Customer Relationship Management

You can tell customer relation management (CRM) software is an "it" technology just by looking at the market: At the height of the craze last summer, there were more than 800 businesses calling themselves CRM providers. Today, many have been acquired or have folded, cutting the number of companies in half, according to Gartner, a research and consulting firm. But unlike with other overhyped technologies, such as Internet appliances and distributed computing, there's a reason for the madness. Simply put, CRM provides companies a broad view of customer behavior and—when implemented correctly—can help retain and upsell current customers and assist in acquiring new ones.

CRM automates the recording of customer contacts and improves the development of products and services by analyzing existing buying patterns and streamlining access to customer data. Anyone who has ever been caught in automated-telephone-system hell or had to explain a problem to more than one customer service agent knows why CRM is not only desirable but crucial for long-term consumer satisfaction. CRM can provide a company with the customer information needed to handle complaints and questions quickly and intelligently. Moreover, companies can get their sales forces working effectively with their marketing and customer service staffs and eliminate inefficiencies such as underutilized customer service reps.

CRM entered the public consciousness in the mid-1990s, but the mad CRM push coincided with the growth of the Web. Many businesses, hell-bent on not being left behind, bought into the trend. Unfortunately, a lot of these companies, fearful that online sales channels were going to replace their tradional brick-and-mortar models and looking for a quick fix, acquired suites and software first and thought about what they needed later.

"Every brick-and-mortar business was going to be 'Amazoned,' so there was a rush to add CRM solutions," says Gita Gupta, vice president of strategic marketing for Pleasanton, California-based PeopleSoft's CRM division. Many of these solutions just focused on dealing with customers via the Web. But that attitude is dying out, because dot-coms are dying out, and the flaws in pure-play e-commerce models are showing.

Companies are stepping back from their wild buying sprees and are instead making purchasing decisions based on lessons learned and due diligence. That additional caution won't harm the CRM market, according to a forecast by Gartner that projects more than a tripling of worldwide CRM sales from $23.2 billion in 2000 to just over $76.3 billion in 2005.

CRM Success

It all goes back to the customer. Companies implemented CRM and—for the first time—could track every customer interaction, whether by e-mail, telephone, or paper mail, and do so from a centralized location. Phone-sales representatives could see what products customers purchased in the past and suggest products that had a good chance of hitting the mark again. Direct-mail pieces could be targeted more narrowly, so customers would receive no unwanted solicitations, saving money and preserving goodwill. Ongoing problems could be rectified more quickly and satisfactorily, because everyone involved—from the sales rep to the help-desk support person—knew any given customer's history. Even with an often hefty price tag—sometimes running to millions of dollars for a single implementation—CRM was a win/win situation for everyone involved.

The real-world implications of CRM are tangible. For example, an airline sales representative can see whether a passenger with a complaint is a frequent flier worth keeping, and offer a $100 voucher to keep the customer happy. The sales representative can also find out, though, that another person with the same problem flies just twice a year and offer only a $25 coupon. Both customers remain happy, and the company saves money. The carrier loses neither customer and also keeps $75 in credits.

In addition, the airline can cater to individual preferences automatically, based on information from a passenger's previous flights, perhaps offering a window seat or a vegetarian dinner. This can work as well for relationships with business customers. "You can organize sales teams to focus on the top 75 or 100 accounts," says Beth Eisenfeld, research director at Gartner, "and you'll know about ongoing problems ahead of time when you go into key accounts."

Companies are moving toward CRM suites and away from standalone products, but there are plenty of options available for companies that want only part of the package, such as personalization or e-mail–based marketing. Among the most popular of the standalone packages are live customer support applications from E.piphany, FaceTime, and HumanClick that let reps chat with Web site visitors in real time. This dovetails well with the fact that more than 90 percent of online shoppers want some form of human interaction during the shopping process, according to Jupiter Research. Generally, the more expensive the item being sold, the more demand there is for live customer service.

Of course, online customer service chat can backfire unless implemented in a useful way. Common missteps include hiring too few representatives and fielding people who don't know the products or services well enough.

No Magic Pill

As strategically powerful as CRM software is, how could so many companies have spent millions of dollars on such packages in the past few years and have seen no return on their investments? The problem lies in poor planning and failure to set up a way to measure the success of CRM. "The failures aren't failures of technology; they are failures of people, processes, and politics," says Gartner's Eisenfeld. "If they don't know what they're trying to achieve and don't understand the target, they can't know the cost savings or benefits."

