The Financial Impact of CRM: The Real Story (Part 3)

This article is the third of a series of articles focusing
on the financial impact of CRM on an organization. The article centers
on the CRM benefits associated with improved efficiencies. We will discuss
some practices used by successful companies to reduce expenses while realizing
CRM effectiveness.

Before we begin, let’s clarify the difference between efficiency and
effectiveness. Effectiveness is doing the right things,
i.e. making the right strategic decisions. Efficiency is doing
things right, which means being as productive as you can be with
the resources you have available to you. Many companies embrace CRM technology
to increase efficiency, reduce costs, standardize processes and better
leverage their legacy systems.

Efficiencies not only lead to reduced expenses but also to better data
quality and customer knowledge. In CRM, efficiencies can be realized in
the areas of sales, marketing, service and operations. Here are just some
of the most commonly experienced efficiencies in sales, marketing and
service:

Sales Efficiencies
• Increased productivity of sales people
• Reduced cost per sales contact
• Reduced cost per sale
• Reduced cost per salesperson
• Faster lead generation cycle and better management of the cycle
• Improved ability to track and measure sales performance

Marketing Efficiencies
• Reduced cost per marketing campaign or customer contact
• Improved selection of target customers through better knowledge
• Improved response rates through better positioning and offers
• Improved ability to track and measure marketing efforts
• Increased customer loyalty due to more personalized offerings

Service Efficiencies
• Reduced cost per service call or encounter
• Less service problems or errors
• Faster resolution of service call due to better customer knowledge and
processes
• Improved ability to measure service representative performance
• Increased customer loyalty due to more personalized service encounters

The primary contributor to improved efficiency is well-designed business
processes. Many CRM technology initiatives fail because companies implement
the technology first and then realize that they need to design the processes
to fit the technology. This is backwards. The focus is not on sales, marketing
or service automation per se – the focus is on value creation for customers.
Technology only facilitates this value creation. Designing interactive
and well-defined workflows prior to software implementation can facilitate
automated and manual process activities, decision points and business
rules, as well as manage process exceptions.

Effective CRM initiatives complete the design of business processes or
workflows first, based on the customer’s needs and expectations – processes
that create value at all customer touch points – using process maps, experience
blueprints, touch point maps and other tools. Processes should be customer-interactive
or customer-centric so that they provide unmatched features and ease of
use to improve efficiencies throughout an organization.

The benefits of well-designed workflows or processes can include:

• Improved efficiency through the elimination of unnecessary and redundant
steps and standardization of operating processes, as long as they create
value for your customers;
• Improved data quality;
• Better process control for future improvements through the use of audit
trails and standardized work methods;
• Improved customer service and relationship-building due to increased
process consistency and predictability;
• Ability to modify or adapt (flexibility) processes quickly and accurately
when they must be re-designed as business needs change;
• Improved employee productivity because employees work faster and smarter
– they know what is expected of them in terms of actions and skills;
• More effective training and faster adoption of CRM technology because
technology use is linked to business processes, leading to reduced training
time and errors;
• Reduced operating expenses in system and data maintenance costs; and
• Reduced operating expenses in access and sharing of customer information.

One of the key components of efficient CRM systems is the ability to
increase a company’s knowledge of its customers. Our current business
environment is no longer transaction-based – it is knowledge-based. An
IDC study revealed that "knowledge workers spend 15-20 percent of
their time actively looking for specific information; however, these searches
are successful less than 50 percent of the time." Considering time
spent on unsuccessful searches, IDC’s study found that these unsuccessful
searches could cost a company approximately $6,000 per worker, per year.
A small business with ten knowledge workers could lose $60,000 per year
while a larger organization employing 1,000 knowledge workers could lose
$6 million per year.

Learning organizations constantly strive to learn more about their customers
through effective and efficient interactions. With the right marketing
strategies, customer-centric processes and technology, a company can realize
increased revenues, improved efficiencies, and an unmatched competitive
position in the marketplace. CRM is for the taking – it’s not a question
of why; it’s a question of how.

For more information on the CRM certification programs offered by FIU,
see http://cba.fiu.edu/web/ope/crm.htm

Dr. Nancy Rauseo is on the faculty of Florida International University’s
College of Business Administration where she teaches marketing. Nancy
holds a Bachelor of Science in Industrial Engineering from Purdue University
and an M.B.A and Ph.D. from Nova Southeastern University. She is also
IBM-certified as an e-Business Solutions Advisor. Prior to her teaching
career, she held various senior management positions for over 20 years
in the areas of sales, marketing and technology implementation.

Dr. Rauseo is also Instructor for FIU’s Professional Certification
Program in CRM. The next program runs from January 27th through February
24th, meeting on Fridays from 9:00 am to 4:00 pm at FIU’s campus. For
more information, visit: http://cba.fiu.edu/web/ope/crm.htm