Customer Retention

Companies find more ways to use CRM technology

It was the eve of a big IBM announcement. After years of dealing with 500 different customer databases spread around the world, IBM, in partnership with Siebel Systems, was set to debut a centralized database that call center operators could access from any continent.

IBM was particularly proud of a "call me back" button on its Web site, and had reserved advertising space in The Wall Street Journal announcing the new feature.

Get ready for a barrage of calls, IBM told its U.S. call centers. Wait a minute, they said. What if a customer from Australia or Germany calls at noon his time? Where can IBM find a German-speaking U.S. operator at 5 a.m.?

Good point, the IBM reps said, but the "call me back" button ad was going to break in The Wall Street Journal the next day.

Well then, someone said, "turn that button off."

Brian Lawe, customer relationship management (CRM) director at IBM, uses this anecdote as an illustration of how far-reaching, yet provincial, customer retention technology can be.

Interdepartmental Wars

"The complications of these new technologies relate back to those business process issues," Lawe says. "To do [CRM] just because the technology is there is fundamentally an environment for failure."

CRM encompasses a broad range of technologies, from automatic e-mail response to ordering wireless services via cell phone. Theres no market shortage for CRM, nor is there a dearth of technology. But the problem is that while most companies are keen to retain customers, and many are willing to spend the money to do so, few are sure what to do with the technology once they have it.

"If an organization isnt aligned, technology is just going to automate that dysfunction," says Dave Daniels, an analyst at Jupiter Media Metrix. "The thing thats impeding success is organizational culture thats not aligned between a single customer vision. Youve got different departments fighting over who owns the customer."

The definition of CRM has changed as technology has evolved. The first incarnation of CRM software mainly focused on sales and ser-vice. Sales force automation allowed sales reps to keep records of their activities and instantaneously access customer information. Call center operators used the technology to familiarize themselves with customers and to assign calls to specialized technicians.

Now, CRM is moving more into the marketing space. The idea is to analyze customer usage or purchase patterns on the phone, on the Web or on a wireless device, and formulate better customer retention strategies.

Because it can reduce customer churn, CRM is considered recessionproof. A Jupiter survey of 35 executives found that 75 percent plan to increase their CRM spending this year.

Lawe believes that CRM technology is important in industries that differentiate themselves via customer service, such as the financial services, insurance and telecommunications industries.

However, companies may cut costs by opting for compartmentalized CRM software. While CRM pioneers such as Siebel still offer companywide platforms that integrate customer information into a single database, other software manufacturers are developing systems designed to appeal to certain niches or problems.

Ogden, Utah-based MarketStar, which provides sales rep services for manufacturers such as Hewlett Packard and Intel, bought a $100,000 specialized CRM system, known as partner relationship management (PRM), to monitor the activity of its salespeople. The system, manufactured by Partnerware, allows MarketStar to pinpoint client information, such as "last week, your 10 reps made 52 phone calls," says Lee Wells, vice president of U.S. operations at MarketStar.

Wells says he looked at a companywide CRM system, but that "theres tremendous difficulty with so many legacy systems in place. The accounting department has to agree with the sales department."

Four Hot Topics

Sheryl Kingstone, CRM program manager at the Yankee Group, says that there are four hot CRM areas this year: wireless or mobility-based customer service, customer self-service, marketing analytics and collaborative commerce, which includes PRM. PRM is a CRM niche that specializes in managing dealer, distributor and reseller networks for large companies.

Jupiters Daniels believes that PRM is just a makeover for ugly-duckling CRM products. "PRM is the hot thing for all those CRM vendors who couldnt get financing or had trouble cutting through the clutter of the CRM space," he says. "The underlying technology is really the same. Most CRM systems can do [partner] relationships."

Steve Cole, vice president of product strategy at Chicago-based Click Commerce, disagrees. "Theres a big difference between managing partner relations and managing customer relations," Cole says. "A customer relationship is single-tier, while a partner relationship is multitier, with a manufacturer selling to dealers and distributors, who sell to customers."

Kevin Nix, vice president and general manager of Siebels call center and service products, says theres "a little bit of carrot and stick associated with PRM." For example, if a customer in San Francisco visits Ford Motors Web site and asks for the name of a nearby dealer, Ford could refer its best-performing dealer. "It can make partners raise the bar," Nix says.

The same can apply to customers, Nix points out. "In some cases it may be OK to fire a customer" based on net worth, amount purchased from a vendor, household income or type of business.

