CRM Success Requires Action

Some people assume that if they install a CRM system that instantly their connection with their customers will strengthen. I’m sorry to report that just installing software will not revolutionize your organization. Everyone knows that installing Word or PowerPoint doesn’t guarantee that a powerful speech will be written or presentation created. You have to put the work in.

Two articles recently reminded me of this, one discussed the effort required to get data in, and the other discussed using that data.  In other words, you have to take action to make CRM work.

Fellow Duct Tape blogger Georgia Patrick discusses, in a recent post, how you need feet on the street and real discussions with customers to truly understand what they want:

“…I'd have enough money to take early retirement and watch the tides on the beach if I had $100 for every customer, friend of a customer, or curious inquiry for the past 12 years that told me "CRM doesn't work like it was promised."  Well, of course not because you have NOTHING to put into that database in the way of notes about recent conversations and eye-to-eye relationship building, I find myself screaming back at them.”

Georgia’s nailed one of the most important truisms about CRM software. If you don’t put anything into the system, how can you expect to get anything out of it? Forming relationships, discussing issues, truly understanding your clients needs. Those are the notes you need to be collecting about your clients. CRM software helps organize this information, but it can’t help you form that relationship.

The other side of this issue -- once you put the information in, what do you do with it? Jeanne Bliss of MarketingProfs tackles this in, “Is Your Company a Customer Survey Whore?”

How many organizations take painstaking measures to survey their customers? They enter their scores and their comments and never look at them again.

“As with any customer feedback system, it's what you do with the information that's key. What will you do when a customer won't recommend you? Will you find out why not? Are you collecting all of that information from dissenters and identifying the big things that are broken in your business and fixing them? Are you identifying and holding those who have declared that they would recommend you close and building stronger relationships with them? Have you spent the time to find out what they really love about your business and then pinpointed which part of your operation and in what geographies those actions are coming from? Have you created systems and processes to reliably replicate those loved experiences across your enterprise?”

Collecting information only helps when you use the information to make positive change in your company. Like Bliss says, “it’s what you do with the information that’s the key”.

So I regret to report that simply plugging CRM software into your office network isn’t going to improve customer relationships. It takes action. Action in the form of gathering information; then taking that information and doing something positive with it. It’s a little more work, but the benefits to your business are staggering.

Segmenting Your Customers Vegas Style!

As I’ve shown in the last four posts Las Vegas does a good job of catering to all levels of gamers, from the high roller to the low rollers. But how do they do it?

I always imagine the high rollers in James Bond tuxedos with monocles and expensive canes. That would make them easy to spot, except it isn’t that easy. The guy in the high roller room betting $10,000 is nine times out of ten dressed the same as the guy at the $5 minimum table. Maybe he has nicer shoes.

What’s the secret? It turns out casinos are some of the most advanced CRM users in the business world. Whenever you use a player’s club card or receive credit with the casino, you’re being tracked. How much you bet and for how long are extremely important. The more you bet and the longer you do it, the more money the casino makes.

The casino takes this information, compiles it in their CRM system and breaks their customers into many different tiers. At the very least your business should break down your customers into the three tiers we’ve discussed this week.

• High Rollers (Your Top Customers)
• Low Rollers (Regular Customers)
• Customers You Need to Fire (Bad Customers)

As we’ve covered before this should be done by profitability and not solely on revenue. Alice Dragon in “How to Do Customer Segmentation Right” explains:

“A lot of companies segment customers by revenue, intuitively assuming that revenue is a good indicator of profit. But, Selden argues, that's hardly ever the case. He maintains that an effective segmentation strategy should begin with a profitability analysis, divvying customers into 10 deciles ranging from most to least profitable. When he segmented one major retailer's customers by revenue, some that had the largest revenue generated among the lowest gross profits.”

Taking on this segmentation task will yield the greatest Return on Investment (ROI), but there are many other ways to segment your customers so that you can properly market to them.  Why? Dragon continues:

“Precise, needs-based customer segmentation is time-consuming and difficult, and very much in its infancy. But it's worth doing because it enables cost-effective targeting of customers with product and service offerings that match their needs. That kind of precise targeting obviates spending a bundle on largely ineffective mass mailings—and alienating customers with irrelevant offers. It's the quintessential win-win: Customers get what they want and subsequently buy more; companies waste less money and increase sales and profits.”

A basic Customer Relationship Management system can help you with both these tasks provided you can compile and keep current data. Segmentation is difficult, but the pay off is huge!

Hope you have enjoyed the Vegas themed posting. Next week we go back to a closer look at the technology enabling good Customer Relationship Management.

