CRM: Data-Driven Customer Management

Customer relationship management (CRM) is not a new concept. It’s been around in one form or another for years, often without businesses realizing that a healthy amount of what’s considered CRM is already ingrained into their everyday business practices.

But more recently, increased emphasis has been placed on its importance. As companies grow and as competition gets more fierce, businesses are searching for ways to make themselves stand out in the eyes of their customers — they’re implementing software strategies that allow them to nurture customer relationships to the fullest extent. They’re doing what many experts say will be what separates the losers from those that will succeed in the coming years.

CRM is characterized by software or capabilities that allow businesses to record, track and beneficially use data about each specific customer. This collection of data is then used to sell to and service customers across multiple channels, analyze their behavior, and devise marketing plans accordingly. It creates uniformity in all communications with the customer, whether by phone, fax, e-mail or the Web. The data collection devices standardize information and allow representatives or salespeople to communicate knowledgeably and efficiently with customers. It also allows the business to keep close track of the transactions and interaction between customers and sales — important information should a salesperson leave the company or not be available.

CRM is an offshoot of Sales Force Automation (SFA), and CRM really began getting popular about two years ago. Like SFA, CRM provides for the management of contacts, accounts and sales opportunities, but it also includes front-end applications that assist in customer interaction, the addition of customer and product information and it has the ability to hook to back-end systems, including financials, inventory, and Enterprise Resource Planning (ERP).

Adding Value
Intensive relationship management is the one thing that will give distributors the leverage they need to outperform the countless forms of competition that are available to customers, experts say. The Internet makes price-shopping and access easy, and there are always new competitors popping into the market willing to do a better job or provide a better price than you. Maintaining a firm relationship with existing customers is what will keep them coming back for more. And mining repeat customers is the most effective sales strategy businesses can employ, many experts say.

“Really today the hype around CRM is because it’s such a competitive marketplace,” says Melinda Nykamp, a consultant who conducts CRM courses for the American Management Association (AMA), New York, N.Y. “There are dozens of places customers can buy things from today. Consumers have a lot more options, so it’s important from the standpoint of retaining customers. They’re shopping around a lot more than they used to, and they look on the Web and can buy things. That sort of competition pushes the issue of why else would they buy from you.”

CRM systems are designed to help businesses lower costs while achieving higher revenues, say Nykamp.

“Essentially, what we view CRM as is figuring out how to increase the value of what you’re providing to your customers by being more relevant to them. It’s determining, ‘How am I of value as a distributor beyond product and price, and what else can I do to make sure I retain my customers on an ongoing basis.’”

Relevancy is a key trend, Nykamp says, and it has been covered more heavily in recent seminars. The concept relies on the company’s ability to form the type of relationship and service to fit the customer’s exact wants and needs.

“Really for a lot of clients, CRM has a lot to do with relevance. How can I be more relevant to someone rather than just improving customer service,” she says.

“The greatest value distributors provide in the marketplace is relationship management,” says Steve Epner, of BSW Consulting Group in St. Louis. He says CRM is very important for the survival of the distributor.

Now and in the future, Epner explains, people are taking each part of the distribution process and doing that part better. “The value that’s left is coordinating everything in the supply team and managing relationships.” That’s the distributor’s job.

“It’s really become almost imperative for companies to start looking at how well they’re really servicing their customers,” says Nykamp. “Customer expectations are higher than they used to be yet the challenge is that everyone’s in cost-cutting mode. There’s a gap in what we can spend and what the expectations are.” CRM can help in that goal, she says.

“It’s important to use these types of technologies to close that gap, and really to be able to do more and deliver on customer expectations at a lower cost. That’s where technology comes into play.”

The sales function also improves vastly with the addition of a CRM strategy, says Don Hunt, president of EDG Business Services, a consulting firm based in Atlanta.

“From what I’ve seen, it’s probably most effective where the company wants to intensively manage their sales force. If a person leaves they have a complete record of all transactions. If all the CRM is done at the sales rep’s level, there’s a big benefit,” Hunt says.

CRM database information can tell you when the customer was last contacted and who initiated the contact.

“You can look at whether all you’re doing is fire fighting,” says Hunt. “You can determine whether you’re being proactive enough. You’re maintaining, enhancing and strengthening the relationship with the customer.”

Hunt says CRM capabilities are available in any size, shape or form. Depending on the size of your business, the complexity and the capabilities vary, says Hunt.

Cost relies on scalability: How much can it grow? How many customers can it handle? How many locations are there?

“For small distributors, CRM can be as simple as a contact management system,” says Nykamp. “There are lots of low-cost solutions.”

