CEO at Econsultancy
30 October 2000 15:40pm
eCRM is one of the hottest new buzz words on the block, but what exactly is it and how do you do it? A little tricky to answer properly in a single post, but here is an overview that might help clarify things.
1. What is eCRM?
It depends on who you talk to. As it’s such a hot topic, many people describe what they do as eCRM in order to make it easier to sell. eCRM has been used to cover a wide range of things including the following:
- Web-enabled CRM. It’s just traditional CRM with an ‘e’ in front. Big CRM players like Siebel and Vantive or the ERP crowd such as SAP, JD Edwards and Baan have e-enabled their CRM solutions and this has been called eCRM.
- Analytics. Taking customer data generated by their interaction with digital offerings and mining it for segmentation, profiling, marketing and other purposes. Software vendors such as Broadbase, Net Perceptions, BroadVision, Vignette, Microstrategy and E.piphany are strong players in this arena
- Personalisation. Passive, active, inferred, real-time… where you change what you present the customer through digital channels according to what you know about them or others like them. This is very closely tied with Content Management – you cannot personalize the customer experience without being able to manipulate content in accordance with a user profile. Merchandising and cross/up selling can be considered part of personalization. BroadVision, Vignette, ATG and Open Market are big players in the personalisation sphere.
- Customer Contact Management. Using digital means to handle interaction with the customer including email management (inbound and outbound), online agents and customer service, ‘call me’ functions, web chat etc. Companies such as e2 Communications, LivePerson and PhoneMe are active in this area.
- Community Building. This is more about encouraging inter-user interaction through discussion forums, user-generated content, messaging functions, ratings, auctions, viral marketing etc. Companies who specialize in this area include eLoyalty (US) and etribes (UK).
2. Why is eCRM such a hot topic?
As you can see from the above list of areas that eCRM could be described as covering, it has been seen as the magic wand that will bring the following:
- Better levels of customer service
- More effective customer lifecycle management
- A single ‘360 degree’ customer view
- Higher sales (better conversion rates etc.)
- User-generated content
- Site ‘stickiness’
- Increased customer switching costs
- Decreased costs (through customer self service etc.)
Perhaps the single biggest aim of eCRM is to reduce customer acquisition costs and improve customer retention. Much has been made of the high customer acquisition costs for web sites (around £60 for a net pure play by most reckonings), indeed this has been ‘blamed’ as the reason for the demise of many dot coms, the bottom line being that customers cost more to acquire and retain than they generate in profit.
Equally everyone knows a) the web customer is ‘only one click away from the competition’ and b) it typically costs 5 times as much to acquire a new customer as it does to retain an existing one. A recent McKinsey study showed that the average new customer spends $24.50 at a give web site in the first 3 months as a shopper. The average repeat customer spends $52.50 every 3 months. So customer retention and loyalty are absolutely key to driving profitability.
In reality eCRM must be seen not necessarily as a way to grow a customer base but as a means to defend it. In the real world a customer’s experience of a particular product or service may be restricted to a particular catchment area, whereas online he or she can get the best in the world. Unfortunately this means that users’ expectations of eCRM (including all of the elements outlined earlier) are exceptionally high and only continue to grow with every better experience they have. Customers want what they want, when they want it, how they want it, through the channel they choose to use. Best practice eCRM is ultimately about trying to meet customers’ needs in order that they don’t desert elsewhere.
3. So how do you go about it?
It will depend on which flavour of eCRM you’re trying to implement. However, having a user profile database is fundamental to most flavours of eCRM and essential for effective analytics and personalization.
Here are some of the things you will need to do in implementing such an eCRM strategy:
- Terms of Reference
Everyone needs to be clear on what they understand by eCRM for the project and why they consider eCRM is going to be of benefit.
- Commercial Scope
Before plunging into an eCRM project, it is worth at least doing a ‘back of the envelope’ business case to support the aspired to level of eCRM being proposed. Advanced analytics and customer segmentation, or the Holy Grail that is the single customer view, are clearly desirable but typically don’t get out of bed for less than £250k+. What is the realistic scope and likely ROI for the initiative?
- Customer Insight
eCRM is fundamentally about your customers. The better you know them, or get to know them, the better you will be able to serve them, the better your proposition to them can become. So, who are your current and future customers? How much do you currently know about them (audit your quantitative and qualitative data)? What are your points of contact with them? How do they perceive you etc.?