Firing Your Customers -- It's Not Easy

In Las Vegas, when a customer takes money from the casino they are rewarded with a great deal. I’m hoping that tomorrow I can turn my meager five dollar bet into a thousand. If this happens the casino might pay for my stay, offer me free dinner, and secure me front row tickets to a show.  They want to keep my winnings close, because they know if I stick around long enough, I’ll lose it all back.

Here we need to turn our back on Vegas conventions and realize that someone taking money from us, or the equivalent, free products and services, is very bad for business. Unless you are a casino, you have little chance to earn that money back in future interactions. In the case that you have a customer that is continually unprofitable you need to do something drastic. You need to fire your customer.

When Should I Fire a Customer?

The concept of “firing your customer” has been popularized in only the last ten years. Before that, we heard the familiar mantra of “The customer is always right.” So how can you justify getting rid of a customer when you’ve been trained that the customer is always right?

• Constant Aggravation – Your customer is constantly making outrageous demands for your service and when you deliver they complain about something that wasn’t discussed. They take up immense time for small projects and call to discuss the minutest of details. These clients are good candidates for firing.
• Abusive to Staff – Your customer calls up to scream at your staff for every perceived problem they have with your product or service. They can use foul language and take every opportunity to belittle your employees. Consider yourself lucky if you can avoid it, but if you stay in business long enough, you’ll come across at least one of these people. These clients are good candidates for firing.
• Habitual Non-Payers – Norm Brodsky of Inc.com explains it best, “I don’t mean customers who have fallen on hard times; we work with these people. I mean customers who were following a deliberate strategy of ignoring our bills and payment requests for as long as they could get away with it.” These clients are good candidates for firing.
• Unprofitable – Basically when the cost to service the customer exceeds the revenue they generate for you, they must be let go. That cost can come from behavior causing, as Brodsky says, “bad morale, low productivity, and turnover.” It can come from constant project over run or bad word of mouth. It definitely comes from clients who refuse to pay for services rendered to them. The source is inconsequential. If you feel that this customer will always be a negative force on the bottom line, out they go.

If those aren’t good enough reasons Seth Godin offers one more,

“If you’ve got something worth paying for, you gain power when you refuse to offer it to every single person who is willing to pay you.”

How Should I Fire a Bad Customer?

Firing anyone, employee or client, can be a difficult experience and the chance for negative repercussions are high. Just like you don’t want a mishandled employee firing to hurt your reputation, you don’t want a poor customer firing to lead to bad word of mouth.

Scott Clark discusses the impact of using the wrong method before going into three techniques to avoid:

“The impact of this personal campaign of retribution against your business can be significant. Although satisfied customers may recommend your business to their acquaintances when asked, disgruntled customers will use every opportunity to describe the horror stories of dealing with your company to anyone who will listen. The consequential lost sales to your business may be considerable, even though your only mistake was in the manner in which you dismissed your problem customer.”

So how can you properly fire a customer?

Karl Walinskas in “The Fire Your Customers Myth” has three keys. Scroll to the bottom of his article for full details on each:

• Clarify Disagreements First
• Be Professional
• Offer Alternatives

Firing a customer can be an extremely difficult decision, but in the long run you’ll benefit. If you stick to Walinskas’ points and attempt to leave the situation amicably, you’ll reduce the chance your fired customer will speak ill of your business. Who knows, maybe their replacement will be a better fit for them. They’ll definitely be a better fit for you.

Low Rollers Sustain Your Business

That first 25% of earnings from high rollers may be the easiest for casinos to obtain, but they know that without the regular customer, the low roller, they wouldn't stay in business for very long. You probably face a similar situation.

What's crucial is keeping your high rollers happy without making the regular folks feel like second class citizens. If you are really good, you make your regular customers feel like high rollers even when they aren't receiving the same level of service.

Vegas nails this. When regular customer, Mike Santoro, walks into a casino I feel like I have access to the same world of high rollers. Free drinks, classy atmosphere, and employees waiting to take my every request. Unlike high rollers, you aren't staying in the classiest villas and every request won't be filled, but the atmosphere is the same and they attempt to make you feel special.

That's the key. Your regular customers support your business, so make them feel special. Find the equivalent to a free drink or holding the door open within your business. It's cheap and basic, but can mean the world to them. Reserve your villas and limo service for your high rollers. Provide elite amenities for your top customers to reward their commitment to you, but never forget that the bulk of your business comes from the everyday customer.

Identify Your High Rollers and Treat Them Like Ones

In Las Vegas, high rollers own the city. If you bet big you can have anything you want. Luxurious villas. Personal butlers. Private pools. Plasma televisions. As long as you are putting down the money the casino will grant your wish. One high roller received Gucci shoes for his dog to chew on.