There are bells and whistles that go along with the more-involved and pricey software packages, but the main differential in price among systems is scalability, Nykamp says.

Some of the add-ons that come with more expensive packages are management capabilities for sales and marketing functions, rather than one or the other, and trigger-based reminders. But Nykamp says even lower-end software can support larger companies.

“There are many, many different approaches to it,” Hunt adds.

Why Buy?
Epner is adamant that CRM in some form will be essential for survival in an ever-squeezed market, and cautions against viewing CRM as merely a tool to sell more product. He sees relationship maintenance and great customer service as the thing that will keep distributors from being outbid and outperformed by the competition.

“Consultative selling is the future. You need to be able to capture and maintain the information that relates to the end user,” Epner says.

“When I come in to offer you any kind of information I better make sure that information is very accurate.”

And Epner says CRM capabilities carry over to the relationships between distributors and manufacturers. It adds efficiency to the process and contributes to the formation of working partnerships. Distributors know who to contact within an organization for help, among other things. Manufacturers are embracing CRM to tell them who their most important customers are. The tools allow them to pinpoint many aspects of their relationships with distributors, and determine which are most important to their bottom line.

“Not all distributors are the same,” says Epner. “There are true partners, and there are those that are just there. I want to know who’s really working for me.”

It’s partnership relationship management, says Epner.

Though Epner is a proponent of CRM adoption among distributors, he cautions them to know the costs and benefits before they jump in to anything.

“First they’ve got to look at why they want it. They should buy it because they can use it as a competitive weapon. The first thing people need to do is look at ‘What can I do to manage these relationships to gain an unfair advantage over our competitor.’ Then I have the information I need to go out and buy the software,” Epner says.

It’s certainly important to recognize the merits of CRM and be open to the possibilities of acquiring its capabilities, yet Nykamp is confident in the strengths of small businesses in relation to current customer relationships and service.

“It’s an interesting thing it’s a lot easier for small business to get ahead because of these relationships,” she says. “I don’t think they’re behind as far as how they deliver to meet customer needs.” She says the customer relationship strategies being adopted by much-larger companies are closer to what smaller companies are and have been doing all along.

CRM is open to interpretation by distributors in that it started as a concept that has led technological capabilities that serve to drive out inefficiencies and create strong customer relationships and service. Distributors need to assess their capabilities, their purpose and goals and determine what CRM strategy is appropriate to their needs. With new competition beating at the door every day, it couldn’t hurt.

For information on the American Management Association’s instructional CRM seminars, visit AMA’s website.

Web Buzz
FedEx has launched a small business web-center that offers shipping tips, advertisements from other businesses, how to articles, business management tools, financing and marketing tips.

Dowding and Plummer Ltd., Birmingham, England, manufacturer of the Victor floorcare line, has announced the launch of its new website.

Grainger has consolidated the digital businesses of FindMRO.com, TotalMRO.com and MROverstocks.com into a separate organization named Material Logic.com. Grainger.com has been improved to reduce the cost of order processing, contract administration, and customer service.

Networld Exchange Corp., San Diego, announced its agreement with LayFlat Products Inc., Shreveport, La., to be its e-commerce provider.

Environmental Support Solutions, Tempe, Ariz., has partnered with ChemDeals.com, Falmouth, Mass., an online chemical exchange allowing users to buy and sell chemicals. Environ.com has also linked up with The National Safety Council, Washington, a nonprofit non-governmental membership organization, to provide comprehensive information on indoor air quality.

The PQ Corp., Valley Forge, Pa., manufacturer of inorganic chemicals, has launched an entirely revamped website.

Food Processing Machinery and Supplies Association, Alexandra, Va., announces the addition of an industry calendar on its website.

Consumers Interstate Corp., a paper products distributor, has launched an online retail source for paper products and industrial supplies for the home and office.

Governor Jim Gilmore, chairman of the Republican National Committee, launched a website to allow Americans to find out more about President Bush’s plan to lower the national debt and provide tax relief to all taxpayers.

EPA Pesticide Label Information Available Online
The Environmental Protection Agency (EPA) has published its pesticide product label system on the Internet.

The system provides images of pesticide labels that have been approved by the Office of Pesticide Programs (OPP) under Section 3 of the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA).

The labels shown have been initially approved and registered under FIFRA, as well as subsequent changes or amendments.

The posting was done in an effort to make pesticide information more readily available to the public.

Purchase Computers, Software Online
From monitors to modems, www.computershopper.com runs the gamut of technology-related products including desktop computers, scanners, handhelds, notebooks, software and software upgrades. The site’s features include articles and advice on choosing technologies, resources, a help center, and a section devoted to products for small businesses. Purchase information and availability are available for all items.