Customer Relationship Management – Evolution and Revolution in Customer Services
Customer Relationship Management (CRM) as a philosophy or system of business practices has commanded acres of specialist journal and business publication space. CRM has been increasingly heralded as the method of choice for retaining customer loyalty, optimising long term value and ultimately ensuring that a company will continue to succeed in the increasingly competitive medical markets. An expanding number of the major multi-national pharmaceutical and medical device companies have already installed CRM solutions on the recognition of the perceived benefits of a customer-centric business model focusing on the customer as being the most important asset driving growth and profitability.
From Product Value Added to Focused Service and Customer-Centric Value Added Processes.
Throughout the 1980’s and 1990’s marketing gurus, academics and industrial strategists focused on gaining and maintaining competitive advantage through a variety of generic strategies. These strategies such as those pronounced by Michael Porter and others, concentrated by and large, on adding value to the product through either differentiating the product from others, cost leadership to improve profitability or market share or by concentrating on a niche or narrow market segment. Whilst it is clear that these principles have worked it has become increasingly evident that it has become progressively more difficult to gain and maintain competitive advantage for companies within the same market segment.
The medical industry in particular has been at the forefront in recognising, and acting upon, the need to commit substantial resources in basic scientific research, product development and the formation of highly skilled and creative product development teams in the pursuit of meeting unmet medical needs. Clearly this process will continue. In addition, business strategists have focused on developing new solutions to the product value added chain as a means of regaining the business initiative.
The natural evolutionary successor has been to create greater service value and support by developing and fostering the relationship between the customers themselves and the company which is supporting them. This concept of course is not new as Gordon H. Selfridge, the founder of the Selfridges department store in the UK recognised when he coined the slogan "the customer is always right". Since then there have been varying degrees of customer recognition and realisation of their importance and contribution to the development and success of a company.
What has become increasingly evident is that the customer is the lifeline of the company and that customer relationship management is not a new concept. What is new however are the technologies, which enable companies to keep track of and record all the individual preferences of a large number of individual customers and the structural and cultural change processes that are required in order to implement and enact the technologies.
CRM and Enabling Technologies
There have been dramatic developments in enabling technologies since the initial creation of call centres in the mid 1990’s using Computer Telephony Integration (CTI) systems. A variety of new developments have occurred since then including the universal use of internet based e-mail communications systems. Companies used information received from regular e-mail and by telephone to analyse their customer bases and expand their business base. Between the years 2000 and 2002 it became apparent that the Internet provided companies with an opportunity to present a single image to their customers. By unifying the customer information accumulated by various channels, knowledge about a customer deepened further. In addition to improving customer satisfaction, this approach expands the business opportunity by, for example, cross-selling and up-selling. By 2002 the technology had advanced even further through the increasingly widespread application of ADSL broadband and Voice over Internet Protocol (VoIP) services speeding up and spreading the number of customer contacts that could be made through the Internet.
Bill Gates of Microsoft recognised the significance of the Internet when he stated, “The Internet will help achieve "friction-free capitalism" by putting buyer and seller in direct contact and providing more information to both about each other.”
With reference to the healthcare sector one can clearly envisage a seamless interface between the clinical and the “front office” where clinicians are seen as a form of partner within the enterprise rather than as a combatant who has to be dealt with. To help this process the latest generation of technology enabled CRM solutions provides an opportunity for companies to use various customer information accumulated in a company in order to perform effective marketing, effective production, and service activities. However, one of the problems associated with being at the cutting edge of the latest technological advances was highlighted by program analysts from Biosite, a leading biomedical company, who had to constantly upgrade their CRM solutions. They concluded that the critical features which determined which CRM solution they purchased was “cost, ease of implementation and performance. We had determined that lower-end systems which we evaluated only allowed for configuration changes rather than customisation, whilst the higher-end systems involved long, costly implementations requiring excessive consulting.” The CRM solution which this company opted for was chosen because it was felt to “to combine flexibility whilst remaining within our cost restraints. The ability to customise the purchased CRM solution was very important to us.”
The third generation of enabling technologies provides a company with the ability to organise its corporate activity and business strategies from business intelligence gathered through more effectively managing the knowledge acquired from the data gathering process. In effect this approach brings the “back office” environment closer to day-to-day operations as illustrated in Figure 1. Figure 1 illustrates how the enabling technologies provide connectivity between the back and front offices of a company and how they interact with the customer.
Figure 1 - CRM Process Concepts and Developments
Using this approach has helped companies such as KaVo Dental GmbH with formulation of its business strategy. The Head of Information Technology at KaVo informed HBS Consulting that, “the principle objective in installing a CRM solution was to improve the functionality of the order processing function, provide dealers with an opportunity to improve their customer relationships (with dental practices) and as a method of helping dealers track the progress of orders.” It was clear however that not only did the CRM solution which was deployed, enable KaVo to “get closer to the customer and add value to the contact” but also provide the company with a considerable amount of market and competitor activity information. This was found to help marketing determine the company’s competitive position and assist executives with determining the company’s strengths and weaknesses. By highlighting these competitive factors the company feels it is able to respond and create new marketing strategies which will help secure its market position.