Sierra Health Services, a managed-care provider based in Las Vegas, was able to avoid this problem. The company, which uses Onyx Software's CRM package, knew what it wanted to do—get brokers to sell its health-care service more often than the service of its competitors and reduce churn of existing customers. And it had already put best-practice guidelines into place, something other companies often forget. Sierra Health had a way to measure success, because it had tracked performance closely before installing the CRM program in January 1999. The company found that after the CRM implementation, there was a 40 percent increase in sales, a reduction of churn, and a total return on investment in less than six months, according to Robert Church, EDI manager. "Before implementing Onyx's software, we were tracking things with Post-It notes and index cards," says Church. "We had no idea how often we were calling brokers."

Too often, though, CRM is looked at as a way to solve dysfunctional business practices. But these programs can't fix a flawed department or a lackluster call-center staff. In fact, the issue of expectations is critical. A company must have concrete goals and reasonable expectations of its CRM solution. It needs to make sure that it includes the customer in every part of its business processes, including research and development, training, and marketing.

"Companies that buy CRM want to believe in a magic diet pill called technology that's going to get them in shape without heavy lifting or any commitment to change internal processes," says Brent Frei, chairman and CEO of Onyx. "On the other hand, CRM providers and service organizations sometimes take advantage of the companies and do an inappropriate job of setting expectations and then not delivering technology that even remotely covers the bases of what [the customer] needs.


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The Automatic Beach House

During the six weeks a year that Michael Einstein spends at his vacation home in St. Petersburg, Florida, his daily life is very different—and not just because he can lie on the beach instead of commuting to the office. The 54-year-old vice president of corporate innovation for Intermatic, a manufacturer of energy-control products using ZWave home automation technology, chose his Florida home as the testing ground for his company's gear. And as you can imagine, this is one tricked-out house.

In the morning he wakes up and pushes a button to get things started. That button opens the blinds and turns on the bathroom lights and the TV. He takes a shower and leaves his bedroom, pushing another button to turn everything off. When he goes out, he presses yet another button, which turns down the air conditioning, turns off every light in the house, and opens the garage door.

Michael's life is less complicated because of the ZWave two-way wireless home-networking standard. ZWave products use the 908.4-MHz RF frequency—the same used by older cordless phones and baby monitors. ZWave devices run on a mesh network, with each node using other nodes to rebroadcast commands to the intended recipients.

Any electric device—a lamp, radio, or video- game system, for example—can be plugged into the module. Once the device is plugged in, the user presses an Include button to bring it into the network. ZWave light switches and controllers are hardwired into the walls. Michael's favorite feature is the ability to set up "scenes," preset scenarios that include multiple commands and devices, such as his wake-up scene or what he calls a "home theater scene": the lights dimmed, the TV and DVD player turned on, and the audio system set to a specific volume.

One of the biggest advantages of Michael's system is that he can control it through a PC interface from his permanent home in Illinois to make sure he and his wife, sisters, and son don't leave on a TV or light. "In the old days, I'd leave all the lights on and my wife would complain," he says.

Michael says that it took him and a friend about two days to set up his system. He did, however, hire two outside contractors to handle ­window-blind automation and integration with his home alarm system. He estimates that there is about $5,000 worth of equipment installed—50 nodes total, roughly 40 of which average about $35 apiece.

Next up on the agenda: connecting his DVR to the network (so he can program it to record his favorite TV shows from Illinois) and automating his backyard. Along with controlling the hurricane shutters, he wants to "control the pool and the outdoor lighting—create a couple of scenes and control it all remotely."

Michael says there is only one thing missing from his perfectly automated mornings in Florida: a cup of fresh-brewed coffee waiting for him when he wakes up. "I could have my system start my coffee in the morning, too, but I'm still looking for a coffee pot that can grind beans and has a direct connection to the water supply," says Einstein. "But that's coming once I find it."

See how Michaelkeeps tabs from afar.


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Home Tips

Consider a mixed wired/wireless network setup. Wireless is definitely more convenient and easier to install, but the signal can succumb to interference and is more prone to intruders. Wired Ethernet is reliable and fast, but of course, you must run the cables.

Try before you buy. See if you can borrow a few home automation units, or buy some and return them if necessary, for testing (especially in high-density home/apartment environments). And check out all the options, including ZigBee and others.


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  • May 17, 2006
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