickolds
• As a member of Tesco Baby Club, well make sure
  youre the first to know about new services for
  busy mums like yourself.

55
So watch for critical moments

• In the prospects life e.g. marriage, new home
  (new doctor), new baby, 40th birthday.
• Before buying worried about their health,
  reading about it, looking in the mirror.
• After buying - the afterglow having a problem
  time to buy again.
• These determine contact strategy.

56
2. During the sale

• How is the customer handled? Does everyone in
  your firm realise that the customer is always
  right?
• Just remember the customer doesnt have to buy
  from you.
• The customer pays your salary not the other way
  round.

57
What really happens

• 100 mail order firms in 10 sectors were emailed
  for their catalogue or brochure.
• 34 never even replied.
• Average response of those that did was nearly 4.5
  days.
• Only 18 bothered to personalize the reply.
• - Parade Marketing research

58
Imagine you ran a restaurant

• When a customer came in, would you be slow? Not
  know the menu ?
• Never send out inadequate material - particularly
  weak letters.
• Answer all possible questions - not just a few.
• Reply fast. You lose 1 of your potential sales
  every day you delay.

59

• If they have any questions do you tell them who
  to call?
• Is that person fully briefed on what to say?
• Is everybody who ever deals with customers
  through any medium, at any level aware how
  important it is to collect data
• Starting with the name and address.
• Try ringing or writing to your firm some time
  and prepare to be horrified.

60
What do you try harder at replying to enquiries
or cold mailings?

• Nine out of ten spend more effort and
  imagination on the latter.
• This is folly people you mail cold are possible
  prospects.
• Enquirers are certain prospects.

61
Do you give all the relevant facts or just some?

• Give people every reason to do what you want.
  Otherwise its rather like a salesman who sees
  you today and only gives you one reason to buy
  the product then another reason to buy tomorrow
  - and so on.
• John Caples

62

• Any omission at any stage can turn a likely
  customer into somebody who will never do business
  with you.
• It is just like meeting a new acquaintance. How
  polite they are to you in the first few moments
  is critically important.

63
The lost millions

• Do you ignore prospects who dont buy first time?
• Does it occur to you that they may still be
  interested?
• Keep following up till it doesnt pay.
• There is more money lost in this area than just
  about any other.

64
3. What about after the sale?

• The sale is like a marriage. Then there is the
  honeymoon, when the customer is still in love
  with you.
• But after the honeymoon, what happens? How long
  will the love last? Or will there be a nasty
  divorce?

65
Saying thank you

• Isnt it just common politeness?
• Few marketers bother.
• The rare exceptions often make a fortune.
• In the case of this particular marketer, over 2
  billion.

66
Two simple examples

• A Queensland motor dealer sent a 50 cheque to
  people who had traded in their cars.
• We got more for your old car than we expected.
• I still remember a water carafe given to me by
  Wates
• In 1962

67
What happens to sales when you say Thank you?

• A retailer rang up a file of customers one
  month after a product had been bought.
• They just said, Thank you for buying do you
  have any questions?
• They didnt ring a similar file, and
  researched the difference in sales.

68
Easy money

• 70 said they liked the call and would like more.
  
• 45 of those they didnt ring said they would
  like such a call.
• Over the next 6 months 13 more of those called
  bought again.
• The average number of orders increased by 16 per
  customer called.

69
How you treat the customer youve got is utterly
critical

• Have you told them what to do if they have any
  questions after theyve bought?
• Is your after sales service flawless? Have you
  given them a number to call?
• Once youve got a customer, make sure you keep
  that customer. Communicate regularly.

70
Its never too late to start

• What do you do if you have made a mess of
  collecting or storing data?
• Ask your customers!
• You might be pleasantly surprised at the results
  
• If you do it properly, politely and creatively.

71
Communication is an act of service

• I realise that the next sale begins the minute
  I deliver the new car.
• Joe Girard

72
Make it easy for customers to reach you

• On the phone
• In person
• In writing
• On the internet
• 24 hours a day, 7 days a week

73
In real life, if you want to get on better with
someone, what do you do?

• Show an interest
• Be considerate
• Be good company
• Wheedle

74
Going back to my first quote from McKinsey

• What fancy consultants call Customer
  Relationship Management ...
• is largely what they used to call service
• and no scheme will make up for the lack of it.

75
We sell service at a profit it just happens to
be delivered as grape juice in a glass.

• John Hancock of Cellarmasters
• the worlds largest wine club

76
Three desiderata

• 1) Respect your customer.
• 2) Stay close to your customer.
• 3) Use your imagination.

77
Visit www.draytonbird.com

• This 457 page site reveals much of what we know,
  with answers to 278 common marketing questions.
• It gets 20,000 - 30,000 hits a month, with people
  staying about 23 minutes.
• Its free.
• Be my guest.
• And thank you for letting me be yours.