Changing the Course of Corporate Culture
Corporate culture and the ability to change and adapt to the new marketing environment is a key issue during the implementation of any CRM solution. CRM often requires a firm to adopt a customer-centric philosophy and to change its corporate culture where needed. Cultural change typically refers to radical versus limited change process that occurs when an organisation has effectively determined that its organisational culture is inappropriate for the market that it wishes to enter or where it is necessary to alter it in order to compete effectively in a market within which it already operates. The cultural change process is difficult, complicated, and demanding which necessitates a considerable effort amongst all involved over a sustained time period. This can be exemplified by the comments made by the Manager CRM Data Management at B. Braun Medical Ltd who informed HBS Consulting that there was,
“a need to make a radical change to the traditional practices so as to determine not only the needs and wishes of existing customers but also to gather and use market intelligence when prospecting for new customers and new business opportunities.”
The respondent added that, “traditionally, information about customers and scheduling of call contacts, addresses, customer locations and anecdotal comments etc made by sales representatives were stored in filofax hard copy styled documents or laptop computers. This information is by the nature in which it is stored available only to those who have written it and consequently a considerable amount of information was being lost to the company. This presented a problem to sales managers who were unable to access this information and analyse territory, channel and contact activity of individual sales representatives.”
The respondent continued to explain that, “by keeping account of territory and contact activity, sales managers are now able to assess whether sales representatives visited accounts other than those they were comfortable with. It’s in the interest of the company to ensure that sales representatives visit accounts which do not see sales representatives on a regular basis.”
This new culture of sharing and accessibility of information across the company was a radical departure from custom and practice and there was considerable resistance amongst the sales force to these changes. The principal issues amongst the sales force representatives and to some extent sales managers was the reluctance to, “divulge information about their activities and pass on personal information they have about their customers throughout the organisation and there was a feeling amongst the sales representatives that their sales activity was being monitored closely and that they were being judged on the efficiency of the travel itinerary rather than the quality of the sales interviews.”
In order to achieve this corporate culture change senior managers must take ownership of the required changes and facilitate the means of creating and improving a customer focused environment. All too often too many executives either ignore or are unaware of corporate culture. Yet, it is absolutely critical to the success of their company. Such changes need to include:
Predicted Trends and Future Developments
HBS Consulting anticipate that the current trend in developing CRM as a strategic business tool within the medical device and diagnostic sectors will continue and that CRM will make an increasingly important tangible contribution to business success. Figure 2 compared with Figure 1 provides an illustration of how it is expected that the business integration process will evolve over time and as technologies enable companies to break down the barriers between the front and back office environments bringing the whole company closer to the customer. Observers of trends in the adoption of CRM envisage that a number of process and technological developments are expected to take place over the foreseeable future which will continue to include the use of web enabled technologies to integrate acquisition of data and information through IP or Internet Protocol and Internet telephony (IPT). It is anticipated that, across industries by 2010, 40 percent of companies will have integrated their entire voice and data networks into a single network, and more than 95 percent of large and midsize companies will have at least started the process. Through 2010, price decreases of 15 percent per year for data services, and 7-to-15 percent for voice services, can be expected. However, traffic growth of 30-to-60 percent means expert analysts believe that network budgets are expected to grow 5-to-10 percent per year.
Figure 2 - The Future of CRM, Process Concepts and Developments
Another trend is the increasing emergence of modular CRM solutions. This is essentially the process of adding to existing CRM software solutions with compatible add-ons. In other words the vendors such as Siebel, Oracle and SAP will continue to build out their functionality to provide as complete a product as possible - and to capitalise on new and emerging sub-segments of CRM such as marketing automation. What's helping second-time CRM shops, as well as companies only now getting into the technology, is the new modularity to CRM software. Some vendors have separated the rules for how different parts of the CRM system interact from the code that makes the software work. That makes it easier for users to tweak CRM applications to better fit the quirks of how they do business.
One of the latest developments in CRM processes and technologies is the development of the concept of vertical CRM. Vertical CRM is the emergence of CRM solutions for individual market segments and/or individual industries. For years, CRM vendors fought off one another by seeking to capture a broad base of customers who would all use their one-size-fits-all applications. The promise of vertical CRM solutions is that they can deliver greater value by providing software that is pre-configured to suit the data and process needs of specific industries, for instance, manufacturing, health sciences or consumer packaged goods. In addition not only do vertical CRM solutions require less customisation, proponents believe, but because they can be installed and deployed more quickly, they show a better return on investment. In addition, real-time analytics is anticipated to be combined more effectively with CRM solutions to create business solutions which allow medical device and diagnostic companies to utilise more effective marketing communications vehicles to improve the customer experience and increase customer loyalty.
Author: Dr. Paul Taylor, Consultant