Why? The Travel Channel reports that although the high rollers account for only 5% of the patrons in Las Vegas, they bring in 25% of the earnings. Your business most likely has a similar situation, and if you are dealing in a business to business environment, your high rollers could be contributing an even greater percentage to your bottom line.

Do you think it's important to keep these high rollers happy and away from the competition? Here's how to follow the Vegas High Roller strategy:

• Segment Your Customers by Profitability -- Using your CRM or accounting system look at your list of customers. Identify what they have spent with your company, depending on sales cycle, in the last one to three years. Then determine what it cost to provide these products and services and calculate profitability.
• Identify the High Rollers -- You'll sometimes surprise yourself by finding out who your best customers really are. Take the customers with profitability head and shoulders above the rest. Those are your high rollers.
• Provide the Very Best in Service -- If you know that these few high rollers contribute to 25% of your business you don't want to lose them. Give them the best service. Offer exclusive technical support access. Implement special return policies. Provide free shipping. As long as they are a high roller, you should give them what they want.
• Monitor High Roller Status -- When a millionaire goes broke and can't bet $50,000 a hand, they no longer receive a three bedroom villa with a waterfall. You'll need to monitor your own customers to make sure they maintain their high roller status as well. If their status changes, their special arrangements should change as well.

A word of warning. Sometimes people can focus too much on their high rollers at the expense of the rest of their customers. On a customer by customer basis regular customers provide less than the high roller, but added together they'll make up the other 75% of your earnings. If you lose the little guys, your business will crash.

Tomorrow we'll talk about remembering the needs of the low roller.

CRM Blogging Vegas Style

A city in the middle of the desert where temperatures in the summer regularly reach over 100 degrees shouldn't be a tourist mecca, but Las Vegas breaks all the rules. Attracting 37 million visitors annually is no small feat. What can your business learn from Vegas and does CRM have anything to do with it?

Since I'm headed to Las Vegas on Friday, I figured I'd dedicate this week's blog to what Vegas is doing to draw in business, how it relates to customer relationship management and, most importantly, how you can apply those principles to your business.

The key to Vegas' popularity? It's a Purple Cow.

If you haven't yet read Seth Godin's book, Purple Cow, I highly suggest it. Here's his definition, taken from Free Prize Inside:

"Here's the quick definition of a Purple Cow: A Purple Cow is a product that's remarkable. "Remarkable" simply means that a customer is willing to make a remark about it. If you can create remarkable products, people will talk about them. If that happens, the word will spread and your sales will grow. That explains the success of most every fast-growing company of the last ten years.

"Are you invisible? Or remarkable?"

Vegas is a place where you can visit the Statue of Liberty, The Pyramids of Egypt, and the canals of Venice in the same day. It's one of the most unique places in the world. You have a chance indulge all of your senses, and you are treated like absolute royalty.

Is Vegas remarkable? Absolutely. Find someone who just got back from Las Vegas and inevitably they'll have a good story of what they saw or experienced there. What do your customers say about you? Is your business remarkable? Are you a purple cow?

Take a page from Vegas (and Mr. Godin) and make yourself remarkable. Don't know how? Pick up Purple Cow or Free Prize Inside . Make it a goal to become remarkable. Wow your customers so much they can't help but tell their friends about you. Become the jewel in the middle of the desert.

Reporting from the Gartner CRM Summit

I always enjoy when MarketingProfs or Marketing Sherpa sends someone to a giant conference to report back on the latest and greatest in email marketing, direct mail, or websites. Now I get to do the same for CRM at the Gartner Customer Relationship Management Summit being held here in Chicago.

Gartner is, in my eyes, the top IT analyst firm in North America, and for four days in September I'll have the opportunity to learn the latest in CRM technology research, trends, and products. All that info will be brought back to you via our blog.

Gartner always has outstanding information, so I'm very excited to attend. Besides the keynote speech "Why the Future of CRM Will Look Very Different than the Past" from Scott Nelson, here are the sessions I'm most looking forward to:

• The Eight Building Blocks of CRM: The Essential Elements of Success
• Customer Segmentation: The Key to Customer Relationships
• Driving Profitable Growth with Sales and Marketing Technology
• The CRM Vendor Landscape: Sense Emerges from the Chaos

So you can look forward to reports on that in September. If you want to attend the seminar yourself, you can register here.

Walk a Mile in Your Customer's Shoes

Do you know the troubles your customers go through in order to purchase your products and services? You may think that you have the smoothest path to purchase, but until you walk a mile in their shoes how can you know that something isn't adversely affecting their relationship with you?