- Data capture and analytics
Many e-businesses suffer from data overload but cannot make out how to use it to business benefit. You have to think through what data you will need to support your digital strategy, how you are going to capture that data, how you will store, manage and use that data. You must define the key metrics that should drive performance and benchmarking evaluations (browse to buy vs. number of page impressions per user session etc.).
- Business Case and Implementation path
Once you have clearer idea of what you want to do, you will need to revisit your business case to see if the numbers still stack up. Bearing in mind that strong customer relationships and the benefits that these bring do not happen overnight, how do you best roll out and phase the implementation of your eCRM initiative? How do you ensure you build a platform for future growth and yet not spend too long and too much money trying to do everything at once? What is your optimal cost / ROI development path in light of your digital strategy?
- Do and Review
Much of your time could be spent on capturing or cleaning data, getting it into the right format and structure so that it can be used, systems integration etc., until you can begin to apply the required marketing savvy to exploit the data. This really does require the ultimate fusion of marketing and IT skills. You don’t need to conquer the world from day one. Concentrate on manageable and measurable projects that you can quickly learn from. You won’t develop strong customer relationships overnight – however, you need to make sure that whatever you do do, you do very well. And make sure you measure and review what you do against the hard metrics you defined earlier.
4. eCRM resources
- If you want to read up on eCRM then you can do a lot worse than going to the white papers search section of this site (http://www.e-consultancy.com/knowledge/whitepapers/search.asp ) and doing a search on eCRM. There is a lot of good stuff there.
- http://crmproject.com/crm/home.html - a tome of information on CRM and personalization. This page contains whitepapers that cover the spectrum of personalization and CRM.
- http://www.personalization.com/ - "personalization.com focuses on the most critical challenges facing e-businesses today - how to deliver value to the customer and to the business using profiles of customers. By seeking to provide a gathering point for all parties to address this challenge, personalization.com performs a real service for the e-commerce community." - John Hagel, co-author of Net Worth and Net Gain
- http://www.crm-forum.com/ - “The CRM-Forum is the pre-eminent independent on-line resource center for CRM professionals working in the business-consumer marketplace. It provides CRM professionals and companies involved in CRM on both the demand and supply side of the industry with a place to keep up-to-date with CRM developments, and to, meet, discuss, and contact each other about CRM-related issues.“
5. This post can only go so far in addressing eCRM and perhaps raises more questions than it gives answers. Feel free to contact me to discuss things further:
Ashley Friedlein, pres.co (http://www.pres.co.uk ), tel. 020 7831 3630
Strategic Planner at M&C Saatchi
16 February 2001 14:03pm
It seems to me that the market downturn and chill blast of profitability is turning personalisation and eCRM into dirty words? Will they suffer the same fate as the much-touted WAP?
19 February 2001 07:41am
I agree there is certainly an undercurrent of unease which is beginning to express itself with personalisation / eCRM as potential target victims. However, I think it is more that they are scapegoats for a market struggling to attain profitability and justify large earlier expenditure than the fact that they are fundamentally flawed concepts.
- Why might there be a turn against personalisation / eCRM?
1. The failure of ‘best of breed’ personalised sites such as Garden.com or recent redundancies at Motley Fool, also touted for its community strengths, gnaw away at senior management’s confidence that personalisation / eCRM / community building etc. is actually worth it
2. Recent market research and reports are suggesting that actually you should just concentrate on getting the fundamentals of the online customer experience right and that, for all the extra effort, maybe advanced personalisation / eCRM doesn’t add enough value:
One of the ‘eBranding myths’ from a recent Accenture and Online Insight report:
“Myth #7: Personalization makes people come back again and again.
Reality: Site personalization is the second to last in value to consumers of all attributes studied. Across all segments, consumers express strong concerns about the privacy of their personal information.
New Strategy: eBranders should raise a caution flag when personal information is tapped, even for internal marketing purposes.”
