Author’s Note: Below is a short essay I submitted as part of an exam for the “Business Relationship Management” course I am currently taking as part of the NC State University Master’s of Global Luxury Management program.
Prior to the proliferation of computers, cloud-based software, and analytics in our daily working lives, CRM systems were reserved for large organizations that could afford a capital investment into the concept. “CRM Done Right” notes that “through the late 1990’s and into 2000, managers plowed millions of dollars into information systems meant to track and strengthen customer relationships.” In 2015, a subscription to the world’s #1 CRM system, Salesforce.com (according to its homepage), costs just $25.00 per month when billed annually. Even though the financial playing field for CRM systems seems to have been leveled, the primary reason for use and the potential benefits still hinge on implementation and strategy.
In “CRM Done Right” (Rigby and Ledingham), four key questions were proposed for brands to ask to decide where and how to use CRM technology:
- “Is it strategic? (Identify the processes that most support your company’s strategy.)
- “Where does it hurt?” (Where in your customer relationship cycle do performance-sapping problems arise?)
- “Do we need perfect data?” (Distinguish between activities that truly demand perfect data and those that don’t.)
- “Where do we go from here?” (Analyze system-generated data to pinpoint new opportunities to extend CRM’s power.)
Although the Harvard Business Review feature was published in 2004, and amidst all of the leaps and bounds in growth that technology has made since, the four key questions still pose a basic foundation that any brand should consider before committing the time and financial resources required to launch a CRM strategy.
According to “CRM Done Right”, “a comprehensive CRM system can, in theory, automate every aspect of a company’s relationship with its customers”. But what part of the relationship needs to – and should – be automated? (Is it strategic?) Is it potentially every interaction (for example, with an e-commerce based business) or potentially just at major pain points in the process (another example: a salon that sends text or email message based reminders for upcoming appointments rather than intrusive, labor-intensive, and more time-consuming phone calls)? (Where does it hurt?) Asking this question in advance – “which parts of our relationship can and should be automated” – indicates understanding of the best practice noted in “CRM Done Right” that “successful CRM practitioners have learned to distinguish between routine aches in the business and strategic pain points before prescribing CRM solutions.”
In solely web-based transactions, first-click or last-click attribution methods (while possibly varying in efficacy of sales conversion) are often accurate and easy to associate with a singular customer’s purchasing history and behavior, but where brick-and-mortar businesses are still concerned, even the most modern of CRM systems can still be victim to human errors and tendencies — begging the question, “how good is our data”. (Do we need perfect data?) For an example, when setting an appointment to meet with a luxury real estate agent, the agent might ask their new client: “how did you hear about my services?” – to record in their real estate agent CRM software. Even though the agent invests heavily in print advertising, outdoor/billboard campaigns, and online advertising, the client might erroneously credit “a radio ad”, even though the agent has never invested a single dollar in radio advertising. Even though the data is not perfect, it is still of value for the agent to know where their marketing investment is having the most impact – although in this case, some mediums may never offer what is considered to be “perfect” data.
After marketing investments have been made and a client list begins to grow, what happens next? (Where do we go from here? — and– Is it strategic?)
In 2015 and beyond, brands of all sizes have nearly limitless opportunities to use a CRM and its associated data to grow their business. For luxury businesses in particular – specifically the travel and hospitality industry – one single, but potentially greatly impactful use – is in providing preference-based benefits to travelers that can increase not only consumer satisfaction, but average spend, as well. Take, for example, a luxury hotel and spa property. Having booked a repeat visit from a guest who has dined on-site in the past, what if the hotel had a record of the wine that guest ordered at a prior dinner that was exceptionally well-received? A data point on the guest’s account at time of booking could trigger the reservation-booking agent to offer to have a bottle of that same wine chilled to the correct temperature in the guest’s room upon arrival. A $300 reservation might have just become a $375 reservation with the addition of the wine purchase, whether or not the traveler even sets foot in the dining or spa facilities at the luxury hotel.
The technology to enable these types of suggestion-based selling opportunities already exists – the only hurdle to implementing and benefiting from them are the same as when CRM systems were introduced in the 20th century: management support and investment, as well as end-user buy-in. In many cases, the “end-user” buy-in might not be limited to the business employee participating in the transaction, but the consumer, as well. For privacy and convenience-minded customers, they may never take the extra effort to create a “registered user account” when shopping online or may not regularly book travel accommodations directly through a hotel reservation desk or website, so the real future for CRM systems lies in how well they can be implemented for consumer profiles with incomplete data points or histories, while still enable value-increasing experiences for business and consumer.
Additional value from CRM systems can be gleaned by provided analytic-based insights, rather than decision makers relying on “gut feelings”. Comparing RBC Bank’s example where the “Value Analyzer came online, the Bank found that profitability rankings changed by at least two deciles for 70% of customers” (“Customer Profitability and Customer Relationship Management at RBC Financial Group (Abridged)”, Narayanan) to an estate jewelry brokerage, the brokerage also has the opportunity to gain valuable customers and audience-based data to inform their business decisions like the bank did. Being able to see which customers generate the most value, the most frequently (thus, earning a position in the valuable “True Friends” segment of the matrix shared in “The Mismanagement of Customer Loyalty (Reinartz and Kumar)), would allow the business to invest more in improving the relationship with that customer and thanking them for their business (for example, with more valuable customer gifts). They also can have true insight into which products receive the most traction and insight on their website and how that translates into sales and inventory turnover with data driven by free or paid website and e-commerce analytics software.
By narrowing in on the best practices shared in “CRM Done Right” (from “Which results matter most” to “business needs taking precedence over technological capabilities” ), decision makers and their marketing and sales teams can see that while CRM technology continues to grow by leaps and bounds and become more affordable and accessible than ever, strategic decisions still must be made in advance about how to structure and implement a system for it to be most effective in generating results that everyone (business and consumer) can benefit from.