Sampson Lee of CRMguru.com discuss his experience of falling in love with Starbucks coffee. In "One Cup of Coffee, 20 Experiences: Take a Tip From Starbucks", Lee outlines his initial feelings upon coming in contact with Starbucks and outlines the set of process and emotions associated with each step of the customer experience.

Lee suggests mapping out the customer experience at your own organization as well as at competitors and industry leaders to improve your business. His suggestions:

• Map competitors and industry leaders.
• Map your desired performances.
• Map your past and current performances.
• Manage and enhance the process.

Lee's article is a bit academic at parts, but he brings up a good point. How can you improve your customer's experience if you don't understand it first? Be sure that once you walk a mile in your customer's shoes, that you don't soon forget it. Map your trip with Lee's graphical tool and you'll easily identify where you can improve your customer's experience.

Tackling Obstacles to Marketing Measurement

MarketingProfs (must read for any marketer) features a story on "Six Primary Obstacles to Marketing Measurement." As the marketing manager, one of the roles I have here, and the way I keep my job, is to accurately measure the success of any campaigns I run. With a good CRM system in place, measurement is pretty easy, so I was intrigued.

"1. Applying Rocket Science to Garbage Data
Measurement requires data, and your organization has plenty of it. But do you have the right data—or are you just torturing the data you can and undermining the credibility of your conclusions? Measurement-inspired marketers often try to mold data into something worthy of brilliantly conceived metrics. Bottom line: If the data seems off target, avoid advanced analytical gymnastics."

First off, not all organizations have "plenty" of data. In fact many small ones just put together a campaign and don't track any results. That's bad. If you aren't doing basic marketing measurement through the use of CRM or other tools, you have no idea as to its effectiveness. Maybe marketing is generating 90% of your business or maybe it's a massive cost center you are wasting valuable budget on. Without accurate reporting you won't know.

That's the major problem, but if you do have data, the article is spot on. "Do you have the right data?", is the question you need to ask. People will measure how much they spend on direct mail, advertising, telemarketing, etc., but stop there. The more important items to measure are things like delivery rate, response rate, and most importantly impact on sales.

If you can tell that, of the 10,000 people that received a business flyer, 5% responded to your offer, you have a good start. If you can report the reason why those 5% responded and put it in a nice pie chart, you are doing even better.

Those are good, but here's the key to marketing measurement. Show that of the 500 that responded, 50 decided to purchase your product or service. List the reason why they did so and why the other 90% didn't. Demonstrate that the $5,000 you initially spent, led to $80,000 in sales. Then you have really accomplished something.

The article goes on to make many good points, but obstacle three I had to disagree with:

"3. IT Enthusiasts Control the Agenda
IT people are living their glory days. In an increasingly data-driven marketing era, IT is responsible for collecting and storing data, mining customer files to build profiles of the most profitable buyers, and sending and receiving messages in record time. The people who groove on all of this monopolize the corporation's agenda; they make progress and success all about the technology."

The glory days of IT people controlling the marketing measurement agenda are over. Their time peaked about five years ago. As business tools like CRM and Business Intelligence continue to become more user friendly, IT is needed for implementation and occasional maintenance only. The user determines what he or she needs measured and goes after it. IT specialists don't need to get involved.

Now I do agree with this obstacle when we consider that many of people currently using CRM and other measurement tools are doing so with older systems. But as we see replacement in the technology tools occur, it reduces the need for users to request IT to crunch our data for us.

So if you are late to the marketing measurement party, here's your invitation. It's extremely important and fairly easy. And if you have been doing it for a while, but are frustrated with scheduling IT time, it may be time to look at new tools or upgrading current ones. You'll gain more control over the data and give IT more time to handle more important tasks.

The full MarketingProfs article can be found here.

Do Your Industry Research

Two days ago, I talked about vertical marketing. If you plan to focus on a given industry, First Research is a service you need to look into.

First Research was just named a Top 50 Sales Website by Selling Power Magazine(.pdf). We've been using it for over a year and I can't say enough good things about it.

First research provides you with a complete overview of your selected industry along with the latest news on the industry, business challenges facing the industry, and trends and opportunities within this area. Best of all, First Research provides a "Call Prep" sheet that summarizes much of the information and gives you several industry-specific questions to ask anyone you call.

I've used it to research before deciding to pursue a particular industry and I encourage our salespeople to use it before calling any prospect. Just a quick review of the prospect's industry can make your conversation so much more effective.

Bottom line, it's the best tool I have seen for researching industries. Check it out at www.firstresearch.com/.