A recent McKinsey article suggest that if you want to hold onto your customers, you are best off concentrating on getting your basics right:
“The common trait of the companies that hung on to their customers was their reliability in basic operational execution. Their sites downloaded quickly; they responded to customer queries quickly; they delivered more than 95 percent of their orders on time; and they made it easy for customers to return or exchange purchases. One company that raised its on-time delivery rates to 90 percent, from 60 percent, cut customer churn in half. “
3. The practical experience of many companies who have implemented large scale software systems capable of advanced personalisation (e.g. Broadvision, Vignette) are finding that they are not even scraping the surface when it comes to actually using the technology for what it can do. That may be because they are still too busy sorting out the fundamentals (e.g. content management, publishing, workflow) or that there aren’t the skills in the organisation to actually exploit the personalisation potential. Either way the feeling is that a lot of money was spent which has not yet shown a return on investment.
- In defence of personalisation / eCRM
Peppers and Rogers, who popularised the concept of 1-to-1 marketing that happened around the same time as personalisation was really beginning to take off as one of the mantras for e-business success, did indeed talk about the ideal of the ‘segment of one’. However, they always emphasised that this is a vision to aim for, a mindset more than anything. What they proposed was a shift towards increased customer-centricity and personalisation / eCRM helped deliver this.
I don’t think anyone would now argue that understanding and meeting the customer needs, fulfilling your promise to them exceptionally well, protecting their privacy and giving great customer service are the keys to success online – and offline for that matter. Key to longer-term profitability is identifying your most valuable customers and holding onto them. All this means that you absolutely have to match value propositions to customer segments.
And how do you deliver a valuable proposition? How do you understand your online customers such that you can meet their needs and segment them? Well, personalisation / eCRM would be a good start…
There is also a high level of consensus that e-mail marketing, if permission based, targeted and handled properly is an extremely effective and cost effective tool to attract, retain and enhance custom. This again is only done successfully if driven from a core made possible by eCRM and personalisation.
- The way forwards
Patricia Seybold, made famous as the author of customers.com, recently wrote an article titled: “CRM from the Outside In: Empower your customers to manage their relationships with you”
In the article Patricia suggests that companies should open themselves up to their customers:
“Customer relationship management systems - whether straight CRM (client-server heritage) or the newer, e-CRM (Internet-based) variety- have typically been designed from the inside out. They're designed for your call center personnel, for your sales force, for your customer service organization, for your campaign management organization, and for your email support group. In short, they're designed to help your company manage its relationships with your customers. What if you began instead by designing a customer relationship management system that lets customers manage their relationships with you? You take all the information you have about customers' current relationships with you and make this information easily accessible to the customers themselves via the Web. This is, in fact what most e-businesses do. We ask customers to create and maintain their profiles; we let them access their order and payment histories. We provide information to them about the products and services they've bought from us.”
This can then evolve towards levels of near total transparency in customer / company interactions:
“Once you've deployed the relationship management system for your customers and met all their needs, only then is it time to extend that customer-centric information to include the things you don't want your customers to see, such as your salespeople's account plans, your telemarketers' crib sheets, and the results from your latest marketing campaign. Actually, I suspect that there are many kinds of information that you currently consider proprietary that you'll probably find should be part of the customers' view of their information. For example, why not show customers what marketing segment(s) you've placed them in? If I'm a delegator and you've classified me as a self-directed investor, I might want to set you straight. What if I delegate a part of my portfolio to a professional financial advisor but want to be self-directed for the rest? Why not show the customer the same up-sell and cross-sell scripts that your telemarketers use? If they work on the phone, wouldn't they work as well online? And here's a really off-the-wall suggestion: What if you showed customers whether or not they're currently profitable for your firm? That doesn't mean you'd treat them badly. You'd just let them see whether they're earning their keep.”
It seems inevitable that this form of relationship is the way things must go, though it might work better for some customer segments than others. For it to work there clearly needs to be a relationship between customer and company that is built over time with increasing levels of trust, transparency and co-operation between the two. Ideally, as a company you would aim to attain a state where people actually competed to become your customer, or at least competed to belong to one of your higher-valued customer segments – it already happens to some degree with credit cards, frequent flyer clubs etc.
Might the net actually end up creating not the ultimate democracy but the ultimate network of elitism?
On 14:3:20 16 February 2001 Ben wrote:
>It seems to me that the market downturn and chill blast of
>profitability is turning personalisation and eCRM into
>dirty words? Will they suffer the same fate as the
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