Siebels MySiebel system carries the concept of collaborative commerce further and adds yet another set of initials to the CRM field. ERM, employee relationship management, "makes each employee more aware of whats going on with the customer," Nix says.

An employee portal merges information from the CRM database and publishes a mininewsletter, giving employees updates on what the companys top five or six customers are doing. It can reduce bickering about which department "owns" a customer.

Promptu, in Milpitas, Calif., has a suite of tools designed around content collaboration that involves the customer directly. The customer can log on to a companys Web site and get a portal updating his account. The software is designed to make sales reps jobs easier by identifying a client by occupation or any other demographic, and then sending info relating to the customers interests.

In the analytical marketing sector of CRM, most applications are Web-based. The similarities end there. This is the wild, Wild West of the Web world, where few rules apply.

"Its the final step of the chain: enterprise value management," says Norbert Scholz, an analyst at Gartner Dataquest. "Its a holistic strategy that uses data to target the most valuable customers and offer them incentives. You can also figure out what the competition is doing."

Many companies have reached the point where they can collect customer data via online or offline surveys and usage patterns.

TeaLeaf Technologys CRM product tracks every move a customer makes on a clients Web site.

Randi Barshack, TeaLeafs vice president of marketing, says that customers will complain only 4 percent of the time if they have a problem on a Web site. And even those customers that do complain may not know what caused the problem. TeaLeafs technology allows a Web technician to go through a customers online experience second by second and identify problems. The company could then send an apologetic e-mail, free coupons or other come-back incentives.

The idea behind analytical marketing CRM tools is to change the way companies solicit customers. One way of doing this is through dialog marketing.

Doug Parizeau, vice president of strategic marketing at Burlington, Mass.-based Revenio, says that dialog marketing doesnt necessarily push a product. Rather, it makes a site a "good place to be," and that sells product.

Say the Colorado Rockies baseball team wants to sell T-shirts on its Web site. But rather than send out an e-mail blast saying "Get your Rockies merchandise here," the team can opt to establish a longer-term relationship by asking fans who their favorite player is, and then sending them daily information about how he did in yesterdays game. At the bottom of the e-mail is a link to the Web page.

Mountain View, Calif.-based Annuncio Software has a dialog marketing CRM product that designates areas of "real estate" on a clients Web site for marketing data. When a customer logs on to the Web site, he can get a targeted offer based on previous transaction and customer service data.

"It can become the brains behind the customer relationship," says Kim Weins, vice president of marketing at Annuncio.

San Francisco-based DemandTecs CRM software applies statistical principals to price and promotion in grocery and chain drug stores.

"Nobody has provided science to retail processing in a significant way," says DemandTec CEO Mike Neal.

Eliminating Guesswork

If a grocery store wants to put Crest toothpaste on sale, it usually determines price by the gross margin it wants to achieve, Neal says. DemandTecs software takes away the guesswork by quantifying actual sales history in 100 fields, such as what happens when Colgate is on sale and Crest isnt? What happens if you drop the Crest price 5 cents? Ten cents? What if its moved to a display at the end of the aisle?

"Its quantifying very precisely customer preferences. Thats the heart of CRM," Neal says.

In the self-service sector of CRM, fewer companies are launching products. But, Jupiters Daniels points out, "CRM infrastructure pieces like automated e-mail or self-service are winning the budget dollars this year."

Organik, a CRM product created by Orbital Software in Framingham, Mass., allows customers to interact with each other on a companys Web site. A customer can ask a technical question, and Organik can search through users or vendors profiles and find people who know the answer.

"The idea of automated customer answering [software] wasnt working too much of the time with pre-answers. People dont like that Ask Jeeves type of solution," says Bob Nilsson, Orbitals vice president of U.S. marketing. "Organik is bringing humans back into the loop."

Netonomy, based in Boston, has taken customer self-service to the wireless industry. Customers can buy a phone, activate it and add new products and services via cell phone, Internet or personal digital assistant. The companys CRM software, MyNetonomy, can generate a customer profile based on minutes used, and can detect when a customer is likely to churn. The service provider can then send personalized offers or deals.

John Hughes, Netonomys co-founder and executive vice president, says a "certain demographic — and that demographic is very attractive — thinks self-service customer service is better service."

But Hughes admits that that demographic is limited, encompassing young business professionals, early technology adopters and teen-agers. About 5 percent to 10 percent of all customer service calls fit into that demographic, he says. Thats part of the reason self-service technology, along with wireless CRM, is a less advanced market.

"With wireless, theres more prospects for next year," Jupiters Daniels says. "Now, its primarily for field sales and service staff."