Keeping the customer satisfied

By IRENE CHAPPLE

When the jargon-littered worlds of marketing and information technology collide, confusion is almost inevitable.

And CRM is not only the marketers' hot new catchcry, it is also the industry's most recent victim of that misunderstanding.

CRM stands for Customer Relationship Management, a business concept to which much research has been dedicated.

But the concept is hampered by wildly differing perceptions of how it should work.

A survey released this month shows that while marketers and IT staff may end up walking together, they effectively talk in foreign tongues.

CRM, quips Direct Marketing Association (DMA) head Keith Norris in tech talk, is D'base-driven B2B (database-driven, business to business) on a one-2-one basis.

But, he pleads, do not fall into the trap of thinking CRM is information technology.

"CRM is not call-centre or IT-based," he says. "It's a company culture. People think they can buy a piece of software and change their life - they can't.

"It's been boiled down to so much jargon that we forget it's about people dealing with people, and you've got to have a relationship."

Indeed, 10 years ago it was called Relationship Marketing. Then, people were measuring ROI through LTV (Return On Investment through Lifetime Value).

CRM was dubbed as such in the mid-90s by software company Pivotal Corporation. So the concept is hardly new.

"People have been practising relationship management since the dark ages," agrees Pivotal's New Zealand managing director, Helen Robinson. "But now we've got the tools to do it."

Yet it is more than just buying the equipment - CRM advocates say the corporate theory must be a top-level management concern.

New Zealand businesses surveyed seem to agree. But problems remain over what needs to be done and how results are quantified, because CRM can be expensive.

Top software can cost $3 million. In New Zealand, Pivotal sold 15 units last year at between $50,000 and a "few million" each - a big jump from the five units sold three years ago.

According to US-based International Data Corporation forecasts, there will be $40.4 million spent on CRM package software in New Zealand this year and $150 million spent on services related to the product.

Under the system, a database records customers' details and tries to build a bond between seller and consumer. Its main aim is retaining customers, working off the business maxim that a new client can be up to five times as expensive to attract as a repeat purchase by an existing customer.

Mr Norris says CRM is "simply the art about storing information about customers".

"It is about the demand-and-supply chain: if manufacturers could forecast demand, they could organise the supply chain."

Auckland Co-op Taxis' automated service recognises the address a customer phones from and can arrange a cab without the aid of a human.

The CRM system, worth "about a million", was implemented last May.

It now takes 40 per cent of telephone orders, and a customer's average wait time has dropped from 45 seconds to 12.

But communications manager Ian Westley says the system annoys some customers.

"Some don't understand it, and when there's a lot of background noise it doesn't work, or when it's on speakerphone."

The system has taken the pressure off staff dealing with 20,000 calls on a Friday night.

Mr Westley does not subscribe to the CRM mantra.

"I don't like it as a term. It's just jargon, and will be something else next year."

Co-op staff have nicknamed the system Ivy, a twist on IVR, or Instant Voice Recognition.

At The Warehouse Stationery outlets, a "six-figure" CRM system was implemented last year.

It gives telesales staff - "actual people", emphasises spokesman Alan Mayo - direct access to customers' past buying information.

The CRM survey, commissioned by the DMA, Ceritas Digital, Microsoft NZ and Pivotal, drew anonymous comments from 262 senior managers, of 800 invited to respond.

About 86 per cent of respondents said they had or were implementing a CRM system, with customer retention cited as the main aim.

Those who said they had no intention of investing in CRM cited cost as the key drawback.

Although 82 per cent of respondents said the goal of buying into CRM was customer retention, only 51 per cent said it was working.

Mr Norris says the results simply show a lack of understanding about the product. For a CRM system to work properly, he says, there must be a training programme of up to three years.

The survey also showed a dramatic divergence of opinion between marketing and IT respondents on what parts of their CRM initiative are working.

For example, 55 per cent of marketers said CRM definitely improved customer retention, yet only 35 per cent of IT respondents agreed.

"That simply shows that IT people and marketers are from different planets," laughs Mr Norris.

"They have different concepts of how CRM is delivering and they clearly have different expectations."

CRM needs strong leadership and better communication within the companies, he says.

Mr Mayo, though saying The Warehouse's CRM system has been well-received, reckons a system cannot be mandated from the chief executive down because customer relationships are forged by frontline staff. CRM is not the key, says Mr Mayo. "If people think CRM is important, well that's just not true.

"If a company spent vast amounts of money on CRM, I don't think the shareholders would be very impressed."

Ms Robinson says the high-cost reputation is a hangover from ERP (Enterprise Resource Planning) systems. CRM is a much cheaper option that "sits over the top of ERP".

Dr Margo Buchanan-Oliver, senior lecturer in marketing at Auckland University, says CRM is essential for any business.

The DMA is inviting corporate representatives to a "round-table" next month to discuss the survey findings.

Mr Norris says interest is expected to be high.